World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 78

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usually set in the human resources
department, and is often opaque to
everyone else. People may work as
hard and as cleverly as they can, but
they still don’t know if this will get
them a higher rating. That’s because
the rankings reflect not just their
individual performance, but their
perceived contribution compared to
a cohort of their peers. If everyone
is performing optimally but the
manager can reward only the top 10
percent with the highest ranking, the
employee’s sense of control is thrown
out the window.
3. Autonomy. When a student
gets a poor grade at school,
there is generally a clear path to
improvement—a path that may involve
studying harder or seeking extra help.
Whatever it is, the individual has some
control. In an organization, a clear path
is not always evident. Improvement
may depend on factors (such as
customer response to a product or the
willingness of others to collaborate)
that employees feel they cannot control
or even influence. Though workers may
actually have more influence than they
think, the ratings trigger a sense of
lack of autonomy. They reinforce the
perception that the employee is neither
trusted nor empowered. Moreover, in
most PM systems, the focus is on past
performance, not on future potential.
This sends an unconscious message
to employees: Their capacities are
fixed and may never change. If those
workers have not had much autonomy,
or experienced it in the past, they
are unlikely to see that change in the
future.
4. Relatedness. If only one person
can be given the top rating and get
the best bonus, suddenly employees
have good reason to undermine one
another’s ratings, rather than to
collaborate. “We spend performance
season getting battle ready,” explains
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one manager. “Two weeks before my
review, I begin to prepare my attack.”
In one celebrated case, Microsoft’s
ranking system (since discontinued)
was blamed for the company’s decline
in performance. Although Microsoft did
not apply ranking quotas to individual
small teams, a Vanity Fair article
quoted a programming staff member
who clearly believed the company did,
and who said, “It leads to employees
focusing on competing with each other
rather than competing with other
companies.” A similar unintended
consequence occurs up the hierarchy.
If employees feel that their bosses are
comparing them against their peers,
they will not openly share information
that might compromise their ranking.
5. Fairness. A CEB study showed
that at least two-thirds of the
people paid as top performers are
not actually seen by their peers
as contributing the most to the
enterprise. Perhaps that’s why
another survey, this one from the
research firm i4cp, found that 75
percent of the respondents believed
performance systems were not fair.
This represented a threefold increase
since 2008, when it was only 25
percent. Unfairness is perhaps the
biggest problem with forced ranking,
because the system is set up in a
way that makes the decisions seem
more arbitrary every year. In most
companies, after several years
of a forced ranking system, poor
performers have already left. Everyone
who remains performs above
expectations, almost by definition.
But managers are still forced to rank
their subordinates on a 20/70/10
scale, and the bottom 10 percent are
required to leave. Thus, every year,
at least one highly motivated, highly
capable employee is ranked as a
bottom performer. This ends with the
employee exiting the company, and
the manager deeply frustrated.
Of course, all these factors reinforce
one another in ways that worsen the
effect. For example, when people feel
that others were ranked more highly
without merit, and have no recourse to
complain, the combined lack of fairness
and autonomy can generate a much
stronger emotional reaction than either
would alone.
The result of all this? People feel
unappreciated. They become more
conservative. They set their goals
low to ensure that they are seen as
succeeding. They retreat from candid
conversations about development,
because the whole issue of progress
and feedback is so emotionally
charged. The experience becomes one
of “ticking a box.” There is little of
the type of conversation that actually
promotes personal growth.
The rating system is particularly harsh
on those who conduct the appraisals.
Supervisors feel pressure to continue
to show improvement, raising some
people’s rating over time. They also
feel pressure to differentiate, leading
them to scapegoat some of their
subordinates as poor performers.
Steven Rice, executive vice president
of human resources at the technology
company Juniper Networks, explains
why it deliberately shut down its
forced ranking system: “The critical
practice of letting someone know
where their performance authentically
stood became hijacked by artificially
categorizing individuals into forced
ratings in order to meet a fixed
compensation budget. The process
lost its integrity. In the majority
of situations, it rendered the
performance feedback incongruent
with compensation and the rating.
Ironically, an HR process designed to
drive fairness resulted in mistrust....
Managers blamed it for tying their
hands and wrote the whole process
off as unhelpful.”