Forced Rankings Are Institutionalized Stupidity at Its Worst

A recent looked inside Microsoft's deeply flawed forced ranking policy has columnist Rob Enderle thinking of ways to combat the practice (and its equally heinous partner, confirmation bias) and improve corporate decision-making processes.

By Rob Enderle
Fri, July 13, 2012

CIO — A lot of stupid things go on in the technology industry, but forced ranking and rating, tied negatively to Jack Welch and GE, in my mind, is near the top. This was made clear in a recent Vanity Fair article linked to Microsoft, but I doubt there are many companies in the U.S., thanks largely to Welch, that don't have a similar policy.

On a national scale, you have to wonder if Welch is largely to blame for why the U.S. as a nation is less competitive in a global market. We'll leave that for another time as we focus here on forced ranking as an example of institutionalized stupidity.

Forced Ranking: Great Employees Leave, Dead Weight Remains

Generally, when you bring up forced ranking and point to the reasons it is a company killer, the most common defense is that some other successful company does it—but then that would be like pointing to the ex-vice president of the United States and suggesting that his practice of shooting friends in the face with a shotgun should be more widely adopted. In short, forced ranking is an employee evaluation process in which managers are required to distribute ratings for those being evaluated.

What is telling is that Steve Ballmer's response to Vanity Fair never even mentions Forced Ranking. Like a real-life emperor showing off his new clothes, Ballmer appears absolutely sure that isn't a problem.

Two causes likely lie underneath this big problem. One is group behavior, which drives people to behave similarly (either in good or bad ways), and the other is the confirmation bias that blinds us to stupid decisions we all make. Forced ranking institutionalizes and drives an unacceptable level of failure—yet even numbers guys like Ballmer are blind to this simple fact and, often like Ballmer, will refuse to even look at it.

If you like forced ranking, I'd like you to step back, look at it mathematically and see what it means to a company. Generally, forced ranking says that about 20 percent of your people are really good, about 40 percent of your people are good, 20 percent are OK, about 13 percent of your people should only barely keep their jobs and about 7 percent of your folks should be fired, according to Microsoft's breakdown.

Sounds reasonable, right? Except why the hell wouldn't you fix a process in which only 20 percent of your people were really doing a great job? Think about it. If you had a product with a 7 percent failure rate, you'd be out of business—yet depending on where you make that lower cut, forced ranking institutionalizes a high failure rate.

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