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Introduction
Jack Welch, and General Electric brought forced ranking into the spotlight with the publication of GE 's 2000 annual report where Welch "explained and extolled" the use of forced ranking at GE (Grote, 2005). Since then its popularity as a performance evaluation tool has continued to grow. By some estimates as many as one-fifth to one-third of all companies are using forced ranking in some form (Grote, 2005). A recent study by Novations Group Inc. found that a total of 54.8% of all responding companies used forced ranking. Still, the total number of firms using it may be understated because some firms are unwilling to admit publicly to using the practice (Grote, 2005). Along with its growth in popularity has been a fair share of criticism. This article will look at what forced ranking is and how it affects organizations and the individuals being evaluated with forced ranking systems.
Definition
Forced ranking is a differentiation process where managers are required to evaluate an employee's performance, based on predetermined categories, against other employees in the department or peer group (Gary, 1990). These employee performance rankings are then applied to a bell curve. Those that rank at the bottom of the curve: usually the bottom 10%, are either put on probation, coached to improve performance, or terminated. Those at the head of the curve, usually the top 20%, are generously rewarded for their performance (Grote, 2005).
In its purest form, forced ranking is distinct from periodic performance appraisal systems used in most firms. Grote (2005) uses the term "talent management" to describe forced ranking, indicating that the purpose is to rank your best people not only for performance recognition but also future promotion decisions. While traditional performance appraisals tend be criterionbased (setting a performance bar), forced ranking is about distinguishing people. Forced ranking demands a differentiation among performers; performance appraisals don't necessarily do that.
Forced ranking differs from other well-known performance management tools such as balanced scorecard and 360-degree analysis. We note these two particular tools because of the popularity they have gained both among the firms choosing to adopt them and the literature reporting on them. While the balanced scorecard and 360-degree analysis tend to focus on individual goals and development, forced ranking is a...