Forced-ranking systems (forced distributions, “rank and yank”)

Forced-ranking systems are employee performance review systems where workers within groups or departments are rated best to worst with the lowest ranked workers either terminated or considered for termination. Also called forced distributions or “rank and yank,” forced-ranking systems were popular in the 1990s among many major companies including General Electric, Cisco Systems, Ford, Microsoft and Intel. Even the infamous Enron Corporation had a forced-ranking system. At Enron workers rated “needs improvement” meant “you have one leg hanging out the window,” while “there are issues associated with an employee” meant “you’re gone.” Ford’s system probably received the most negative publicity and was dropped after numerous employee complaints and lawsuits. The most common criticism has been that forced-ranking systems are biased, often using subjective criteria and favoring younger and majority employees over minorities. These systems can also be demoralizing, especially when their criteria are not well understood. Another criticism is that forced ranking might make a mediocre employee in a poorly performing unit look good and penalize a strong performing employee in an exceptional unit. Many senior managers like forced-ranking systems. Legendary General Electric CEO Jack Welch Jr. touted the system as the best way to eliminate the least productive employees. Welch is quoted as saying, “A company that bets its future on its people must remove that lower 10 percent, and keep removing it every year—always raising the bar of performance and increasing the quality of its LEADERSHIP.” An Intel spokesperson says of forced ranking systems, “It rewards good performance, not seniority, not cronyism, not teacher’s pets. We think it is a pretty accurate reflection of people’s performance.” However, as Bonnie Kabin, a workforce-training consultant, notes, “What happens with forced distribution is that there is no place to hide. If your performance is poor, a manager is forced to make a decision.” Often managers, especially first-line supervisors, are reticent to make critical evaluations and decisions. Called the “halo effect,” or “Lake Wobegon” evaluations, everyone is rated above average.
See also 360-DEGREE FEEDBACK.