Webinar: Build Your 2023 Performance Review Playbook With HR Experts

The Good, The Bad and The Ugly of Forced Rankings

Akshit Dangi

Forced or stack ranking is a performance management system that has been widely debated for years. This system categorizes employees into groups with predetermined criteria, typically classified as ‘top performers,’ ‘average performers,’ and ‘low performers.’

This categorization is based on a subjective evaluation of an employee's work, often conducted by managers, and is frequently used to determine promotions, bonuses, or terminations. The concept of forced ranking was initially popularized in the early 1980s by General Electric's former CEO, Jack Welch.

While forced ranking has gained popularity over the years, it has also faced significant criticism. Critics argue that this system can be demoralizing, demotivating, and ultimately ineffective in achieving its intended goals. Furthermore, the forced ranking has been linked to increased employee turnover and lack of employee engagement.

Simply put, it’s the endgame of strange performance management practices that almost every manager faces once in their lives. Considering that you’re here, it’s your turn now, right?

One of the most notable examples of the adverse effects of forced ranking comes from Microsoft, which famously abandoned the system in 2013. According to a former Microsoft employee, the company's forced ranking system created a "cutthroat" culture where employees were pitted against each other and discouraged from collaborating. This led to high turnover, particularly among top-performing employees who were dissatisfied with the system.

Keeping that in mind, it is clear that forced ranking is a complex issue that requires careful consideration. If you are considering implementing a forced ranking system in your organization, it is essential to understand the potential benefits and drawbacks and evaluate whether this system aligns with your company's values and goals.

With this guide, we aim to provide you with a comprehensive overview of forced ranking, including its history, the pros and cons of using this system, and alternative performance management strategies.

By the end, we hope that you will have a thorough understanding of forced ranking and you will be able to decide whether this system is right for your organization.

With all that out of the way, let's delve straight into the good, the bad, and the ugly of forced rankings.

The business case for forced rankings

The primary business use of forced rankings is to create a competitive work environment where employees are evaluated based on their performance and rewarded accordingly. This is intended to motivate employees to perform at their best and improve overall company performance. 

The concept is usually used as a performance management system to identify and develop top talent while eliminating underperforming employees. The idea here is that employees are ranked against each other based on their performance, and then rewards or penalties are assigned accordingly. 

Talking about the moolah, the rewards include bonuses, promotions, or other incentives for high-performing employees. No social recognition here, unfortunately. Anyway, on the other end of the spectrum, the low-performing employees are either placed on performance improvement plans, aren’t trusted with high-ticket projects, or are ultimately let go from the company. Brutal.

Proponents of forced ranking argue that it can create a sense of healthy competition among employees, which can drive productivity and innovation. By identifying top performers, companies can offer them more career advancement and development opportunities, which can help increase employee retention rates.

Additionally, forced rankings can help companies align individual employee performance with overall business goals and objectives, improving the organization’s performance and rate of growth.

The lighter side of forced rankings

Now that we’re equipped with a basic understanding of the concept and its primary use case, it is essential to take a closer look at the potential benefits and drawbacks of implementing such a system in your organization.

There’s no doubt that there are some significant concerns surrounding forced rankings. We’ll get to this a bit. However, you must understand that this approach also has several significant aspects to managing employee performance.

Keeping that in mind, let us first walk the path of the Jedi and explore the five potential advantages of forced rankings in more detail.

1. Identifying top performers

Forced ranking can be beneficial in identifying top performers within an organization. This allows companies to more easily recognize those who are contributing the most to the organization's success. This information can then be used to reward top performers with promotions, bonuses, and other incentives.

2. Fostering a competitive environment

The sense of competition created by forced ranking can drive employee productivity and innovation. When employees know they are being evaluated and ranked against their peers, they may be more motivated to perform at their best and strive to improve their performance.

3. Aligning individual performance with business goals

Forced ranking can help companies align individual employee performance with overall business goals and objectives. By setting clear expectations and evaluating employees based on how well they meet those expectations, companies can ensure that employees are working towards the same goals and objectives as the organization as a whole.

