By Danielle Smyth Updated December 08, 2020
The forced distribution model of employee performance management is a widely acknowledged and highly debated management strategy. It has been implemented in large-scale manufacturing corporations and small, lean teams with varying levels of success, but it has mostly been abandoned for a “check-in” method where managers regularly confirm that employees are meeting or exceeding their goals and providing guidance where needed.
Sometimes called the “forced ranking” or “forced choice” method, forced distribution is a form of employee evaluation in which employees are ranked against one another rather than performance standards, explains SuccessDart.
The method is done by stack ranking the employees from first to last or by creating three to five groups and evaluating each employee’s skills and performance within those bounds. The result is typically a bell curve with a small percentage of low- and high-performing employees and a large population of middling employees.
The top tier can be encouraged to continue exceeding expectations with raises, and promotions or stock benefits. Middling performers can be given lesser raises and goals to meet along with training and encouragement to meet those goals. Poor performers are encouraged to do better in the next evaluation cycle or face release from the company to seek success elsewhere.
There are benefits and risks to implementing the forced distributions model, explains SHRM. Benefits include streamlining your staffing and dispassionately creating a team of motivated and capable employees to achieve real gains. The risks of forced distributions include increasing employee competitiveness to the point of debilitating teamwork and positive office culture, which results in burnout, high turnover and the sabotage of coworkers to achieve personal gain.
The forced choice method can be a crucial step in turning around a floundering company, especially in cases where management has avoided hard conversations or evaluations of the staff. Using an arbitrary numerical system to rank employees based on their accomplishments compared to their peers removes sentiment and bias, forcing managers to confront employees who are likable or have personal relationships with coworkers but are failing to perform.
Proponents claim that companies who find this method stressful have failed to lay the groundwork in office culture and communication, but Clear Review explains that many business consulting companies encourage moving away from the “rank and yank” method of management.
General Electric CEO Jack Welch was a strong advocate of the method and implemented it for the nearly 20 years he headed the company. This resulted in growing the company’s market value from $12 billion to $410 billion, says NPR.
A strict policy of terminating the bottom 10 percent-ranked staff every year was just one example of how Welch pushed GE to new heights in terms of market worth. It removed low-performing members and incentivized the remaining employees to do better at all costs, which created a sleek and powerful corporate missile aimed at the highest possible financial gains for upper management.
Namely explains that Yahoo has had numerous lawsuits brought on by the arbitrary termination of large swathes of employees due to its implementation of the forced distribution method to meet quotas of termination numbers or percentages. Some claimants put forth that the system was designed to be biased against women, while others that it was biased against men. Regardless of their demographics, employees did not accept being terminated because they didn’t make an arbitrary cutoff.
Many companies have moved away from the forced distribution method since 2015. Even the highest performing employees eventually burned out, and removing the “worst” employees is regarded as treating a symptom of dysfunction in the company, not the cause. In the infamous words from the cult classic film “Office Space,” setting arbitrary cutoffs and goals to inspire competitiveness makes someone work just hard enough to avoid being fired.
Forced distribution is a method of employee performance appraisal that many companies use. We also call it the forced distribution method, stacked ranking, or bell-curve rating. It is a rating system that employers use to evaluate their workers. Managers must evaluate each employee, usually into one of three categories, i.e., poor, good, or excellent. There may be more categories.
Although forced distribution is extremely popular among companies, it is somewhat controversial among HR experts. HR stands for Human Resources.
Opponents say it can create undesirable competition or unhealthy rivalry among employees. It can also trigger resentment and low morale.
Additionally, critics say that it is not possible to categorize some employees within one of the three categories. They say that the category of some workers do not reflect their true performance.
Force distribution – General Electric
American multinational corporation, General Electric, adopted the forced distribution method in the 1980s. It was one of the first companies to adopt it.
Jack Welch, who was Chairman and CEO of General Electric at the time, wanted to reduce the company’s workforce. In fact, he regularly cut down employee numbers by firing ‘poor’ performers.
The website mbaskool.com says the following regarding the Method:
“The forced distribution method is one of the most widely used and also the most criticized method of performance appraisal.”
“This is a rating system that is used all over the world by companies to evaluate their workforce.”
Forced distribution – pros and cons
Like all systems that companies use, this method has its pros and cons.
In a Forbes article, Victor Lipman says he can see some benefits to forced ranking. However, overall he concludes that the harms, i.e., managerial problems the method causes, are greater than the benefits.
Lipman had been a manager at MassMutual Financial Group, a Fortune 500 company.
ProsIt can boost productivity. If all workers fear slipping to a ‘poor’ ranking, they will work harder to remain as ‘good’ and ‘excellent’ performers.
General Electric said that the system helped boost its earnings between 1981 and 2001 by 2800%.
Among companies that adopt the method, managers have hard conversations with employees. These are conversations they might not otherwise have had.
