There has been a lot of debate over the years about the process of ranking employees as part of an organization’s performance assessment process. Some people swear it’s the only way to run a truly competitive business, while others view it as punitive and destructive to culture and morale.
I’m here to tell you that both perspectives can be right! There are pros and cons to forced ranking. While it pushes managers to carefully assess talent and address performance issues, the cons of employee ranking can include legal exposure and employee morale issues. However, when you do it right, you can achieve all the upside without the downside.
The legal exposure and negative business culture impacts from the ranking process come into play when objective criteria are missing from the process. It’s not uncommon for CEOs to require their executives to rank each of their employees with no specific or consistent guidance around how to accomplish this task. The problem with this process is that there is no objective criteria used to sort individuals. Consequently, it can be viewed as biased by favoritism and heighten the risk of discrimination claims if employees view their protected class as the reason for their position in the stack. To further complicate matters, some companies require executives to divide employees into fixed percentages. This requirement introduces the risk inherent in “grading on a curve.” For example, when specific percentages are required, an employee can’t move up in ranking without pushing someone else down.
A New Method for Employee Ranking
I offer an alternative. This alternative began as a tool developed by Nicole Mattson, a talented member of one of my past HR teams. Nicole developed improved metrics to assess the healthy and unhealthy aspects of turnover in our organization. I have continued to build on this process and have re-tooled it for many different purposes over the years and now believe it’s most valuable when utilized to objectively assess the ranked contribution of each member of the team. Here’s a high level outline of how it works:
- Identify each of the categories of quantified data that is currently gathered in your organization that could be used to assess relative employee contribution to driving value. Chances are there is more of this data in your business than you first realize. Some examples of quantified data include customer service survey scores, performance review scores, number of sales calls managed and/or volume of sales generated, tenure, etc.
- Have your executive team discuss what these different categories really measure in terms of driving value and how critical each one is to the success of the organization. The results of this discussion will drive the weights you assign to each category. Incorporate only those factors that actually drive value in your business!
- Develop a point system for each category. For example, if you are a service company that tracks complaints, a service technician might receive five points if his or her complaint rate as a percentage of calls is less than 1 percent, while another technician with a complaint rate over 10 percent might receive just one point.
You now have the beginnings of an objective and quantifiable way to look at individual scores for your employees that more accurately describes the relative contribution they are making to your business. The chart below illustrates how an employee ranking might look:
Obviously there is more nuance to this process than can be captured in a relatively short narrative; however, it should be clear that the exercise accomplishes several objectives. When you standardize the process and rank your employees from top to bottom (with some ties in between) you have the confidence of knowing that your executives used the same objective criteria for all employees. This improves the likelihood that the tool will really drive value in your business, reduce negative culture impacts due to an improved perception of fairness and significantly minimize the chance of a discrimination claim.
Your next challenge is to figure out what to do with this valuable information. A few examples include:
- Developing your employee retention strategy
- Building individualized development programs for your employees
- Fostering improvements of your managers by building it into their compensation programs
I often see companies adding on one HR program after another, without using data to drive these decisions. More isn’t better! This methodology can provide you with information to ensure that you invest your time and resources into fewer of the right programs.
Amy Thrall is a Senior Human Resources Consultant for vhr. She can be reached by email at email@example.com.