LWC MBA Companies Yanking Forced Ranking & Forced Ranking Systems Discussion
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Your initial posts will be due by Sunday of each week of the module. All original threads should be at least 250 words. This parameter helps to promote writing that is thorough, yet concise enough to permit other students to read all the postings. The thoughts and opinions expressed in your thread need to be substantiated by research and literature (from the textbook or outside sources). All references should be in correct APA style. While this is a formal discussion environment, you are allowed to use the first person perspective in all your posts since you will be expressing your personal opinions. All original threads should: Bring clarity to the issues being discussed. Raise new and novel (yet relevant) points. Relate issues to personal experience. Rationally defend your stated position.
Why Are Some Companies Yanking Forced-Ranking?
Forced ranking is a popular performance management tool for many well-known companies such as Ford Motor Company, 3M, and Intel. For decades, forced-ranking appraisal practices have helped organizations and their managers differentiate among high- to low-performing employees. This exercise is important because it shows how organizations decide to recognize and reward top performers and determine grounds for terminating low performers.
The goal of this exercise is to demonstrate the advantages and disadvantages of forced-ranking systems.
Read the case about the Adobe’s performance-management practices. Then using the 3-step problem-solving approach, answer the questions that follow.
Money is an important tool for both attracting and motivating talent. If you owned a company or were its CEO, you would likely agree and choose performance management practices to deliver such outcomes. You would probably also favor rewarding high performers and having an effective means for removing low performers. For decades, forced-ranking appraisal practices have helped organizations and their managers differentiate employee performance and achieve both objectives—rewarding top performers and providing grounds for terminating the low performers.
Broad Appeal
These qualities made forced ranking (also known as forced distribution or “rank and yank”) a popular performance management tool for many marquee companies, such as Ford Motor Company, 3M, and Intel. GE, for instance, made the approach famous using its “vitality curve” to rate employees into three categories—top 20 percent, middle 70 percent, and bottom 10 percent. The top often received raises two to three times greater than the next group, while the bottom group was often put on probation or fired.1 Microsoft also used forced distribution to ensure it was always raising the bar on talent and performance. It replaced its lowest-performing employees with the best in the market and ensured there was always more exciting work than it had people to do it.2
One argument in support of forced ranking is increased accountability. It requires managers to do the difficult work of differentiating performance. While nobody likes to be the bearer of bad news, not confronting performance issues is an underlying cause of score inflation (grade inflation in school) and mediocrity. The implication is that not everybody can be a top performer, and it is management’s job to know and acknowledge the differences. Forced ranking also can be used to remove “dead wood.” Employees who aren’t as driven, capable, or competitive are driven out and replaced with those who are.3
Another central supportive argument is that resources are constrained, notably people and money. Culling the workforce based on performance is a way to be sure your best employees are able to work on the company’s most important and valuable projects, products, and services. And it allows companies not only to allocate more to their best employees, but also to create clear and often substantial differences between different levels of performance and associated rewards.
This All Makes Sense, But Why Are Many Company’s Yanking the Practice?
Performance management practices have compounded the challenges faced by Yahoo and Amazon. According to a spokesperson at Yahoo, the company’s program—quarterly performance review (QPR) recommended by McKinsey Consulting—is intended to “allow for high performers to engage in increasingly larger opportunities at our company, as well as for low performers to be transitioned out.”4 However, problems arose when managers and employees accused the company of using it to fire employees “for performance” instead of laying them off. The scale of this issue is substantial, given that nearly one-third of the company’s workforce left or was terminated in 2015-2016, though the law requires at least 30 days’ notice for mass layoffs.5 Similar practices also were linked to discriminatory dismissals at Ford, Goodyear, and Capital One and caused them to change their practices.6
Amazon has embraced forced ranking to foster internal competition and drive employees to always improve. Its organizational-level review (OLR) process requires managers to select which employees to support and which to “sacrifice” (not all employees can pass). Even after an incredibly rigorous hiring process intended to select the best of the best, employees are distributed into high, average, and low performers—20, 60, and 20 percent, respectively. This means 80 percent of the company’s employees have stopped being stars by the time of their first performance review. The process is challenging for managers too, who must continually select talented subordinates to fire at every performance review.7
Rank and Yank at Adobe
Another company that championed forced ranking was Adobe. It had a rigorous, complex, technology-driven process for ranking its employees each year. Performance expectations were set and performance was measured, documented, reviewed, and rewarded. The goals were to help the company improve employee performance and ensure it had the best talent. However, what the company actually achieved was quite different.
