Summary
Forced ranking is a performance appraisal system that is intended at improving the performance levels of an operation by getting rid of low performers and hiring replacements. Workers are ranked based on a scale that determines those that have been performing well, average performers, and those that need improvement. Top performers are encouraged by being offered training and/or promotion, while low performers are given warnings or terminated. Some renowned companies that have employed forced ranking include Microsoft, Conoco, Ford Motor Company, Goodyear, and Sprint. Because of forced ranking, most of these companies have faced lawsuits on the grounds that the method is discriminatory. The main advantage of forced ranking is that it raises the bar for performance, thus creating a team of top performers. The method has, however, been criticized for various reasons. The forced ranking has been known to weigh down on collaborative cultures, instead of promoting competitiveness. The method is also associated with a lack of continuity in teams. Moreover, the method is likely to promote high levels of performance while disregarding ethical performance.
Critical thinking questions
- I do not think that forced ranking is a good performance management system. Although it promotes performance, it has multiple downsides and is likely to weigh down on an organizational culture.
- Relative performance judgments are wrong because they tend to coerce managers and supervisors to make a decision based on performance levels of best performers. They tend to disregard other contributions that employees could be bringing to the organization. Thus, relative performance judgments are wrong.
- As a manager, I would prefer to rely on an absolute performance rating system. Such a system would assess employees based on a set of predetermined performance parameters. Such a system would still be effective in sustaining a team of high performers.
- It is possible to devise an absolute performance system that would guarantee differentiation among workers. Unlike relative performance systems, however, this differentiation would not be determined by the performance of others but by the ability to meet a set of predetermined performance standards.
Key learnings
One of the key learnings I derived from this case is that, although an appraisal method may deliver desirable results for the organization, it may not always be beneficial to the welfare of employees. This is in lieu of the fact that forced ranking is likely to get employees to performed based on coercion and fear of termination. While the method may bring the best out of employees who thrive under pressure, it is likely to oppress those who prefer being guided and nurtured by leaders. Furthermore, according to Prendergast and Topel (1993), relative performance judgments disregard the importance of subjective judgment by the employer who may be well-placed to determine best practices for bringing the best out of employees.
The other key learning is that eliminating low performers from teams may not necessarily bring about the level of performance that an organization should strive for. This is because relative performance judgments tend to judge low performance on the performance of best performers, yet the best in the team may not necessarily be performing to the optimal standard (Rubin & Edwards, 2018). This added to the fact that the method is likely to inspire employees to cut ethical corners in order to maximize performance makes the method unsuitable for driving results. For these reasons, an absolute evaluation criteria would be more viable in driving performance and the growth an organization desires.
References
Prendergast, C., & Topel, R. (1993). Discretion and bias in performance evaluation. European Economic Review, 37(2-3), 355-365.
Rubin, E. V., & Edwards, A. (2018). The performance of performance appraisal systems: understanding the linkage between appraisal structure and appraisal discrimination complaints. The International Journal of Human Resource Management, 1-20.