4. Encouraging employee development

Forced ranking can also encourage employee development. By identifying areas where employees need to improve, companies can offer targeted training and development opportunities to help employees reach their full potential. Additionally, by offering promotions and other incentives to top performers, companies can create a clear path for career advancement, which can help to increase employee retention rates.

5. Making tough decisions

Forced ranking can help managers make the final calls for performance and staffing. When employees are ranked based on their performance, it becomes easier to identify those who may be struggling or not meeting expectations. This information can then be used to decide promotions, transfers, and terminations.

Where do forced rankings start falling apart?

Yoda once said (or did he?), "The dark side of forced ranking, there is." 

Despite the potential benefits, many companies in the US and Europe are abandoning this approach due to concerns about its effectiveness and fairness. However, the debate surrounding forced rankings still rages on. Here are some of the factors that can contribute to the failure or controversy surrounding this approach to managing employee performance:

1. Limited differentiation

One of the main criticisms of forced rankings is that they can lead to limited differentiation among employees. When employees are ranked against each other, it becomes more challenging to recognize and reward the contributions of those who fall in the middle of the pack. This can lead to frustration and demotivation among employees who feel their efforts are not being recognized or rewarded.

2. Unfairness

Forced rankings can also be seen as unfair, mainly if the criteria used to evaluate employees are subjective or biased. For example, if managers are ranking employees based on their likability or personal relationships rather than objective measures of performance, this can lead to resentment and dissatisfaction among those who feel that they have been unfairly evaluated.

3. Negative effects on collaboration

Forced ranking can create a competitive environment that can harm teamwork and collaboration. Employees competing against each other may be less likely to share information or ideas with their colleagues for fear of giving away a competitive advantage. This can lead to silos and a lack of communication within the organization.

4. Adverse effects on employee morale

Forced ranking can also hurt employee morale. When employees feel that they are being constantly evaluated and compared to their peers, it can lead to stress, anxiety, and a sense of unfairness. This can ultimately lead to decreased employee engagement, motivation, and productivity.

The penumbra of forced rankings

Similar to how Batman needs to be careful not to create too many villains in Gotham, organizations must be cautious of the adverse consequences of forced ranking on their employees and success. 

While the approach may appear objective and straightforward, it can lead to disengagement, low morale, and even legal troubles, pushing it into a morally grey area—a penumbra of sorts. 

So, before implementing forced ranking, it's crucial for organizations to consider the following potential drawbacks and whether it aligns with their goals and values.

1. Loss of valuable employees

Forced rankings can lead to a "survivor" mentality among employees, where they feel like they have to constantly compete and outperform their colleagues to avoid being voted off the island. This can ultimately result in losing valuable team members who feel frustrated and demotivated by the process.

2. Damage to team dynamics

Forced rankings can create a competitive and divisive work environment where employees focus more on their individual performance than on teamwork and collaboration. This can damage team dynamics and lead to reduced productivity and innovation.

3. Reduced employee engagement

Forced rankings can create a culture of fear and anxiety among employees, reducing engagement and motivation. This can impact employee satisfaction, productivity, and overall performance.

4. Misalignment with organizational values

Forced rankings may not align with an organization's values and culture. Organizations prioritizing collaboration, teamwork, and employee development may find that forced rankings are at odds with these values and can ultimately lead to a negative work environment.

The abyssal side of forced rankings

Like your typical role-playing games, where confident choices can lead to disastrous consequences, forced ranking in performance management can have a range of negative impacts beyond just creating a toxic work environment.

From causing employee burnout to damaging company culture, the adverse effects of forced ranking can be considered as "the final boss that organizations must defeat to achieve long-term peace and glory.” By approaching forced ranking like a strategic player in a video game, organizations can better navigate the potential consequences and emerge victorious in the end.

Putting aside the excessive video-game reference we used, let’s look at the ugly and abyssal side of forced rankings.

1. Toxic work environment

Forced ranking can create a highly competitive and stressful work environment, where employees are pitted against each other in a race to the top. This can lead to a toxic workplace culture, where employees are willing to engage in unethical behavior to gain an advantage.

