Note To Performance-Driven Companies: Yank Those Stacked Rankings!
There’s been a lot of chatter lately in the media and across social sites about the subject of stacked ranking (aka, “forced ranking,” “rank and yank” and few other colorful terms).
In case you’re not familiar with it, stacked ranking is essentially the practice of ranking employees along a bell curve. Some employers use the rankings to openly compare workers’ performance (primarily as a way to motivate those at the lower end of the curve to do better), while others actually use the rankings to fire underperforming employees.
BusinessWeek ran a story last month about Yahoo’s adoption of stacked ranking. Notably, it had this to say: “The Institute of Corporate Productivity says the number of companies using either a forced ranking system or some softer facsimile is down significantly from previous years. Companies performing well were less likely to be using forced ranking systems than those that weren’t. Just over 5 percent of high-performing companies used a forced ranking system in 2011, down from almost 20 percent two years earlier.”
In our experience, stacked ranking is most commonly used by enterprise-sized companies—those with seriously large employee populations. While this might make sense to some degree, we would never recommend stacked ranking to any employer, no matter how large its workforce is. The reason? The practice can easily become misleading, unfair and demotivating. Equally important, it can stretch out the review process unnecessarily.
Under stacked ranking, a manager is able to give a particular ranking to only a limited number/percentage of employees. (For example, only about 10 percent or so of a group can be ranked as “top performers,” and so on down the line including a specified percentage who must be ranked as “poor performers.”) Once the manager has dispensed the total allotment of a particular ranking, she/he must give all other employees a different ranking—even when these employees deserve to be put into the already-filled ranking. Managers often find it an arduous and time-consuming exercise to carefully work through the problems this system causes and distribute employee rankings as fairly as possible.
In addition, stacked ranking can be demotivating to employees. Example: using a scale of 1 to 5 (1 being poor and 5 being excellent), manager Jane rates employee Dave a 3. Dave deserved to be rated a 4 but all of the 4s were already handed out. Jane explains this to Dave and sends him on his way, thanking him for his performance. How do you think this is going to sit with Dave? Maybe he’ll trot back to his desk happy, engaged and motivated to do even better … but we wouldn’t bet on it.
Bottom line, employees should be rated according to their merits—not according to a predetermined scale or a set of forced categories.
In other words, for truly performance-driven companies, stacked ranking simply doesn’t stack up.