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Forced Ranking: Making Performance Management Work
This is a comprehensive how-to guide to designing and implementing a fair and effective forced ranking system, including how to accurately categorise A, B and C players, and manage and reward players differently. It clears away the confusion surrounding a controversial performance management practice called forced ranking, which evaluates how well employees perform relative to their peers instead of against predetermined performance goals. More importantly, it provides a tactical, how-to guide for doing forced ranking right - and highlights the huge advantages firms and their employees can reap by doing so.
- GenresBusiness
260 pages, Hardcover
First published November 1, 2005
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June 5, 2012
Forced Ranking: Making Performance Management Work
Dick Grote
Introduction:
• Forced ranking is a management process that requires managers to assess how well people performed compared with how well other people performed.
• The traditional performance appraisal system asks managers how well George did in meeting his goals. A forced ranking process asks a different question: how well did George meet his goals compared with how well Bob and Sally and Joe met theirs?
• Forced ranking requires that managers differentiate their talent into predetermined buckets: top 20%, middle 70%, and bottom 10%.
• Forced ranking both demands and guarantees differentiation.
• Forced ranking uses a relative comparison approach.
• Managers will differentiate talent with a forced ranking procedure.
• Forced ranking can validate decisions made in other talent management processes like succession planning, career development, and leadership selection and training.
• Creates a forum for serious conversation about performance.
Central Truths:
• Truthfully evaluating the quality of people’s performance – and their potential – allows organizations to make critically important decisions correctly: how should rewards be allocated? When a vacancy arises, who should be tapped for promotion? Do we already have excellent candidates ready and waiting inside the organization, or do we need to go outside to get the talent we need? What is the depth of our talent pool? Do we have the people we need to meet the demands of the future? Who are our best performers, the people who are outstanding performers in their present positions with the potential to take on more demanding roles? Do we have retention strategies in place to make sure that they don not leave? Who are our worst performers and what do we need to do about them?
• One significant reason that managers are reluctant to use their performance management system properly is that the system requires them to differentiate: to go on record that one employee performs better than another.
• Differentiation is the mother’s milk of building a performance culture.
• Every employee wants the answers to two questions: what do you expect of me? and How am I doing at meeting your expectations? Organization has moral obligation to answer both questions honestly.
• What do you expect of me is answered by setting goals, clarifying job responsibilities, and communicating clear expectations about the behaviors we expect of employees.
• The second question can be answered in one of two ways: respond in terms of absolute performance or focus on relative performance.
• Absolute comparison approach: evaluate in terms of what employee achieved and how he went about achieving it (results and behaviors). How well did Sam do against the goals and objectives that were set at the beginning of the year? This is the conventional approach to performance evaluation. Yearend report depends on how tough the goals were and how high or low the boss’s expectations are. Managers tend to set performance standards at a level that they are reasonably sure their subordinates can meet. Everyone, including the least talented, end up exceeding expectations. There is no differentiation in terms of their performance.
• Relative comparison approach: evaluate in terms of how well employee did compared to how well other people did. How good a job did Sam do compared with how well Betty, George, and Tom did?
• A forced ranking procedure forces managers to think in far greater depth about the quality of talent in their unit than conventional performance appraisal systems.
• A forced ranking system alone will not tell you what to do to keep your keepers or make them into even more valuable contributors. You need other processes for that.
• Forced ranking is most successful when it’s positioned and used as a talent management technique and not a turkey targeting exercise. Real benefit does not come from finding and firing the bottom 10%. It actually comes from identifying the organization’s top talent and nurturing and developing these high potential individuals. This may actually be more important than taking action on the poorest performers.
• Ranking happens all the time in an organization, mostly in informal conversations around the water cooler or in similar venues. These offhand discussions are not guided by ground rules, criteria, or procedures.
• Variances in productivity across workers average about 2 to 1; good workers produce about twice the output of poor workers.
• Rewards: combats artificially inflated performance appraisal ratings; forces information out in the open; supplements an organization’s overall talent management efforts; jolts managers and organizations out of complacency; provides sound and defensible rationale for all important personnel actions.
