Performance Management

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 Ge

neral

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.

a

Ranking judgments can be

made in a variety of ways.

b

For example, a forced distribution

can pre

-

assign a set percentage of employees

that must be placed

into categories such as

“

most effective,

”

“

av

erage,

”

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 emplo

yed 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

-

r

anking system and reached an out

-

of

-

court settlement in

a discrimination lawsuit. Ford

Motor Company implemented a

forced

-

ranking system in January 2000 and ended up paying an

award of

$10.5 million as a result of class action suits charging

that the syste

m had a disparate impact on some

subgroups of

employees. Ford has since shelved its forced

-

ranking system.

c

Overall, however, there have been relatively few legal challenges

to the forced

-

ranking system. It remains a

controversial

management practice.

A p

otential downside of forced ranking is increased competitiveness

among workers.

d

Under a forced

-

ranking system, workers

can become less focused on common or

collaborative tasks.

Instead, workers might focus on their individual performance and

of performance, but the

effect decreased to a near

-

zero level within

six years.

Address the following issues:

a. Why does the system work? That is, why did the simulation

find improved

performance?

b. The logic behind the forced

-

ranking approach

and the

simulation is that performance in a

workplace is normally

distributed. Do you think this is an accurate assumption?

Why or why not?

c. If

performance in a workplace is not normally distributed,

do you think a forced

-

ranking approach would still

im

prove

the average level of performance in the organization?

Explain.

Share your judgments on these issues with the rest of the

class

Critical Thinking Questions

1. Do you think forced ranking is a good performance management

system?

Why or why not?

2. Part of the forced

-

ranking label reflects the intent to force

distinctions among w

orker 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. As a manager, wo

uld you prefer to rely on an absolute

performance rating system or a relative system, such

as

forced ranking? Why?

4. Can you devise an absolute

-

rating system that would guarantee

differentiation among workers? Why or why

not?

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. a Ranking judgments can be

made in a variety of ways. b 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 implemented a forced-ranking system in January 2000 and ended up paying an award of

$10.5 million as a result of class action suits charging that the system had a disparate impact on some

subgroups of employees. Ford has since shelved its forced-ranking system. c

Overall, however, there have been relatively few legal challenges to the forced-ranking system. It remains a

controversial management practice. A potential downside of forced ranking is increased competitiveness

among workers. d Under a forced-ranking system, workers can become less focused on common or

collaborative tasks. Instead, workers might focus on their individual performance and of performance, but the

effect decreased to a near-zero level within six years.

Address the following issues: a. Why does the system work? That is, why did the simulation find improved

performance? b. The logic behind the forced-ranking approach and the simulation is that performance in a

workplace is normally distributed. Do you think this is an accurate assumption? Why or why not? c. If

performance in a workplace is not normally distributed, 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

Critical Thinking Questions

1. Do you think forced ranking is a good performance management system?

Why or why not?

2. 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. As a manager, would you prefer to rely on an absolute performance rating system or a relative system, such

as forced ranking? Why?

4. Can you devise an absolute-rating system that would guarantee differentiation among workers? Why or why

not?