Well, here I am again, criticizing Jack Welch. But I think it is well deserved. We recently read that Microsoft has ended their practice of performance evaluations that are based on ranking employees. This is a practice that was made famous by Welch.
To best describe it -
Only a small percentage of employees, typically about 10%, can be designated as top performers. Meanwhile, a set number must be labeled as low performers and are often fired or pushed out, giving the system the popular nickname "rank and yank." (Read more: http://www.businessinsider.com/stack-ranking-employees-is-a-bad-idea-2013-11#ixzz2lbzpdK7a)
Now before you think that I am against performance evaluations, let me say that I am a firm believer that people want to know how they are doing. This is a basic human need. I am all for all types of evaluations – but strongly against the forced ranking that was made famous with GE in Jack Welch days. Welch says it “lets people know where they stand.”
Somewhat like the survival of the fittest in the Roman gladiator battles, this form of evaluation can be brutal, divisive in the workplace, and truly fails to recognize and reward the top players. It also causes political gamesmanship in the workplace – just what we need more of.
And from my perceptive as a headhunter, it negates the idea that leaders can fill their ranks with top performers (I think that is truly possible).
It means that at least once a year, you have to tell someone, “you finished last; now get out of the game.”
The idea of rank and yank is that employees are ranked by their performance, with the best receiving raises and promotions and the worst getting fired. Under this system, divisions must declare a certain percentage of their employees as being top performers, good performers, average performers and poor performers.
In order to stay on track with the merit budget, employers, who force-rank, generally align employees in accordance with the pre-assigned performance distribution percentages. As you can imagine, this scenario results in intense internal conflict and can destroy any resemblance of employee teamwork and cooperation. Consider the employee who improves his or her performance; presumably, someone else will, in turn, be "squeezed down" to maintain a balance "fit" within the guidelines. Forced ranking forces evaluators to make determinations on a person-versus-person basis rather than a person-to-established-standards basis. In my opinion, this also causes management to move away from focusing on pre-established, objective job standards, and toward evaluations based on personal attributes. A Pandora's Box subsequently opens to all sorts of problems, including corporate infighting, person-rater bias, management subjectivity, and even lawsuits (all demotivating factors), which negatively impact the overall productivity of the organization. In the final analysis, "merit pay" is oftentimes only a catchy cliché.
Consider these posts:
The "rank and yank" system that he popularized results in workers being pitted against their peers to avoid being labeled as losers. Those workers who ended up on the wrong side of the ranking curve were penalized, usually by a denial of merit raises or bonuses, and sometimes by losing their job.
http://management.fortune.cnn.com/2013/11/18/microsoft-ge-ranking-employees/
http://ordinary-gentlemen.com/blog/2013/09/11/is-the-stacked-ranking-of-employees-actually-bad
"Every current and former Microsoft employee I interviewed — every one — cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees," Kurt Eichenwald wrote in Vanity Fair last year. http://www.moneynews.com/Personal-Finance/Welch-differentiation-rank-yank/2013/11/15/id/536900
