Why ranking employees by performance backfires
The ‘forced distribution’ model used by many companies is an outdated idea that should be scrapped
When Bill Michael, the former chair of KPMG, told staff to “stop moaning” in a virtual meeting in February, one of the issues they were complaining about was the “forced distribution” model used to assess their performance. This way of appraising people is a zombie idea. No matter how many times it proves disastrous for a company’s culture or morale, it refuses to die.
Generally speaking, “forced distribution” or “stack ranking” methods divide employees each year into a certain percentage of top performers, average performers and underperformers. In the UK’s senior civil service, for example, the proportions were fixed at 25, 65 and 10% respectively, until the system was reformed in 2019.
The idea is to avoid “grade inflation” and force managers to have honest conversations with people who are sub-par. Jack Welch, former CEO of General Electric, said in 2013 he couldn’t understand why people thought this cruel. “We grade children in school, often as young as nine or 10, and no-one calls that cruel. But somehow adults can’t take it? Explain that one to me.”..