The dangers of forced ranking

Companies
that have adopted forced ranking as a performance measure to slim down their
workforce have found themselves in court. Caroline Horn investigates how to
make the system a success for staff and employers

With
the poor performance of the US economy starting to have a global impact, many
companies are adopting forced ranking to slim down their workforce.

Early
users of the system — which assesses staff against a range of criteria, then
divides them into brackets according to their results  — generally intended to improve the performance of individual
employees by grading their work and highlighting areas that needed improvement.

Kevin
Rubens, senior vice-president and European region head of Aon Management
Consulting, says, "Historically, grading was adopted in companies where
there was a lot of opportunity for training and development. If you weren’t
doing well, there were opportunities to get yourself trained before the
consequences hit."

Oppressive

However,
during economic downturns, when there are fewer opportunities for training and
staff turnover slows, the system can be seen as more oppressive. At such times,
companies might adopt forced ranking as a performance measure in order to slim
down the workforce, rather than to provide opportunities for individuals to
improve their performance levels.

A
recent spate of court cases has highlighted the dangers for companies that take
such an approach to forced ranking. Those currently involved in court cases in
the US include Microsoft, Ford and Conoco, where plaintiffs contend that forced
ranking was discriminatory.

Discrimination
claims

Microsoft
has been accused of using grading systems that are discriminatory against black
staff and women. It grades its employees on a scale of one to five points.

A
lawsuit filed last October, seeking class-action status on behalf of blacks and
women, states that the rating system "permits managers, who are
predominantly white males, to rate employees based upon their own biases rather
than based upon merit". Microsoft defends its system as fair and helpful.

Another
more recent lawsuit against Ford argues that the company’s new grading system
discriminates against older workers. The company adopted its performance
management process a year ago and gives its 18,000 managers A, B or C grades,
with 10 per cent getting A grades and 10 per cent C grades. Again, Ford states
that its system is "fair and non-discriminatory" in a highly
competitive industry.

Racial
bias?

Conoco
used a ranking system from one to four as the basis of laying off a number of
geophysicists and other scientists in 1999 – employees contend that the company
discriminated against US citizens and older workers and a lawsuit was filed
last year. The majority of those let go were Americans, according to the suit,
as opposed to British, Norwegian and Canadian professionals.

Some
20 per cent of US companies are now understood to be using rating systems, and
while forced ranking is not as prevalent in the UK, the number of adopters is
growing. As a result, the US court cases are being followed with interest, and,
for companies keen to introduce forced grading, lessons are being learned.

Keep
it objective

To
ensure that systems are objective, consistent and non-discriminatory requires
constant management. Here are some of the main points to watch.


Prior to introducing a forced ranking system, employers need to ensure that
staff have had plenty of notice regarding the change in their evaluation
system. For most, who are evaluated on an annual basis, this will mean giving a
year’s notice.


The company must have clear goals for its evaluation system and must inform and
employees of those goals. Employees should be clear about what is required to
meet the new standards.


Each employee should be given clear objectives and a written performance plan.
Their ranking should be clearly explained to them and related to their
performance plan.


Line managers and supervisors must be trained to carry out evaluations
objectively. They should be aware of company goals, the company’s evaluation
criteria, and how to evaluate performance objectively.

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