Case Study:
Forced ranking is a performance appraisal system popularized by Jack Welch when he was CEO of General Electric. It is a system that has been given the derogatory label of "rank and yank" by its critics. The intent of the forced-ranking system is of the bottom 10 percent of performers and hiring replacements who will perform at a high level. Ranking judgments can be made in a variety of ways. For example, a force distribution into categories such as "most effective," "average," and "needs improvement." Alternatively, a simple ranking of workers from best to worst can be used. Top performers may be rewarded and offered promotion or training. Low performers may be given a warning or terminated.
Forced ranking has been employed by a number of companies, but some legal challenges have been made. For example Microsoft successfully defended several discrimination suits challenging its use of a force-ranking system. Conoco used a forced-ranking system and reached on out-of-court settlement in a discrimination lawsuit. Ford Motor Company implemented a forced-ranking system in January 2000 and ended up paying an award of $10.5 million as a result of class action suits charging that system had a disparate impact on subgroups of employees. Ford has since shelved its forced-ranking system. Overall, however, there have been relatively few legal challenges to the forced-ranking system. It remains a controversial management practice.
A potential downside of forced ranking is increased competitiveness among workers. Under a forced-ranking system, workers can become less focused on common or collaborative tasks. Instead, workers might focus on their individual performance and ranking. The net result can be less teamwork and a negative effect on productivity.
Reminder: You must use what you learned from the textbook chapters, Tedtalks, and case studies wherever needed. If you don't show advanced knowledge of the course materials while you answer the questions, you won't receive full credit.
Questions:
1. Do you think forced ranking is a good performance management system? Why or why not?
2. As a manger, would you prefer to rely on an absolute performance rating system or a relative system, such as forced ranking? Why?