Question

Why Are Some Companies Yanking Forced Ranking?

Money is an important tool for both attracting and
motivating talent. If you owned a company or were
its CEO, you would likely agree and choose performance
management practices to deliver such outcomes.
You would probably also favor rewarding
high performers and having an effective means
for removing low performers. For decades, forcedranking
appraisal practices have helped organizations
and their managers differentiate employee
performance and achieve both objectives—rewarding
top performers and providing grounds for terminating
the low performers.
BROAD APPEAL
These qualities made forced ranking (also known as
forced distribution or “rank and yank”) a popular performance
management tool for many marquee companies,
such as Ford Motor Company, 3M, and Intel. GE,
for instance, made the approach famous using its
“
vitality curve” to rate employees into three categories—
top 20 percent, middle 70 percent, and bottom
10 percent. The top often received raises two to three
times greater than the next group, while the bottom
group was often put on probation or fired.102 Microsoft
also used forced distribution to ensure it was always
raising the bar on talent and performance. It replaced
its lowest-performing employees with the best in the
market and ensured there was always more exciting
work than it had people to do it.103
One argument in support of forced ranking is increased
accountability. It requires managers to do the
difficult work of differentiating performance. While nobody
likes to be the bearer of bad news, not confronting
performance issues is an underlying cause of score
inflation (grade inflation in school) and mediocrity. The
implication is that not everybody can be a top performer,
and it is management’s job to know and acknowledge
the differences. Forced ranking also can
be used to remove “dead wood.” Employees who
aren’t as driven, capable, or competitive are driven out
and replaced with those who are.104
Another central supportive argument is that resources
are constrained, notably people and money.
Culling the workforce based on performance is a way
to be sure your best employees are able to work on
the company’s most important and valuable projects,
products, and services. And it allows companies not
only to allocate more to their best employees, but also
to create clear and often substantial differences between
different levels of performance and associated
rewards.
THIS ALL MAKES SENSE, BUT WHY
ARE MANY COMPANY’S YANKING
THE PRACTICE?
Performance management practices have compounded
the challenges faced by Yahoo and Amazon.
According to a spokesperson at Yahoo, the company’s
program—quarterly performance review (QPR) recommended
by McKinsey Consulting—is intended to
“
allow for high performers to engage in increasingly
larger opportunities at our company, as well as for low
performers to be transitioned out.”105 However, problems
arose when managers and employees accused
the company of using it to fire employees “for performance”
instead of laying them off. The scale of this
issue
is substantial, given that nearly one-third of the
company’s workforce left or was terminated in
2015–2016, though the law requires at least 30 days’
notice for mass layoffs.106 Similar practices also were
linked to discriminatory dismissals at Ford, Goodyear,
and Capital One and caused them to change their
practices.107
Amazon has embraced forced ranking to foster internal
competition and drive employees to always improve.
Its organizational-level review (OLR) process
requires managers to select which employees to support
and which to “sacrifice” (not all employees can
pass). Even after an incredibly rigorous hiring process
intended to select the best of the best, employees are
distributed into high, average, and low performers—20,
60, and 20 percent, respectively. This means 80 percent
of the company’s employees have stopped being
stars by the time of their first performance review. The
process is challenging for managers too, who must
continually select talented subordinates to fire at every
performance review.108
RANK AND YANK AT ADOBE
Another company that championed forced ranking
was Adobe. It had a rigorous, complex, technologydriven
process for ranking its employees each year.
Performance expectations were set and performance.

was measured, documented, reviewed, and rewarded.
The goals were to help the company improve employee
performance and ensure it had the best talent.
However, what the company actually achieved was
quite different.
Adobe calculated that its process of reviewing its
13,000 employees required approximately 80,000
hours from its 2,000 managers each January and February.
This massive time commitment actually reduced
employee performance, because this time wasn’t being
spent on productive work like developing products
or cultivating and serving customers. And while the
system was meant to ensure manager accountability, it
actually allowed many to avoid confronting low performers
until the annual review. This meant low performers
were terminated only once a year.
Donna Morris, Adobe’s global senior vice president
of people and places, described the PM flaws this way:
“Especially troublesome was that the company’s ‘rank
and yank’ system, which forced managers to identify
and fire their least productive team members, caused
so much infighting and resentment that, each year, it
was making some of the software maker’s best people
flee to competitors.”109 Moreover, the performance
management practices did not align with the goals of
employee growth and team work, both fundamental to
Adobe’s success. It instead focused on past performance
and compared employees to each other.
The shortcomings of the process were underscored
by internal “employee surveys that revealed employees
felt less inspired and motivated afterwards—and
turnover increased.”110 This last point compounded
problems by causing the wrong employees—the highperforming
ones—to quit.
Assume you are Donna Morris, Adobe’s global senior
vice president of people and places. How does
the information in the case inform your recommendations
about PM practices at Adobe?

What is the main problem?

What is the root cause of the problem?

Can you give any recommendation?

Answer 1

The practice of PM as described in case is a way negative reinforcement instead of a positive one wherein the firm tells its employees that if you are not in the top 20% you are not wanted. Considering a huge chunk of employees (80%) affected adversely by this, it actually promotes an atmosphere of mistrust, feeling of unfair treatment. If I consider myself in the shoes of Donna Morris I would use the information from the case to understand that PM practices are a flawed concept that will actually deter way my best performing employees to the competitors due to unwanted pressure. The low performing and medium performing employees will not be motivated enough due to the mere fact that they will always be in a fear of termination as the appraisal is done yearly rather than periodic feedbacks.

The main problem here is the notion of negative reinforcement/Punishment style approach to the talent management. People are not informed about their performances and feedbacks interim so than cannot really improve on the same. At the same time top performers are also put under pressure in spite of their drive and passion. Employees got a message from the top management that they are not cared and only thing they are worried about is termination.

When all the employees start to believe in a notion that they might be in the last strata of(20%) of employees it triggers the theory self fulfilling prophecy where in even the medium to best performing employees eventually falls in the last strata or even worse they quit and join competitor .

Root cause of the problem hence is the atmosphere of fear and lack of positivity among the employees. When all that you think is yourself getting fired you eventually lose all motivation to perform. Also you are always kept in dark about your performance; only during the year end you are informed about performance where very little can be done.

My advice would be to enforce a monthly feedback system where 1-2 hours will be given to all employees by their managers about their performance and what management expects for them , how to develop ,where to focus. Publish a KPI based score and ranking every month as well and create training programs for lowest performing groups. Efforts should be put to understand the pain areas of the employees are who are not performing as expected. Points should be discussed with top management and development programs should be devised (be it certifications in technical domain or soft skills).Best performing employees should be left alone after some praise as they are on the right track. Continuous feedback and development efforts will instill a belief system among the employees and managers will be accountable as well as updated about all subordinate performances. Embracing this eventually lead to better attrition and employee satisfaction that will trigger better performance in the long run