According to Lipman:
“There’s no question in my mind forced ranking does bring disciplined rigor to the management process.”
“As any manager knows, it’s often easier to avoid difficult, painful performance-related conversations than to confront them head on.”
Forced distribution also makes it easier or possible to identify the best employees.
ConsForced distribution often causes worker morale problems. Many employees who find themselves with a middle ranking, feel that they should be higher up.
Hard working employees especially resent not being in the top categories.
The system can also lead to declining talent in the company. By having too many top-ranked workers in a company, it subsequently becomes difficult to maintain a top rating.
Therefore, people hire personnel with a lower ranking. This means taking on employees who are less productive so that they can retain their high ranking.
There is also a greater risk of burnout. In an article on the Career Addict website, Andy Peloquin writes:
“No one can work at 100% output 100% of the time; it’s just not humanly possible! The Forced Ranking system uses fear as a motivator, which increases the amount of stress placed on employees.”
“This, in turn, increases the risk of burnout.”
This month on Forbes.com there’s been a spirited dialogue around a controversial management technique – “stacking,” also known as "stacked rankings" and "forced rankings." All are names for performance evaluation systems in which organizations require set percentages of employees to be ranked in specific categories – for example, “top,” “good,” “fair,” “poor”… or "exceeds all expectations," "exceeds expectations," "meets expectations," "partly meets expectations," "fails to meet expectations," and so forth. Such systems are used by companies to identify, reward and weed out top and bottom performers.
An article in Vanity Fair by Kurt Eichenwald (“Microsoft’s Downfall: Inside The Executive E-mails and Cannibalistic Culture That Felled A Tech Giant") triggered recent discussion. Forbes subsequently featured posts including "The Terrible Management Technique That Cost Microsoft Its Creativity" by Frederick Allen, "The Management Approach Guaranteed To Wreck Your Best People" by Erika Andersen, and "The Case For Stack Ranking of Employees" by Robert Sher.
These articles - and the entire topic - clearly touched a chord in the business community. They generated on Forbes.com close to 400,000 readers and well over 300 reader comments. As a corporate manager who for several years managed employees in what we referred to as a "forced ranking" environment, I wanted to add my own personal experiences and observations to this active virtual conversation.
As is often the case for me when evaluating complex, emotional topics, I tend to land somewhere in the middle. As a manager with MassMutual Financial Group (a well respected Fortune 500 company), I did see some benefits to forced ranking, though in the end I felt these benefits were outweighed by the managerial problems it caused. That said, here are my two main conclusions:
The system did force managers to have hard conversations with employees that they might otherwise have avoided. There’s no question in my mind forced ranking does bring disciplined rigor to the management process. As any manager knows, it's often easier to avoid difficult, painful performance-related conversations than to confront them head on. Though some managers are outstanding in dealing with conflict, many (being after all only human) prefer to avoid or minimize it. Managing in a forced ranking system reminds me a bit of the famous old line from Joe Louis before his fight with Billy Conn, who boasted he'd rely on his speed in the ring. Responded Louis: “He can run, but he can’t hide.” In a forced ranking system, managers - and employees - have no place to hide. It literally forces performance issues to be addressed; for an organization that wants to tighten or formalize its management processes, I believe the system can have benefits.
From a hands-on management perspective, however, there were also clearly problems associated with it.
Put simply, it caused employee morale problems. While the system I managed in was intended to help promote closer linkage between job performance and bonus payouts – a worthy objective – it often felt like the cure was worse than the disease. As a manager, the discussions I had over many years about the fairness of bonus payouts were not nearly as problematic as those I routinely came to have over end-of-year rankings. The system I managed in had five rankings, and the largest number of employees were "forced" into the middle tier labelled "Meets Expectations." While objectively it may seem perfectly fine in a job to "meet expectations," the reality was (with two levels above this "grade") many employees felt like they were receiving a "C", not an "A" or "B." And good hard-working employees never like to feel like "C" students. Despite considerable management communication on the topic, many employees still felt like they were getting C's, and that bred discontent. (To some extent I believe this situation could have been mitigated by a four-grade system in which the majority of employees received what they perceived as "B's," not "C's." For example, with tongue a bit in cheek, the rankings in such a system could be: “You’re a star,” “Good job,” “Meets but rarely exceeds expectations” and “You’re out the door.”) An ancillary issue for me with forced rankings was that the system resulted in a heightened focus on individual performance and did little to promote team building - always valuable in a corporate environment.
Net-net, this is one manager's perspective. Was my experience that forced ranking was "ruinous," as appears to have been the case at Microsoft? No, not at all. But was the system an encumbrance that ultimately limited managers' flexibility and felt to me more of an obstacle than an aid in the managerial process? Yes, I’d say so.
So that was my personal sense of how forced ranking worked. My own small contribution to this management dialogue. I'd be interested to hear the thoughts of others...
* * *