2. Damage to employee mental health

Forced ranking can significantly impact the employees’ mental health, leading to severe issues such as anxiety, stress, and even depression. Employees constantly worrying about their performance ranking may struggle to cope with the pressure, leading to burnout and other adverse outcomes.

3. Subpar innovation

Forced ranking can discourage risk-taking and creativity, as employees may focus more on meeting specific performance targets rather than exploring new ideas and solutions. This can lead to decreased innovation and a lack of progress in organisation.

4. Reduced collaboration

Forced ranking can foster a culture of individualism, where employees are more concerned with their individual performance than working together as a team. This can undermine collaboration and teamwork, reducing productivity and poor-quality work.

5. Decreased trust in leadership

Forced ranking can lead to a loss of trust in organizational leadership, as employees may feel that the system is unfair or biased against them. This can lead to decreased engagement and motivation, as well as increased turnover and talent drain.

Alternatives to forced rankings

We've gone through forced ranking like Mario navigating through the Mushroom Kingdom. From its humble beginnings to its peak popularity, this performance management strategy has been around for decades. 

However, just like Bowser, forced ranking can cause chaos and damage the workplace, resulting in decreased employee morale. Keeping that in mind, organizations can use these alternatives to create a more positive work environment and help their employees level up.

And yes, we’ll stop with the video game references now!

1. Continuous feedback

Instead of only providing feedback once or twice a year through a performance review, continuous feedback involves ongoing conversations between managers and employees. This approach provides more opportunities for coaching and development, leading to improved performance over time.

2. Goal-setting

Instead of comparing employees to each other, goal-setting focuses on individual employee goals and progress. This approach helps employees understand what is expected of them and gives them a clear path to success.

3. 360-degree feedback

This approach involves gathering feedback from employees' peers, subordinates, and managers. This can provide a more comprehensive picture of an employee's strengths and areas for improvement.

4. Strengths-based approach

This approach focuses on identifying and developing employees' strengths rather than just addressing weaknesses. Organizations can create a more positive and productive work environment by leveraging employees' strengths.

5. Team-based evaluations

This approach involves evaluating teams as a whole rather than just individual employees. This encourages collaboration and teamwork and can lead to improved overall team performance.

These are just a few alternatives to forced ranking. Organizations should consider their unique needs and goals when selecting a performance management strategy. Organizations can drive improved business outcomes over time by choosing an approach that supports employee success and creates a positive work environment.

What you need to know to face forced rankings

After exploring the history, business case, and consequences of forced ranking, it is clear that this approach to performance management has both positive and negative aspects. While forced ranking can provide valuable insights into employee performance, it can also negatively impact employee morale and engagement.

However, by considering alternatives to forced ranking, organizations can achieve similar performance management goals while supporting employee success and creating a positive work environment.

If you still wish to try it out, though, here are some recommendations for implementing a forced ranking system at your workplace. After all, there’s really no harm in testing the system's effectiveness for your organization.

  • Before implementing forced rankings, consider their potential downsides and whether they align with your organization's culture and goals.
  • Implement safeguards, such as training and accountability measures, to minimize bias and discrimination in the performance evaluation process.
  • Provide ongoing feedback and coaching to employees to help them improve their performance and increase their motivation.
  • Most importantly and compulsorily, consider alternatives to forced rankings, such as 360-degree feedback systems and team-based evaluations, which may better align with your organization's values and goals.

At the end of the day, though, the most important thing for any organization is the well-being of its people. Happy, motivated, and engaged employees are the key to a successful business. 

While forced rankings may work for some organizations, it's essential to consider the system’s long-term adverse effects on employee morale, retention, and productivity. As a manager, it's crucial to focus on alternative approaches to performance management that prioritize ongoing feedback, professional development, and collaboration.

Doing so can create a work environment where employees feel supported, challenged, and empowered to grow. Remember, your employees are your biggest asset, and investing in their well-being is your best investment.

By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.