The Folly of Forced Ranking

Navid Nazemian of Waterproof Concepts sent me an article called the Folly of Forced Ranking, by Edward E. Lawler III, from Strategy & Business. Lawler also wrote "Let's Hear It for B Players" recently published in Harvard Business Review. I blogged about a while back.

Diana Robinson summarized the article pretty well, in her article "The Top 10 Reasons Why 'Forced ranking' Quota Systems Don't Work"

1. Legal problems
The system invites legal challenges, and many courts have supported these challenges. Few companies are able to prove to the satisfaction of the courts that their quota systems accurately identify poor performers.

2. The statistics don't work
The theory assumes a normal curve (large numbers of individuals around the middle, flanked by a few "top" and "bottom" performers on either side). In fact statistics relating to normal curves are usually attained only with thousands of individuals, and assume random placement. Few teams or departments have so many members, and one hopes that none place their employees randomly.

3. Inequity across departments
Some teams or departments may consist entirely of superlative performers, yet in this system the bottom 10% will still be cut, whereas another team may be composed largely of poor performers, 90% of whom will be retained.

4. Inequity within departments
Some teams may have many individuals with almost no differences in performance between them, yet supervisors are still forced to identify 10% for elimination. This can lead to charges of unfair treatment, and to lower morale.

5. Long-term damage to morale
If continued year after year, once the initially identified poor performers have been eliminated, who is to be eliminated next? Those who were previously identified as satisfactory? New hires who have not yet had time to get up to speed? When employees are in a state of constant fear they rarely do their best work.

6. Reduced teamwork
The system encourages an 'each person for him/herself' attitude, and discourages teamwork. It also discourages people from asking others for help or for needed training, for fear that this will make them vulnerable to being identified as poor performers.

7. High cost of turnover
Some or all of the employees who are eliminated will have to be replaced, with the resulting costs and uncertainties of hiring and training replacements, and lower productivity in their early months. In addition, employees who are eliminated must have benefits continued, and may bring lawsuits.

8. No incentive to encourage growth in employees
Although intended to encourage improved performance, an arbitrary ranking system provides little chance or time for workers to improve, or for managers to find another job or department in which an employee may fit, and therefore perform, better. The incentive is to retain them so that they may be fodder for the next 10% elimination process.

9. Delays in needed firings
Managers who know that they will need to identify employees for elimination in a few months may deliberately not fire individuals who should be fired immediately, just in order to fill their quota during the elimination period. This can be destructive to the organization and to the morale of other employees.

10. The rich get rich...
Managers do not want to invest time and effort in the development of poor performers who are likely to be eliminated in the near future. Therefore, instead of helping them to develop their skills they may often spend their time working with the better performers who actually need less help."

I haven't run across all this as a manager, but they're certainly things to be aware of. And to be clear, I don't speak for Microsoft, represent the views of those managing our performance measurement system, or make my own management decision based on "fitting to a curve." I should also point out that in my experience, Microsoft DOES NOT have a company policy of eliminating a set percentage of employees annually, or even assigning a quota or set percentage of anything less than a "meeting expectations" score (though many do get such scores).