Forced-Ranking Systems in Performance Management

 -  9/12/07

Many talent managers need some level of differentiation within their performance management systems to compare performance data among peers.

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Many talent managers need some level of differentiation within their performance management systems to compare performance data among peers. The common solution, forced-ranking systems, has been a highly used — and highly controversial — instrument that assigns an individual rank to each employee within the context of the department or organization.

Major U.S. corporations and their executives have invested heavily in strategies to create a high-performance organization, and the use of employee appraisal systems has been a key mechanism for monitoring performance within these programs. Almost every major Fortune 2000 company has used some form of a performance-appraisal system where people are evaluated annually on goal attainment.

Standard performance-appraisal systems basically compare individual levels of achievement against the goals and objectives that were set. One of the major concerns for executives and HR managers, however, is building differentiation into the system to more accurately capture relative performance data compared with peers.

According to Corporate University Xchange research, the use of forced ranking has been a highly used and controversial instrument for introducing this differentiation into the system because it assigns an individual rank to each employee within the context of the department or organization.

In fact, according to a Drake University study, as many as a quarter of the Fortune 500 companies might use some type of performance management system built around the principle for forced rankings.

What is Forced Ranking?

Forced ranking, also known as forced distribution, is essentially a performance management mechanism that requires a ranking of all employees to identify the relative performance of each one. Forced ranking’s objective is to employ only A players, therefore, B and C players must be coached to become A players or moved into other jobs where they can be A players. Employees who are unable to make this transition might be fired. In many cases, there is a required turnover of the lowest-performing group of employees each year.

Article Keywords:   measurement   metrics   technology  


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