In the light of the recent announcement by Microsoft that they are abandoning their stacked ranking system, our HR office has received a number of inquiries regarding our continued use of a stacked ranking system for our associates’ performance evaluations. We realize that a number our associates have had questions and concerns with respect to our use of a ranking system and want to take this opportunity to answer the easy ones.
What are the performance categories and what do they mean? In the past, we have used a numeric set of performance categories, but people were not clear on the meaning behind the numbers 1,2,3,4,and 5. That should have told us something right there. In our next iteration, we went to an alphabetic system but it turned out that “as easy as ABC” is a not always an accurate statement. In an attempt to make the performance categories perfectly clear we have assigned names and numbers to each performance category and provided brief explanations. They are:
- Exemplary – for the highest performers who consistently exceed expectations. These people are so good we don’t really understand why they are still here. Also see Relative Ranking discussion below.
- Pretty Darn Good – Not great by any means, but with some bragging rights and the ability to coast at least for a while. Still you should never expect to see a raise in this lifetime.
- Average – So bland that we fall asleep trying to write these performance evaluations. Managers are encouraged to use “cut and paste” as needed to expedite this process.
- Below Average – Do not put down a deposit on anything or make any long term plans.
- Barely Sentient – We do not typically write complete performance evaluations for this category since they will not be around long enough to read it.
Do we use “forced ranking”? The stacked ranking system we use can not be considered forced in any respect. Each manager is free to place their associates in any of the performance categories. Specifically, there is nothing that forces any manager to place any individual in the lowest bucket. Every manager is given the choice between placing the assigned number of associates in the lowest rank or placing their own name in as a substitute. No one is “forced” to do anything.
What is “relative ranking”? This term is applied when an associate is a son or daughter of a senior manager and receives a performance evaluation. The individual’s direct manager is free to use any of the five performance bands based on their best unbiased judgment and that manager’s personal career goals.
Does ranking really promote good teamwork? Absolutely. When combined with Peer Evaluation Forms, ranking encourages the members of a team to work together to decide who should be on the bottom. Remember, it is not bullying if you do it with a multiple-choice feedback form.
How does ranking improve the performance of a team? This takes a little explanation, but stay with us. In a stacked ranking system, it is clearly to a person’s advantage to find a group where they can outperform everyone else. If you are unfortunate and find yourself in a team where everyone is producing outstanding results, sooner or later you will be at the bottom of the pile. Your task then is to find a team of people who are all mediocre at best, so you can be the star. As this happens across the company, all of our poorly performing teams will be improved as our best people will migrate to those teams. There is an unfortunate side effect that all of our high performing teams quickly fall apart as the most clever people bail, but we
hope think the net result is a gain.
What are the Benefits to using ranking?
- Ranking allows us to have numbers applied to what is otherwise a completely subjective decision. This gives the appearance of objectivity and we know that appearances are everything. In addition, we like numbers more than squishy-soft explanations.
- Managers are very busy or so they tell us. Ranking does not require a great deal of time so they are free to work on motivating each associate after they receive their ranking results.
- Encourages associates to think outside the box because, well, it just does. Trust us.
- Encourages employees to study statistics to achieve a better understanding of normal distributions and why the assumptions behind these distributions can never be questioned.
How do we know ranking works? Because the top ranked people consistently think that the system works and the lowest ranked people think it is unfair. Clearly we want to listen to the opinions of our top performers and not bother with people who, by definition, are likely to be sore losers.
In Conclusion – Now that you have read through this material, we are certain that you have a complete understanding of our ranking system and agree with it. If you do not agree that our system is the best one that there could ever be, please discuss this with your manager so that they can factor this into the upcoming ranking process.
Additional note: The ranking process does not apply to Vice Presidents and above. For our senior management team, we will continue to use a formula based on each individual’s golf score and average blood alcohol level. To insure equitable compensation, Executive salaries will be adjusted monthly based on the inflation rate in Argentina.
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