Smarter Alternatives to Forced Rankings

Nov 19, 2013 Posted by

She’s at it again. Yahoo! CEO Marissa Mayer has introduced another controversial employee program. This time a performance system with forced rankings. Ouch.

People bashed Mayer for putting the kibosh on laid-back schedules and a work-from-home job atmosphere at Yahoo! shortly after she took the helm in April 2012. Now, Mayer has proposed that employees be ranked on a bell curve — a move the media isn’t too fond of. Days later, Microsoft announced it was abolishing its performance ranking system, saying it would focus instead on development and teamwork.

As a result of these two high profile companies taking such separate stances, performance management is sure to weather yet another storm against its value and purpose. Which begs the question: if there’s so much back and forth on how to measure and manage performance, why do it at all?

The answer is simple: measuring performance is an important process. All work in organizations is done by people, so it makes sense that people’s performance is the lever that can improve or damage an organization’s overall performance. Improving the skills of people, helping them clarify their roles and the expectations for their performance, providing meaning in work, and encouraging strong contributions is a good thing. Yes, some hate it, but we can’t get rid of it because, intuitively, we know it is both the right thing to do and is also critically important to the organization’s success. This is why I am in favor of forced rankings.

Why Forced Rankings?

I generally believe that there are few really bad systems out there; it’s just that most are poorly implemented. Jack Welch made ranking work by investing his time and energy into leading and building strong leaders during a successful 20 years as CEO of General Electric. Yet, a similar ranking program at Microsoft was blamed by Vanity Fair in 2012 for perpetuating a decade of poor performance at the company. Here’s why: Microsoft’s ranking program shifted its focus from encouraging employees to do good work to making each staffer look out — first and foremost — for himself.

There is a fundamental reason for forced rankings, in my opinion. The tactic is introduced because the executive leadership team does not trust its leaders to manage performance. And there’s a good reason for that — many people naturally avoid sharing bad news, so ratings inflate to the point where the executive team has to look for alternatives.

Perhaps a viable alternative is for executive leadership is to treat performance management with the same scrutiny and intensity with which it scours financial and operational reports. Business unit leaders regularly present (and defend) financials regularly in review meetings — why not do the same for employees? During financial reports, metrics and measures appear on dashboards showing how the business unit is performing against other units. Suppose that same scrutiny was put in place for performance management. What would that look like?

Here are some ideas:

1. Encourage Executive Involvement

Instead of arbitrary forced rankings, have executives actually look at how leaders are evaluating and developing employees. Written reviews are read and feedback is provided to the reviewing manager (who is accountable for actually improving performance). Discussions about the steps that the leader is taking with the employees are discussed and development plans are reviewed. The cycle of accountability for performance is stronger when forced rankings are in place because attention is laser-focused. This insight about a leader’s capability to manage performance allows executives to coach and develop requisite skills, as a result.

2. Correlate Employee/Leader Performance to Business Performance

In a perfect world, the sum of individual performance should equal the organization’s total performance. Business units that are full of “top performers” as reflected by the performance management system should have business results that are similarly excellent. Of course it’s never quite that simple because you have turnarounds, startups, and acquisition integrations, but it is certainly a place to start. A quick look at written performance reviews gives execs a data-backed sense of how effectively a manager is motivating performance and developing employee skills.

3. Make the Review of Individual Performance as Important as the Review of Business Performance

Performance management has been around for decades. In the late 1990s, talent management emerged as an add-on. The data from the performance management process was relatively useless, so leadership teams met to rank its talent in a separate process. These behind-the-scenes sessions became pretty lively, challenging ratings and looking closely at the strengths and weaknesses of managers. Some organizations even ranked managers as A, B and C players (in Yahoo!’s case on a scale from 1 to 5). Either way, reporting the findings to specific managers and other associated employees is the key to making this type of performance management work.

The Bottom Line: Be Accountable

If performance metrics aren’t working, it’s because the person doing the performing is not receiving candid, helpful feedback about his work. As a result, he is not being developed to do his current job (or future job) well. We can keep developing “easier” programs that focus on team building all we want, but it won’t make a lasting difference. Only when an organization’s leaders take accountability for managing performance, will it make a true difference.