• Objectivity does not involve countability. It means being uninfluenced by emotions or prejudices and basing one’s judgment on observable phenomena, like a person’s job performance, which continually under observation.
• While everyone in a small department may indeed play a unique role well and deliver fully acceptable levels of performance, some play their roles better than others and offer more potential to play bigger and more challenging roles.
• HR departments too often adopt a socialistic rather than capitalistic approach toward the management of human resources. They are too often the advocate of the weak rather than the strong, spending too much energy to ameliorate poor performing employees and managers despite the fact that HR has no statistical evidence or metrics that show that focusing on poor performers results in them ever becoming top performers. Striving to eliminate any special treatment means turkeys and eagles get the same treatment.
• The operation, implementation, and mechanics of a forced ranking system must be clearly thought out and skillfully implemented if the procedure is going to be genuinely effective and accurate in identifying the relative contributions made by employees.
• The least risky use of forced ranking is to use ranking to identify top performers who will receive higher pay and other rewards.
• Performance evaluation system provides for the identification of key job responsibilities and identifies the standards and measures that the boss will use to evaluate the quality of the employee’ performance.
• Performance evaluation largely focuses on the past; forced ranking focuses primarily on the future.
• Growing number of companies are instituting “rater reliability” or “cross-calibration” or leveling mechanisms as part of their performance appraisal systems. Purpose of process is to make sure that different appraisers apply similar standards in assessing the performance of their employees.
o Ensures a level playing field
o Rating errors are reduced
o Increases probability that managers will take performance management responsibilities seriously
o Increases defensibility if evaluation results are challenged
o Enhances appraisers’ managerial skills
• Strong benefit by asking senior managers to review and sign off on the evaluations written by their juniors is that senior managers will be able to confirm or question their own feelings about where the talent in the organization lies.
• Carefully reviewing evaluations in the most important step mid-level managers through top executives can take to build accountability for performance management.
Application:
• To improve the performance evaluation system: make sure that the performance appraisal system is up-to-date, reflects best practices, and is used effectively by everyone in the organization. Second, realize that no matter how well the performance appraisal system may be designed and how well it operates; there are inherent limitations to the results it can produce.
• Forced ranking systems should be used for only a few years and then, once the obvious and immediate benefits have been achieved, replaced with other talent management initiatives. Should be considered as a short-term initiative. The greatest benefits came in the first 3.5 to 4.5 years after initiating a forced ranking system.
• 100 employees is about the minimum-size that should consider implementing a forced ranking process.
• Forced ranking is typically reserved for higher-level employees.
• Exercise caution in deciding on the labels to be used for the different categories in the forced ranking system. Also, consider providing people with the ability to contest the assignment they receive in the process.
• Start by surveying work force to assess whether employees will support the introduction of forced ranking (cultural check). Also conduct a specific audit of the company’s current performance management practices and results. How good a job are managers doing right now at using the current system? Are employees getting a clear, unequivocal message about how they are doing, their career prospects in the company, and their strengths and weaknesses? Are there particular pockets of leniency or toughness in the organization?
• There are many administrative decisions that must be made in creating a forced ranking process: who should be in the ranking pool, how small groups will be handled, what ranking scheme will be used, whether top management will be included in the population to be ranked, what will happen to those ranked at the bottom, what development plans will be instituted for those ranked at the top.
• 20-70-1 ranking scheme has some obvious advantages: it has been used extensively and there are more people at the positive end of the curve than there are at the lower end.
• Provide raters with briefing books that include following information on all individuals to be reviewed: brief bio, photo, title, time in position, and full demographic info.
• Have targeted communication effort (coming directly from the top) aimed directly at the two groups with a personal stake in the process – the rankers and rankees. May be good to have companywide communications effort directed at those who will be neither rankers nor rankees. Can have beneficial outcome of demonstrating to the people at the bottom of the hierarchy that those at the top are subject to greater scrutiny.
• Tell people how they came out in the ranking process: can be an effective retention tactic. If this produces an arrogant crown prince, this may be actually benefit in bringing to light a person’s true nature quickly.