Adobe calculated that its process of reviewing its 13,000 employees required approximately 80,000 hours from its 2,000 managers each January and February. This massive time commitment actually reduced employee performance, because this time wasn’t being spent on productive work like developing products or cultivating and serving customers. And while the system was meant to ensure manager accountability, it actually allowed many to avoid confronting low performers until the annual review. This meant low performers were terminated only once a year.
Donna Morris, Adobe’s global senior vice president of people and places, described the PM flaws this way: “Especially troublesome was that the company’s ‘rank and yank’ system, which forced managers to identify and fire their least productive team members, caused so much infighting and resentment that, each year, it was making some of the software maker’s best people flee to competitors.”8 Moreover, the performance management practices did not align with the goals of employee growth and team work, both fundamental to Adobe’s success. It instead focused on past performance and compared employees to each other.
The shortcomings of the process were underscored by internal “employee surveys that revealed employees felt less inspired and motivated afterwards—and turnover increased.”9 This last point compounded problems by causing the wrong employees—the high-performing ones—to quit.
Assume you are Donna Morris, Adobe’s global senior vice president of people and places. How does the information in the case inform your recommendations about PM practices at Adobe?
Apply the 3-Step Problem-Sol
Step 1: Define the problem.
Step 2: Identify causes of the problem by using material from this chapter, which has been summarized in the Organizing Framework for Chapter 6 and is shown in Figure 6.6. Causes will tend to show up in either the Inputs box or the Processes box.
Step 3: Make your recommendations for solving the problem. Consider whether you want to resolve it, solve it, or dissolve it (see Section 1.5). Which recommendation is desirable and feasible?
Footnotes
1. S. Moon, S. Scullen, and G. Latham, “Precarious Curve Ahead: The Effects of Forced Distribution Rating Systems on Job Performance,” Human Resource Management Review, 2016, 166–179.
2. C. Bartlett, “Microsoft: Competing on Talent,” Harvard Business Review, July 25, 2001.
3. S. Moon, S. Scullen, and G. Latham, “Precarious Curve Ahead: The Effects of Forced Distribution Rating Systems on Job Performance,” Human Resource Management Review, 2016, 166–179.
4. Goel, “A Yahoo Employee-Ranking System Favored by Marissa Mayer Is Challenged in Court,” The New York Times, February 1, 2016: http://www.nytimes.com/2016/02/02/technology/yahoo… .
5. A. Smith, “Yahoo’s Forced Ranking Raises Legal Questions,” SHRM, February 4, 2016, https://www.shrm.org/legalissues/federalresources/pages/yahoo-forced-ranking.aspx.
6. V. Assad, “Forced Ranking: The Good, the Bad, and the Ugly and What to Do About It,” LinkedIn, May 18, 2015,https://www.linkedin.com/pulse/forced-ranking-good-bad-ugly-what-do-victor-assad. See also, G. Giumetti, A. Schroeder, and F. Switzer, “Forced Distribution Rating Systems: When Does ‘Rank and Yank’ Lead to Adverse Impact?” Journal of Applied Psychology, 2015, 180–193.
7. R. Wellins, “Forced Ranking: A Response to the Amazon Story,” DDI World, September 10, 2015,http://www.ddiworld.com/blog/tmi/september-2015/forced-ranking-a-response-to-the-amazon-story.
8. A. Fisher, “How Adobe Keeps Key Employees from Quitting,” Fortune, June 16, 2015, http://fortune.com/2015/06/16/adobe-employee-reten… .
9. R. Sutton, “How Adobe Got Rid of Traditional Performance Reviews,” LinkedIn, February 6, 2014, https://www.linkedin.com/pulse/20140206114808-15893932-how-adobe-got-rid-of-traditional-performance-reviews.
