Why Companies Stack Rank The Performance of Employees...
May 08, 2013
Capitalist Note - On the road talking to some folks about Performance today. Reminded me of the question asked in this post title, and the comments are probably better than the post. Enjoy...
A sharp reader named Amanda writes:
"If you're a strong manager who regularly provides feedback and coaching, and you aggressively manage poor performance (either to improvement or out of the org), then why should it be impossible for you to have a team of strong to high performers? Furthermore, why wouldn't a company want that for all their teams?"
Which begs the question - why do companies stack rank performance and poison so much water?
The answer is pretty simple - most managers can't, won't or aren't boxed in enough to do what it takes to aggressively manage performance. So poppa (the company) has to come in and say the following:
"We haven't trained you as a manager to truly manage performance on your own. And you know what? Even if we did, you'd avoid doing what's required because there's a bunch of daily straight talk involved. So here's what we're going to do - rather than us training you and then you throwing away all that training because it's human nature to avoid confrontation, we're just going to have you rank your employees 1 through 10. We may fire #9 and #10. That's all you have to do - see you in December for that, right around the holidays. Please go back to avoiding tough conversations."
Companies stack rank because it's the path of least resistance, the lowest common denominator for what needs to be done.
Amanda's one of the good ones. The problem is most people won't do what she suggests. Enter the stack rank.
May want to change "past of least resistance" to "path of least of resistance." :)
Posted by: Sanchezjb | July 09, 2012 at 10:09 AM
Did you see the damning article on stacked ranking at Microsoft? Insiders basically blame forced ranking for crippling MSFT over the last decade. Check out the article at http://www.theatlanticwire.com/technology/2012/07/inside-bureaucracy-crippled-microsoft/54143/
Posted by: Bob Lehto | July 09, 2012 at 12:09 PM
I for one love, love, love the process. Posted about it in December 2008 (link here: http://fistfuloftalent.com/2008/12/i-love-forced-rankings.html )
Upshot from that post:
"Now, before the rotten tomatoes fly – I’m only talking about the process of forced ranking – not the ultimate outcome, such as letting the bottom 10% go. I’m also not suggesting that any outcome, from a forced ranking scenario, be shared with your employees. I’m simply saying that following the process, of identifying your top performers, your middle performers and your lower performers, helps crystallize your decision making for the future. Forced rankings inject a constraint in the decision process – and constraints make you think different."
Posted by: Paul Hebert | July 09, 2012 at 01:51 PM
Well, one counterpoint of push-back I’d offer Amanda is “What do your end of year results look like?” If you have maxed out all of your performance targets, I’ll buy you have a team of stars. If not, I won’t. I don’t believe in the nonsense of firing the lowest performers “automatically”. GE, Microsoft and others certainly got their fair share of righteous criticism for doing that. But, that said, let’s turn the conversation around a little to development. If someone does hold the proverbial “gun to your head” and force you to stack rank, there has to be a reason why Suzie and John are #9 and #10 (regardless of how unfair that process is). As their manager, do you have a plan to improve their performance and get them out of the bottom? If not, you’re losing street cred, Amanda. Sell me that you your team has achieved their targets AND that you are aggressively pursuing development with the weakest of your strong performers and I, as your HR Leader, will approve all your raises and probably promote you too, Amanda!
Posted by: Carlo Amato | July 09, 2012 at 03:34 PM
I agree with the earlier post that constraints do make you think differently. I would love to ensure that all the managers I work with provide enough valuable, actionable, and fair coaching/feedback to get everyone to a place in which they are meeting (and preferably exceeding) expectations. I haven't seen this consistently be the case yet. And some managers just can't accept that everyone is not a star because they are so scared of looking bad themselves. I don't know the right answer here, but I do see the reason this came to be somewhat standard over time, and why it is still used. I'll continue to do my part. I expect managers and leaders to do theirs, with or without stack ranking.
Posted by: Joey | July 09, 2012 at 11:53 PM
@CarloAmato - in a team of 10, someone has to be on the bottom. It sounds as if you are advocating doing more coaching for Suzie and John, to the detriment of folks in slots 5 to 8, simply to have a change in rank on your team. This wasting of effort on lower performers is a proven strategy for lowering team performance - instead, spend time coahcing those with the most unrealized potential. Instead of ranking within a team, ideally you rank within an organization, and only punish the bottom ranks if you can get a better person at some or lower cost.
Posted by: Shane | July 10, 2012 at 09:48 AM
Ugh. You've hit a sore spot, Kris. In the past, I've had "upper management" tell me that forced ranking is necessary even with teams of 3-4 people. I have several problems with this.
1 - Unless you have 10+ people, I don't think it is statistically valid (to assume that you have 1 star, 1 mediocre, and 1 poor performer)
2 - To your point: if you have hired well, manage well, and yes, hit or exceed your team's targets you are likely to have a high concentration of star performers. Case closed.
3 - I'm also a strong believer in further developing strengths, not managing weaknesses and that goes for teams as well. Yes, your poor performers need some guidance and management, but the bulk of your efforts should be in further developing your stars and those with the potential for high performance. Unless there is some stand out reason why someone is a poor performer and you can realistically expect that it can be changed, don't waste your precious time there.