• Forced ranking procedure produces five different results: A Players: high-potential, high performance employees. End up in the top 20% category. High B Players: barely missed being named in the top 20% due to newness in position, significant weakness that required attention, or just were just a tad below caliber of solid A’s. Solid B Players: the great majority of fully s8ccessful contributors. B Minus Players: barely escaped being placed in the bottom 10% category. C Players: the bottom 10%.
• Up-or-Out Plans: for people identified in the bottom category. Managers must be held accountable for creating and executing plans to replace or reassign each person so identified.
• Two operational components will always be critical to the system’s ultimate success: training those who will serve as rankers and running the sessions competently.
• Performance/Potential Matrix (P-104) and Results/Behavior Matrix (102). Help raters understand the relationship between performance and potential.
• Must get truth into the performance management process. Must take direct action to build a culture of accountability.
o Provide for a rater reliability or calibration procedure
o Insist that senior managers review all evaluations before the supervisor reviews them with their employees.
• Review manager responsibilities: ensure timely completion of performance reviews; ensure fair, thorough, and complete reviews; ensure inter-rater reliability; and coach appraisers for success.
• Process assessment: final activity in the year-long performance management process is the completion of a survey focusing on how effective the performance management process was and how well it was executed. Did your supervisor conduct a performance planning meeting with you at the start of the year? Did you receive a mid-term feedback report? How would you describe your supervisor’s participation in the performance management process? How long did the performance planning meeting last? How useful was the performance evaluation form in helping you understand your strengths and improvement needs and succeed in your job in the future? How successful were you in completing your development plan? Do you get useful feedback on your work performance and results?
• Areas of examination: is there a consistent distribution of performance evaluation ratings at various job levels? (within PG 13 what % are 1, 2, 3, 4, 5) What % of employees received the same rating in year 2 as they did in year 1? What percentage received a higher rating? What % got a lower rating?
Calibration Process:
• Managers prepare preliminary performance evaluation reports, including planned ratings.
• Group of managers whom all supervise employees with similar job responsibilities meet for calibration session.
• Session participants discuss the proposed rating for each employee
• Talk about how each of them came to the conclusions about the appropriate rating for each person.
• Share information and ensure they are using the same yardstick to evaluate performance.
• Make adjustments in proposed ratings to ensure accuracy, consistency, and inter-rater reliability.
• Stress the importance of ensuring a level playing field is the primary and most accurate message that needs to be sent to everyone.
• Pages 156-164 (Operation of Calibration Session)
Dick Grote
Introduction:
• Forced ranking is a management process that requires managers to assess how well people performed compared with how well other people performed.
• The traditional performance appraisal system asks managers how well George did in meeting his goals. A forced ranking process asks a different question: how well did George meet his goals compared with how well Bob and Sally and Joe met theirs?
• Forced ranking requires that managers differentiate their talent into predetermined buckets: top 20%, middle 70%, and bottom 10%.
• Forced ranking both demands and guarantees differentiation.
• Forced ranking uses a relative comparison approach.
• Managers will differentiate talent with a forced ranking procedure.
• Forced ranking can validate decisions made in other talent management processes like succession planning, career development, and leadership selection and training.
• Creates a forum for serious conversation about performance.
Central Truths:
• Truthfully evaluating the quality of people’s performance – and their potential – allows organizations to make critically important decisions correctly: how should rewards be allocated? When a vacancy arises, who should be tapped for promotion? Do we already have excellent candidates ready and waiting inside the organization, or do we need to go outside to get the talent we need? What is the depth of our talent pool? Do we have the people we need to meet the demands of the future? Who are our best performers, the people who are outstanding performers in their present positions with the potential to take on more demanding roles? Do we have retention strategies in place to make sure that they don not leave? Who are our worst performers and what do we need to do about them?
• One significant reason that managers are reluctant to use their performance management system properly is that the system requires them to differentiate: to go on record that one employee performs better than another.
• Differentiation is the mother’s milk of building a performance culture.
• Every employee wants the answers to two questions: what do you expect of me? and How am I doing at meeting your expectations? Organization has moral obligation to answer both questions honestly.
• What do you expect of me is answered by setting goals, clarifying job responsibilities, and communicating clear expectations about the behaviors we expect of employees.
