The Rationale for Forced Ranking January 15, 2007
Posted by Admin in Forced Ranking, Performance Appraisal, Talent Management.add a comment
There are certainly concerns about the forced ranking process I mentioned last time. Turns out, most of those concerns are actually benefits.
First objection—it’s arbitrary. Well certainly using a predetermined distribution (like top 20 percent, vital 70 percent, and bottom 10 percent) is arbitrary—and that’s its great value. Using fixed and arbitrary percentages forces managers to make tough decisions about who’s an A player, who’s not, and why not. Otherwise, as happens in too many performance-appraisal systems, everyone gets rated superior, managers never have to have tough conversations about performance, and the organization slowly slouches toward mediocrity. Restricting the number that can fall into the A category, and demanding that managers identify a bottom 10 percent who, relative to their peers, are weaker performers, ensures that top talent is recognized and that those bringing up the rear have no false sense of security.
Of course, if you ranked a hundred people using a 20-70-10 process, #21 would be much closer in performance to #20 than she is to #90. That’s why companies that use the forced-ranking process tailor the actions they take with individuals to the individuals themselves, not just to which ranking bucket the person ended up. When I write scripts for managers to use in letting people know how they came out in their company’s A, B, and C player analysis, I develop five scripts, not just three: for the solid A player, the B+ (the #21 guy and his counterparts), the genuine B, the B- (the ones who barely avoided falling into the C category), and finally the true C level performer.
But it is important to use buckets in making relative comparisons (e.g., top 20, vital 70, bottom 10; or quartiling, or some similar scheme). Never ask managers to precisely rank their people in exact performance order. It’s impossible to distinguish between #20 and #21, and the totem-pole approach (who’s #1, who’s #2, and so on down until the last and worst performer is fingered) generates highly valid concerns about accuracy.
Yes, forced ranking is an imperfect process, as is any process in which fallible human beings must make tough decisions in an arena where solid, unarguable, quantitative data don’t exist. The forced-ranking process requires the exercise of honed, objective managerial judgment in a situation where information is always incomplete and the facts are sometimes contradictory. But managers make decisions based on limited data all the time—which projects to fund, which to shelve; when to react swiftly to a competitor’s move, when to let time take its course. Just because a decision isn’t based on countable units doesn’t mean it isn’t objective. Employee ranking is not the same as solving an algebra problem—it can’t be reduced to a mathematical formula.
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360-degree Feedback and Forced Ranking January 8, 2007
Posted by Admin in Forced Ranking, Performance Appraisal, Performance Improvement, Performance Management.add a comment
Here’s a way to improve performance appraisal. And a way not to.
First, we need to forget about 360-degree feedback, at least for performance-appraisal purposes. Certainly, 360-degree feedback may have a place—a minor place—in helping people get a better understanding of their development needs. But it has no place in conventional performance appraisal. To allow anonymous employee assessments into part of the formal evaluation tool does more than just encourage biased and self-serving responses—it poisons the entire well in terms of the original objective. It is particularly inappropriate to tie pay, promotions, development opportunities, and terminations—the things that a strong appraisal system controls—to anonymously provided assessments. The issue is not whether underlings and co-workers can provide relevant information. They can. The issue is whether they should be allowed to do so in a context where they cannot be held accountable.
What we need to do is add some element of forced ranking to our performance-management processes. Forced ranking requires senior managers to look over the organizational talent pool and, based on their performance and potential, identify the organization’s top talent (the A players), the solid-performing middle (the B players), and those bringing up the rear (the C players). Forced ranking can drive the truth into performance management, since not only does it force managers to identify the organization’s most and least talented members (and in the process provide the organization with useful data on managers’ ability to spot and champion talent), it offers independent verification of performance-appraisal data, something everyone agrees is important.
Conventional performance appraisal involves an absolute comparison — how well did the individual perform against the goals and key job responsibilities and competencies that were agreed at the start of the year? Forced ranking requires a relative comparison—how well did this individual perform compared with how well other people in similar jobs performed? Both questions are important to ask to get a complete view of a person’s performance.
Sure, there are challenges involved in implementing a forced-ranking system. Some employees and some managers, particularly those with low standards, don’t like it. And it’s inevitable that some mistakes will arise—you’re bound to miss a few late bloomers and overrate a few glib duds.
But combining a forced-ranking system with a conventional performance-appraisal system, with senior managers holding their juniors accountable for excellence in performance management (just as they hold them accountable for excellence in all the other parts of their jobs), will produce an organizational climate in which people know what’s expected of them, are held to high standards, and know exactly how well they’re doing. Sounds like a great place to work!
Dick Grote is one of America’s most successful and best-known authors, consultants, and business keynote speakers on performance management. He is the Chairman and CEO of Grote Consulting Corporation.
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