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 / Third Quarter 2002 / Issue 28(originally published by Booz & Company)


The Folly of Forced Ranking

Normal distributions consistently occur only when they involve random events and a large sample. This is not typical in companies. A large sample for statistical purposes means not 10, 20, 30, or even 100, but thousands of individuals. Further, in most work situations, each employee’s performance is a planned and controlled event. Individuals are not randomly placed in positions and expected to perform; they are carefully selected, trained, and motivated to do their jobs.

Because employee performance patterns in organizations often do not follow a normal distribution, identifying poor performers using a forced ranking system is fraught with difficulties. First, a very real danger exists that some satisfactory employees will be misidentified as poor performers. For example, some divisions, departments, or teams are always better staffed than others. In those areas, individuals who are satisfactory or even outstanding performers on a company-wide basis may be judged to be underperformers just because they happen to be among a group of very good employees. The right thing to do is to strengthen weak areas where there are a large number of poor performers by replacing them, rather than removing “the worst of the best” from areas dominated by high performers. Most forced distribution systems do not produce this result because every area, regardless of the quality of its employees and its performance, is required to make the same percentage of cuts.

Second, a department or team may consist of a large number of employees who are essentially similar in performance, with no individuals who clearly don’t deliver. This means a supervisor has to separate nearly identical individuals, targeting some for dismissal and others for retention. It is hardly surprising that supervisors resist making such choices, and that when they have to do so, it very often engenders charges of unfair treatment.

Companies that use forced distribution systems are particularly open to legal challenges when individuals who are part of a protected group because of their age, gender, or ethnicity are fired because of their performance. Courts have said that a performance-related dismissal is acceptable only if deficiencies in a person’s work can be proven. In other words, if the company cannot prove that its performance appraisal system identifies poor performers accurately, then it will likely lose its case in court.

Identifying and dismissing poor performers is particularly difficult and damaging when it is done year after year. The first year it is often relatively easy to do because there are usually a few individuals who have obvious work-related problems that either have not been addressed or cannot be resolved. Once these people are eliminated, however, often there are few, if any, truly poor performers left. Furthermore, there are likely to be more only if the “replacement” workers hired turn out to be poor performers, or if some previously satisfactory employees suddenly develop serious performance problems. These are possible but unlikely events. It is particularly unlikely that year after year 10 percent will fall into an
easily identifiable bottom group; instead, there is likely to be a large group of individuals who are performing well, a smaller group of outstanding performers, and a few, if any, poor performers.

Mr. Welch notes in his CEO memoir that by the third year of forced firings, “it’s war.” It is also stressful. What manager wants to face every year having to identify his or her lowest-ranking subordinates and recommend which ones should be fired? Sometimes managers just lack the courage to fire someone, which of course is why forced distributions are put into place in many companies. But this is only one reason managers don’t like forced distribution systems. Managers also worry about what will happen to these individuals. And they’re concerned about firings disrupting the work of other employees and increasing their workload.

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