• The second question can be answered in one of two ways: respond in terms of absolute performance or focus on relative performance.
• Absolute comparison approach: evaluate in terms of what employee achieved and how he went about achieving it (results and behaviors). How well did Sam do against the goals and objectives that were set at the beginning of the year? This is the conventional approach to performance evaluation. Yearend report depends on how tough the goals were and how high or low the boss’s expectations are. Managers tend to set performance standards at a level that they are reasonably sure their subordinates can meet. Everyone, including the least talented, end up exceeding expectations. There is no differentiation in terms of their performance.
• Relative comparison approach: evaluate in terms of how well employee did compared to how well other people did. How good a job did Sam do compared with how well Betty, George, and Tom did?
• A forced ranking procedure forces managers to think in far greater depth about the quality of talent in their unit than conventional performance appraisal systems.
• A forced ranking system alone will not tell you what to do to keep your keepers or make them into even more valuable contributors. You need other processes for that.
• Forced ranking is most successful when it’s positioned and used as a talent management technique and not a turkey targeting exercise. Real benefit does not come from finding and firing the bottom 10%. It actually comes from identifying the organization’s top talent and nurturing and developing these high potential individuals. This may actually be more important than taking action on the poorest performers.
• Ranking happens all the time in an organization, mostly in informal conversations around the water cooler or in similar venues. These offhand discussions are not guided by ground rules, criteria, or procedures.
• Variances in productivity across workers average about 2 to 1; good workers produce about twice the output of poor workers.
• Rewards: combats artificially inflated performance appraisal ratings; forces information out in the open; supplements an organization’s overall talent management efforts; jolts managers and organizations out of complacency; provides sound and defensible rationale for all important personnel actions.
• Objectivity does not involve countability. It means being uninfluenced by emotions or prejudices and basing one’s judgment on observable phenomena, like a person’s job performance, which continually under observation.
• While everyone in a small department may indeed play a unique role well and deliver fully acceptable levels of performance, some play their roles better than others and offer more potential to play bigger and more challenging roles.
• HR departments too often adopt a socialistic rather than capitalistic approach toward the management of human resources. They are too often the advocate of the weak rather than the strong, spending too much energy to ameliorate poor performing employees and managers despite the fact that HR has no statistical evidence or metrics that show that focusing on poor performers results in them ever becoming top performers. Striving to eliminate any special treatment means turkeys and eagles get the same treatment.
• The operation, implementation, and mechanics of a forced ranking system must be clearly thought out and skillfully implemented if the procedure is going to be genuinely effective and accurate in identifying the relative contributions made by employees.
• The least risky use of forced ranking is to use ranking to identify top performers who will receive higher pay and other rewards.
• Performance evaluation system provides for the identification of key job responsibilities and identifies the standards and measures that the boss will use to evaluate the quality of the employee’ performance.
• Performance evaluation largely focuses on the past; forced ranking focuses primarily on the future.
• Growing number of companies are instituting “rater reliability” or “cross-calibration” or leveling mechanisms as part of their performance appraisal systems. Purpose of process is to make sure that different appraisers apply similar standards in assessing the performance of their employees.
o Ensures a level playing field
o Rating errors are reduced
o Increases probability that managers will take performance management responsibilities seriously
o Increases defensibility if evaluation results are challenged
o Enhances appraisers’ managerial skills
• Strong benefit by asking senior managers to review and sign off on the evaluations written by their juniors is that senior managers will be able to confirm or question their own feelings about where the talent in the organization lies.
• Carefully reviewing evaluations in the most important step mid-level managers through top executives can take to build accountability for performance management.
Application:
• To improve the performance evaluation system: make sure that the performance appraisal system is up-to-date, reflects best practices, and is used effectively by everyone in the organization. Second, realize that no matter how well the performance appraisal system may be designed and how well it operates; there are inherent limitations to the results it can produce.
• Forced ranking systems should be used for only a few years and then, once the obvious and immediate benefits have been achieved, replaced with other talent management initiatives. Should be considered as a short-term initiative. The greatest benefits came in the first 3.5 to 4.5 years after initiating a forced ranking system.
