Rank and Yank: Legitimate Performance Improvement Tool or Ruthless and Unethical Management?

Forced ranking is a performance appraisal system popularizedby Jack Welch when he was CEO of General Electric. It is asystem that has been given the derogatory label of "rank andyank" by its critics. The intent of the forced-ranking system isto improve the performance level of an operation by getting ridof the bottom 10 percent of performers and hiring replacementswho will perform at a high level. a Ranking judgments can bemade in a variety of ways. b For example, a forced distributioncan pre-assign a set percentage of employees that must be placedinto categories such as "most effective," "average," and "needsimprovement." Alternatively, a simple ranking of workers frombest to worst can be used. Top performers may be rewarded andoffered promotion or training. Low performers may be given awarning 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 suitschallenging its use of a forced-ranking system. Conoco used aforced-ranking system and reached an out-of-court settlement ina discrimination lawsuit. Ford Motor Company implemented aforced-ranking system in January 2000 and ended up paying anaward of $10.5 million as a result of class action suits chargingthat the system had a disparate impact on some subgroups ofemployees. Ford has since shelved its forced-ranking system.

Overall, however, there have been relatively few legal challengesto the forced-ranking system. It remains a controversialmanagement practice.A potential downside of forced ranking is increased competitivenessamong workers. d Under a forced-ranking system, workerscan become less focused on common or collaborative tasks.Instead, workers might focus on their individual performance andof performance, but the effect decreased to a near-zero level withinsix years.

Address the following issues:a. Why does the system work? That is, why did the simulationfind improved performance?b. The logic behind the forced-ranking approach and thesimulation is that performance in a workplace is normallydistributed. 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 improvethe average level of performance in the organization?

Explain.Share your judgments on these issues with the rest of theclass

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 forcedistinctions among worker performance levels. In an absolute-rating system, everyone could be rated "above average."Does this difference between the absolute- and relative-ratingapproaches mean that the absolute performance judgmentsare wrong? Explain.

3. As a manager, would you prefer to rely on an absolute performance rating system or a relative system, such asforced ranking? Why?

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