3 Reasons Not to Use Forced Ranking Systems

Everything we do for our clients at Align4Profit aims at creating cultures of High Commitment that also produce results-driven High Performance. We believe it’s the only combination that works for long-term growth in an organization. By that I mean, it’s the only way you and your organization can ensure a sustainable focus on people and profit.

DAME

The challenge is to hit what we call the DAME sweet spot—the intersection and situational balance of Driving Accountability (DA) and Motivating Engagement (ME). With that in mind, I’d like to focus on an old-school way of managing that drives accountability way too hard and can upset the balance organizations aim to achieve.

Forced Ranking Systems

The old idea of ranking employees along a bell curve still survives, but it may do more harm than good. The Institute of Corporate Productivity reports that forced ranking systems are falling by the wayside. At last count, only 5 percent of better-performing companies use forced ranking systems. And for good reason.

In Punishing by Rewards: When the Performance Bell-curve Stops Working For You, authors Vaishnav, Khakifirooz, and Devos give us three good reasons to eliminate forced ranking systems.

Kills Morale
The constant awareness of forced ranking demoralizes a workforce. Already under pressure to perform in tough economic times, under massive workloads, and alongside fierce competition, employees have enough stress-producing issues to worry about.

Skews Evaluations
Under a forced ranking system, managers must reward visible performance as opposed to actual performance. For example, putting out visible fires rather than planning and preventing unseen problems.

Erodes Social Capital
Teamwork and collaboration, in which glory is shared, take a backseat to behavior that shows off individual achievement. This builds resentment that further discounts cooperation within teams.

The Sweet Spot

I also want to represent the upside. Forced ranking works well when organizations are training leaders how to differentiate performance levels. It helps them use Leadership Intimacy to best support their Stars, High Potentials, Medium, and Poor performers appropriately. There is, however, a better solution—train your leaders to operate in the sweet spot!

Evaluating employees with a forced ranking system forces leaders to do what they should be doing to manage performance anyway. So how about training leaders to make the hard calls on performance? How about teaching your managers to differentiate performance as an ongoing process that happens throughout the year?

From our experience in working with leaders and according to the scholarly research on rating biases, leaders need to learn how to balance Driving Accountability and Motivating Engagement. At times it may be necessary to up the focus on being directive. At other times it is more appropriate to support employees and understand the challenges they face. Achieving this balance we call “working in the leadership sweet spot.”

Whether or not your organization ranks employees, all your leaders strike some combination of DAME. Is it the right combination for where your organization is heading? Are your leaders fully equipped to manage well within the sweet spot? To begin to understand where you and your leaders fall in relation to the sweet spot, take our free Mini Leadership Attraction Profile.

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