• 100 employees is about the minimum-size that should consider implementing a forced ranking process.
• Forced ranking is typically reserved for higher-level employees.
• Exercise caution in deciding on the labels to be used for the different categories in the forced ranking system. Also, consider providing people with the ability to contest the assignment they receive in the process.
• Start by surveying work force to assess whether employees will support the introduction of forced ranking (cultural check). Also conduct a specific audit of the company’s current performance management practices and results. How good a job are managers doing right now at using the current system? Are employees getting a clear, unequivocal message about how they are doing, their career prospects in the company, and their strengths and weaknesses? Are there particular pockets of leniency or toughness in the organization?
• There are many administrative decisions that must be made in creating a forced ranking process: who should be in the ranking pool, how small groups will be handled, what ranking scheme will be used, whether top management will be included in the population to be ranked, what will happen to those ranked at the bottom, what development plans will be instituted for those ranked at the top.
• 20-70-1 ranking scheme has some obvious advantages: it has been used extensively and there are more people at the positive end of the curve than there are at the lower end.
• Provide raters with briefing books that include following information on all individuals to be reviewed: brief bio, photo, title, time in position, and full demographic info.
• Have targeted communication effort (coming directly from the top) aimed directly at the two groups with a personal stake in the process – the rankers and rankees. May be good to have companywide communications effort directed at those who will be neither rankers nor rankees. Can have beneficial outcome of demonstrating to the people at the bottom of the hierarchy that those at the top are subject to greater scrutiny.
• Tell people how they came out in the ranking process: can be an effective retention tactic. If this produces an arrogant crown prince, this may be actually benefit in bringing to light a person’s true nature quickly.
• Forced ranking procedure produces five different results: A Players: high-potential, high performance employees. End up in the top 20% category. High B Players: barely missed being named in the top 20% due to newness in position, significant weakness that required attention, or just were just a tad below caliber of solid A’s. Solid B Players: the great majority of fully s8ccessful contributors. B Minus Players: barely escaped being placed in the bottom 10% category. C Players: the bottom 10%.
• Up-or-Out Plans: for people identified in the bottom category. Managers must be held accountable for creating and executing plans to replace or reassign each person so identified.
• Two operational components will always be critical to the system’s ultimate success: training those who will serve as rankers and running the sessions competently.
• Performance/Potential Matrix (P-104) and Results/Behavior Matrix (102). Help raters understand the relationship between performance and potential.
• Must get truth into the performance management process. Must take direct action to build a culture of accountability.
o Provide for a rater reliability or calibration procedure
o Insist that senior managers review all evaluations before the supervisor reviews them with their employees.
• Review manager responsibilities: ensure timely completion of performance reviews; ensure fair, thorough, and complete reviews; ensure inter-rater reliability; and coach appraisers for success.
• Process assessment: final activity in the year-long performance management process is the completion of a survey focusing on how effective the performance management process was and how well it was executed. Did your supervisor conduct a performance planning meeting with you at the start of the year? Did you receive a mid-term feedback report? How would you describe your supervisor’s participation in the performance management process? How long did the performance planning meeting last? How useful was the performance evaluation form in helping you understand your strengths and improvement needs and succeed in your job in the future? How successful were you in completing your development plan? Do you get useful feedback on your work performance and results?
• Areas of examination: is there a consistent distribution of performance evaluation ratings at various job levels? (within PG 13 what % are 1, 2, 3, 4, 5) What % of employees received the same rating in year 2 as they did in year 1? What percentage received a higher rating? What % got a lower rating?
Calibration Process:
• Managers prepare preliminary performance evaluation reports, including planned ratings.
• Group of managers whom all supervise employees with similar job responsibilities meet for calibration session.
• Session participants discuss the proposed rating for each employee
• Talk about how each of them came to the conclusions about the appropriate rating for each person.
• Share information and ensure they are using the same yardstick to evaluate performance.
• Make adjustments in proposed ratings to ensure accuracy, consistency, and inter-rater reliability.
• Stress the importance of ensuring a level playing field is the primary and most accurate message that needs to be sent to everyone.
• Pages 156-164 (Operation of Calibration Session)
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