Meaning & Definition
Forced ranking, often referred to as “stack ranking,” is a performance management and talent management practice used by some organizations to assess and differentiate their employees based on their performance. The primary characteristic of forced ranking is that it requires managers to categorize their employees into specific groups or tiers based on their performance, typically through a forced distribution curve. This process involves ranking employees from high performers to low performers, often with a fixed percentage of employees designated as top performers, middle performers, and low performers.
Key features of forced ranking
- Bell Curve Distribution
Forced ranking typically employs a bell curve distribution or similar curve, where a certain percentage of employees are classified into each category, such as “top performers,” “middle performers,” and “low performers.” For example, it might dictate that only a certain percentage of employees can be labeled as top performers, regardless of the actual performance distribution in the organization.
- Comparative Evaluation
Employees are evaluated in comparison to their peers. This means that even if all employees are performing well, some may still be rated as low performers simply because the ranking system requires differentiation.
- Rankings with Consequences
Forced ranking often has consequences tied to the rankings. For example, top performers may be eligible for promotions, raises, or other rewards, while low performers may face consequences like performance improvement plans or even termination.
- Annual or Periodic Reviews
Forced ranking is typically performed during annual or periodic performance review cycles.
While some organizations find forced ranking helpful for creating a competitive environment and identifying top talent, it has been a subject of controversy and criticism in recent years.
Critics argue that it can have several negative consequences, including:
- Encouraging unhealthy competition among employees.
- Fostering a culture of fear and distrust, as employees may be pitted against each other.
- Disincentivizing collaboration, as employees may be more focused on outperforming their colleagues rather than working as a team.
- This potentially leads to unfair evaluations, as employees may be rated based on the need to fit into predetermined categories rather than their actual performance.
Because of these criticisms, many organizations have moved away from strict forced ranking systems in favor of more collaborative and individualized performance assessment and talent management processes. However, some variations of forced ranking or performance differentiation are still used in specific contexts where differentiation of performance is considered crucial, such as in highly competitive sales environments.