You Manage It! 1: Ethics/Social Responsibility Rank and Yank: Legitimate Performance Improvement Tool or Ruthless and Unethical Management?

Forced ranking is a performance appraisal system popularized by Jack Welch when he was CEO of General Electric. It is a system that has been given the derogatory label of “rank and yank” by its critics. The intent of the forced-ranking system is to improve the performance level of an operation by getting rid of the bottom 10 percent of performers and hiring replacements who will perform at a high level. Ranking judgments can be made in a variety of ways. For example, a forced distribution can pre-assign a set percentage of employees that must be placed into categories such as “most effective,” “average,” and “needs improvement.” Alternatively, a simple ranking of workers from best to worst can be used. Top performers may be rewarded and offered promotion or training. Low performers may be given a warning or terminated.

Forced ranking has been employed by a number of companies, but some legal challenges have been made. For example, Microsoft successfully defended several discrimination suits challenging its use of a forced-ranking system. Conoco used a forced-ranking system and reached an out-of-court settlement in a discrimination lawsuit. Ford Motor Company, Goodyear, and Sprint have all faced lawsuits relating to forced ranking systems.

The advantage of using the forced ranking approach is to regularly trim the lowest performers and thereby regularly raise the bar for performance and create a team of top performers. Unfortunately, the practice of forced ranking can have important disadvantages. The use of forced ranking can be detrimental to a collaborative culture, creating instead competitiveness among workers. If the bottom 10 percent of workers are terminated each year, the forced ranking system can also produce a lack of continuity in work teams. You could, for example, just be learning to work well as a team when some of them are replaced due to forced ranking. The pressure of forced ranking may also influence workers to focus on performance to the extent that ethical corners might be cut.

Critical Thinking Questions

  1. 7-14. Do you think forced ranking is a good performance management system? Why or why not?

  2. 7-15. Part of the forced-ranking label reflects the intent to force distinctions among worker performance levels. In an absolute-rating system, everyone could be rated “above average.” Does this difference between the absolute- and relative-rating approaches mean that the absolute performance judgments are wrong? Explain.

  3. 7-16. As a manager, would you prefer to rely on an absolute performance rating system or a relative system, such as forced ranking? Why?

  4. 7-17. Can you devise an absolute-rating system that would guarantee differentiation among workers? Why or why not?

Team Exercise

  1. 7-18. As a team, address the effectiveness of the forced-ranking approach for improving the level of performance in an organization.

    Address the following issues:

    1. a. What is the logic of forced ranking? That is, on paper, why might you expect forced ranking to improve the performance level of your group?

    2. b. The logic behind the forced-ranking approach is that performance in a workplace is normally distributed. Do you think this is an accurate assumption? Why or why not?

    3. c. If performance in a workplace is not normally distributed (for example, maybe your organization has outstanding hiring and training programs that positively impact performance), do you think a forced-ranking approach would still improve the average level of performance in the organization? Explain.

    Share your judgments on these issues with the rest of the class.

Experiential Exercise: Team

  1. 7-19. Proponents of forced ranking see the system as a means for a quick exchange of personnel in a way that lifts the average performance level of the organization. Critics see the approach as possibly damaging the culture and camaraderie in an organization and would prefer to keep people and develop their skills.

    Select representatives as members of a pro or con forced-ranking team. Each team identifies its assumptions about how performance is distributed in the workplace. They will then offer reasons why they are for or against forced ranking. Some of the issues to be addressed include:

    1. a. What is the expected impact of forced ranking on performance in an organization?

    2. b. Turnover has costs associated with it (see Chapters 5 and 6). How would these costs affect your position?

    3. c. What would be the impact of forced ranking on the organization’s culture? What about the culture without the system?

    4. d. Is it better to replace a poor performer or to try to develop and improve that worker?

    In a debate-style format, each team makes its presentation of position and rationale and has the opportunity to question and rebut and rejoin the other team. The instructor moderates this process. At the end of the debate, the instructor leads the class in identifying the key reasons for and against the use of forced ranking. Is there a clear consensus in the class for or against this system?

Sources:Based on Amalfe, C. A., and Steiner, E. G. (2005). Forced ranking systems: Yesterday’s legal target. New Jersey Law Journal; Hill, A. (2012, July 16). Forced ranking is a relic of an HR tool. Financial Times; Marchetti, M. (2005). Letting go of low performers. Sales and Marketing Management, 157, 6; Rajeev, P. N. (2012). Impact of forced ranking evaluation of performance on ethical choices: A study of proximal and distal mediators. International Journal of Business Governance and Ethics, 7, 37–62; Scullen, S. E., Bergey, P. K., and Aiman-Smith, L. (2005). Forced distribution rating systems and the improvement of workforce potential: A baseline simulation. Personnel Psychology, 58, 1–32.
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