In my humble opinion....
Posted by: Kris | July 10, 2012 at 10:52 AM
How misguided a label can make people. stacked ranking , performance etc. All are use to deflect the real agenda to keep you from seeing the truth.
the truth is we get used and abused by employers who are only interested in squeezing the most profit from the staff . When times are tough these people have $$s to survive and most often flourish while the rest of us lose everything. Dont allow these mugs to manipulate you this way. Put in a decent days work for a decent days pay yes but dont accept performance measures which are so arbitrary and dependent on outside forces as to be useless...accept to the company to keep you enslaved
Posted by: George | July 10, 2012 at 06:47 PM
History is full of methods that back-fire badly - Here is what you miss:
1. People in the *same* group will not help each other - they now compete with each other and the stakes are very real - from bonus to jobs. In the bad case - people will sabotage other people work.
2.people will be inclined to hire poor performers and avoid hire people better than them. Managers will be included to keep poor performers until they leave of forced to be fired - so it will be easy to fill the low ranks
3. people that move groups will get the lowers rank, as a consequence workers will not share their intend to move and drop it unplanned
4. after few rounds you don't have poor performers - then managers are forced to lie to workers.
Posted by: anonymous | September 28, 2012 at 11:47 PM
I lean towards believing that forced ranking/distribution and pay-for-performance is the lesser of other evils and certainly better than nepotism. If you couple it with honesty and compassion, you've got a good recipe. It's like someone (Churchill?) said about capitalism... it's the worse system ever invented... except for all others.
I've seen a range of implementations of forced rankings exercises. Some have resulted in some great conversations. Some have resulted in a political/popularity contest. I think IF you have to do this - it's good to let each person know
1. where they ranked
2. why they were ranked there, and
3. what they can do to change that ranking.
My company lets everyone know if they ranked in the top, middle, or bottom third.
Have any of you ever had to let go someone that was not aware they ranked at the bottom? That is a horrible feeling. I did it early in my career when we had an unexpected RIF. I considered it a moral failure, and it's never happened again.
I've managed for 15 years and been managed for 25. My experience is that most managers don't have frank conversations with their employees. Sometimes it's lack of courage, sometimes it's from laziness (they just really don't know what the hell their folks are doing). One thing I have seen work well is to have HR professionals review the written evals (at least for the top and bottom X%). It minimizes laziness and wimpiness and allows coaching of managers who may be a little rough around the edges. But, you better put some experienced HR folks on this task.
Now, what if we turned the whole stressful performance eval process on its head and didn't link the eval with pay? Just put aside for the moment the question "how do you decide compensation if not performance evals?" What if managers had performance conversations with their employees that had nothing to do with ranking or what their raise or bonus would be? That is, conversations solely geared to development. We've seen from the research on 360s that it's likely we would get better conversations.
Doubtless some of you have read Alfie Kohn's work on pay-for-performance and competition. I don't know where I stand on it, but it's interesting over-a-beer material.
Posted by: MattL | May 08, 2013 at 04:11 PM
The reason that people like Amanda get justifiably pissed off about stack ranking is because the Company or HR makes the performance group, for stack ranking purposes, too small. It's based on an actual statistical theorem called the "Law of Large Numbers". Sometimes your data doesn't show a normal distribution because you don't have enough observations or people in it. Technically speaking your p test is statistically insignificant because your "n" is too small.
If you make the group large enough then it is inevitable that you will have poor performers. Sure non-confrontational managers will always complain about the process, but HR has been misapplying this statistical concept for too long. The other HR issue here is that a manager rarely manages enough people to get a normal distribution that will guarantee poor performers. That means that this exercise is probably more appropriate for a higher level manager, director or executive that is managing, I'd say at least 15 people. The problem there is that they probably don't see the performance of each individual enough, as the amount of their direct reports grows, to actually do the performance review. That's why it's critical that goals, objectives, performance appraisals, performance management, etc.. are clear, consistent, detailed, objective and accurate enough to make a decision off of.
The entire performance management cycle and process has to be effective in order for stack ranking to have a chance. If you use stack ranking to force a non-confrontational manager to "give you a low performer", then you might be better off finding a confrontational manager who you trust. That forced process may be getting applied to too few people and may result in you losing good people.
Posted by: Josh Westbrook | May 09, 2013 at 01:15 PM
Both the article and the comments talk about the bottom performers. That is something that you cannot avoid. People are not robots, and most of the work that we do cannot be quantified into numbers. And no matter how highly trained and smart your team is, you will still have a bottom performer. But that is no reason to fire him or make him/her feel bad.
Imagine the scenario of putting in the same room humanity's great minds, like: Einstein, Tesla, Da Vinci, insert more names here... and then apply stack ranking. How would that look?
Stack ranking is a system that is always looking for a scape goat. And it's not fair to anybody to do that. Because most of the time at work will be spent backstabbing team-mates. How's that for productivity?
So no matter how top management gift wraps this system, it's still something that doesn't encourage productivity and performance, but only backstabbing and remorse.
A good idea would be to try and keep your employees motivated and engaged, not scared witless for their jobs.
Posted by: Robert Beriscovich | May 13, 2013 at 09:50 AM