How Do You Handle Employee Ranking in Performance Reviews When Managers Disagree?

How "ranking" of employees against one another helps while making performance reviews.

We have a problem with the ranking of employees. Our line management is not favorably inclined to do the "ranking" while top management insists on it.

We have the following performance review process:

1) Setting performance goals, performance factors (competencies), and development objectives at the beginning of the financial year and reviewing employee performance quarterly;

2) During the annual review, all employees are appraised on a scale of 1-5, and accordingly, ratings are given;

However, we now want the line managers to rank the employees against one another and recommend the ranked order list.

Line managers advocate that employees' performance should be appraised based on performance objectives set at the beginning of the year, which are mutually agreed upon, and each employee should be rated independently. However, ranking against one another is not based on objective criteria as we benchmark a "best employee" and draw rankings. There are multiple reasons for an employee being "best," and such reasons cannot be the same for all employees.

All of my line management team is strongly against ranking.

Please share your comments.

DN Rao

Dear Mr. Rao,

I suppose when you are talking about the rating, then it should be forced ranking, and the manager should try to rank their employees accordingly. I think what one should tell the managers is that they are not ranking the employees as good or bad on a scale of 1-5. They are selecting the best of the lot, and accordingly, the ranking is done. By doing this, the managers are helping to identify the top, middle, and bottom performers.

Cheers!! Faiz

Dear DN,

Why would you want to do a "ranking" when you already have implemented a proper performance management system? Your performance review process and your line managers are on the right track, but not your top management. Seldom do I get to see line managers strongly advocating conducting performance reviews in this manner, as many view it as a tedious and time-consuming process. The situation is made worse when managers are not trained to objectively appraise staff. This is a good practice and should continue.

If you are the HR in the company, you may have to "educate" your top management on the pros and cons of both the PMS and ranking. A properly implemented PMS will improve company-wide performance. Ranking will only redistribute the awards (e.g., annual increments & bonuses) without performance improvement. Using ranking, "the rich get richer"!

Going from PMS back to ranking is taking a step backwards!

Autumn Jane

The Top 10 Reasons Why 'Forced ranking' Quota Systems Don't Work

In recent years, some industrial leaders and major corporations have advocated a system of "forced ranking and elimination" of an arbitrary percentage (often 10%) of the lowest-performing employees every year. Not all organizational experts agree that this is an effective system. Some believe that it can lead to an attitude of fear, unwillingness to make mistakes, and stifled creativity. Here are some of the counter-arguments to forced ranking, summarized from an article by Edward E. Lawler III in 'strategy + business.'

1. Legal problems

The system invites legal challenges, and many courts have supported these challenges. Few companies are able to prove to the satisfaction of the courts that their quota systems accurately identify poor performers.

2. The statistics don't work

The theory assumes a normal curve (large numbers of individuals around the middle, flanked by a few "top" and "bottom" performers on either side). In fact, statistics relating to normal curves are usually attained only with thousands of individuals, and assume random placement. Few teams or departments have so many members, and one hopes that none place their employees randomly.

3. Inequity across departments

Some teams or departments may consist entirely of superlative performers, yet in this system, the bottom 10% will still be cut, whereas another team may be composed largely of poor performers, 90% of whom will be retained.

4. Inequity within departments

Some teams may have many individuals with almost no differences in performance between them, yet supervisors are still forced to identify 10% for elimination. This can lead to charges of unfair treatment and lower morale.

5. Long-term damage to morale

If continued year after year, once the initially identified poor performers have been eliminated, who is to be eliminated next? Those who were previously identified as satisfactory? New hires who have not yet had time to get up to speed? When employees are in a state of constant fear, they rarely do their best work.

6. Reduced teamwork

The system encourages an 'each person for him/herself' attitude and discourages teamwork. It also discourages people from asking others for help or for needed training, for fear that this will make them vulnerable to being identified as poor performers.

7. High cost of turnover

Some or all of the employees who are eliminated will have to be replaced, with the resulting costs and uncertainties of hiring and training replacements, and lower productivity in their early months. In addition, employees who are eliminated must have benefits continued, and may bring lawsuits.

8. No incentive to encourage growth in employees

Although intended to encourage improved performance, an arbitrary ranking system provides little chance or time for workers to improve, or for managers to find another job or department in which an employee may fit, and therefore perform, better. The incentive is to retain them so that they may be fodder for the next 10% elimination process.

9. Delays in needed firings

Managers who know that they will need to identify employees for elimination in a few months may deliberately not fire individuals who should be fired immediately, just to fill their quota during the elimination period. This can be destructive to the organization and to the morale of other employees.

10. The rich get richer...

Managers do not want to invest time and effort in the development of poor performers who are likely to be eliminated in the near future. Therefore, instead of helping them to develop their skills, they may often spend their time working with the better performers who actually need less help.

Please note that my earlier post regarding "The Top 10 Reasons Why 'Forced Ranking' Quota Systems Don't Work," originally submitted by Diana Robinson, PhD., PCC, Personal Effectiveness Coach, with a note:

"Copyright 1997, 1998, 1999, 2000, 2001 CoachVille Autumn Jane."