Can you handle the truth?

Friday, 11 March 2011 00:19 -     - {{hitsCtrl.values.hits}}

By Niroshan Silva

IT’S that time of the year when HR professionals, line managers and employees dread appraising their fellow employees. This may not be true for many, yet the majority would, if given the chance, prefer not to be a part of the appraisal process.

The psychological trauma of making a decision on a person’s performance, thus his salary increment and perhaps promotion, is daunting. While the people-centred culture quotient and the fact that Sri Lanka’s systems are not properly developed are given as factors of escape, the real issue is about being coached on how to deal with appraisals.

To add to the commotion, many organisations use a forced ranking system or fondly known as the Bell Curve. The article is written to enlighten some of the dynamics of this ranking system, its pros and cons and to request more HR professionals to help the teams and individuals with performance coaching.

Rank-and-yank advocates like Jack Welch of General Electric that spoke about the top 20%, the vital 70% and the bottom 10% advocated a ‘shape up or ship out attitude to work’. Motorola, which has tried many forms of the curve, ended up during the year 2000-2002 using a 10:80:10 Curve.

Whatever the proportions may be, the rationale is about ranking the top, general population and the poor performers on a normal distribution curve. Advocates of forced ranking seem to believe it is widely used across the globe and is a good, tough minded talent management process. They agree that there are issues when it is poorly conceived, yet when it is used right does increase productivity and profitability.

Benefits associated with forced ranking

1.Forced ranking combats artificially inflated performance appraisal rating and forces people to come up with the truth. While only a small percent can be in the top quartile, no matter how much everyone does in meeting ones objectives the mangers have to choose the best and the rest. While Camille Olson & Gregory Davis, authors of a study on forced ranking for SHRM, found many inflated the figures of the appraisal till the forced ranking was brought in. E.g. before FORD brought in Forced Ranking 98% ranked the people as meeting and exceeding the expectations. Managers in our part of the globe are relationship oriented and very people savvy therefore find it hard to call a spade a spade. Their rater errors are many as they ‘feel sorry’ for the employee. Given that we are a developing nation this syndrome would be aggravated. Forced ranking jolts the managers out of complacency.

2.    Besides forcing the truth into performance management the forced ranking process forces information out in the open. Because the real information is critical – it forces people to discuss issues more freely and hence correct the issues at shop floor level.

3.Forced ranking helps to supplement the organisations over all talent management efforts. Many managers shy away from admitting that there are people who are more talented than others and can perform better. This process wakes them up to reality. While British psychologist Adrian Furnham in his work talks about how the variance in productivity is such that it is two to one. A talented good worker is twice as much productive as a poor one. While many would argue that KPIs and goals would mitigate this, it still remains that on an individual level there are top and poor performers.

4.Forced ranking can reduce favouritism, nepotism and other organisational rewards based factors. This provides a system that is tight in its analysis of the process and no back scratching deals and political tradeoffs would come into play. It helps the managers sit down and clearly outline the measurement. While many would argue against the very points pronounced above, it remains as a guide to understand why many high performing organisations still use the bell curve.

Risks associated with forced ranking

1.It may increase unhealthy cut-throat competitiveness.

2.It may harm morale and may reduce team effort, cooperation and risk-taking and increase fear of failure.

3.It is legally not very sound, giving rise to discrimination lawsuits. May increase the risk of litigation due to perceived lack of ‘due process’.

4.Targeted distribution may not reflect the actual performance distribution. Ratings may not be assigned in accordance with performance (e.g. “it’s her turn”).

5.May force the managers to only develop their stars.

With all these arguments for and against, if one needs to implement a forced ranking system in ones company – we need to understand that our organisations may not be ready as a performance culture. Many HR professionals would be outraged with this statement.

Being a performance driven culture and having a good performance systems are two different things. Many of us have sophisticated systems prepared by many leading organisations, yet the organisations themselves don’t have a culture to embrace the changes.

As Jack Welch disclosed: “I wouldn’t want to inject a vitality curve cold turkey into an organisation, without a performance culture already in place. Differentiation is hard stuff. Our curve works because we spent over a decade building a culture with candour and openness at every level”.

Therefore ask yourself the following:

1.Does the organisation have a transparent robust succession plan?

2.Are the managers of the organisation trained for performance coaching?

3.Do the managers understand the statistical architecture behind the ranking?

4.Has the system made provisions for secondments, project based work and the like.

5.Does the organisation have an existing talent management system?

6.Has the organisation understood that there are many other forms of ranking that might help it achieve a better end result – e.g. ranking matrix, alternation comparison, guided distribution, tiered comparison, ranking at the CUSP, multiple comparisons and the like?

As a result of the quality of answers given for the above mentioned questions, forced ranking is seen as ‘the demon’ that creates hell at the end of the year. So where do we go from here. It’s never too late to get back to the basics. If the following is considered to be true for your organisation, rethink the process of forced ranking.

For example consider:

1.If lifelong employment is encouraged by the company.

2.If the company maintains ‘niceness’ as the cultural core value of the organisation.

3.The stability of the company is a value more than innovation.

4.Senior management wants to keep things just the way they are.

5.Promotions and other organisational rewards are based as much on longevity as on performance.

6.Managers are not trained in performance coaching and no prominence is given to receiving and giving frank feedback.

Steps to build a performance culture where the forced ranking would work better

Step 1: Do a performance management audit. (How well are the managers using the current appraisal system? E.g. the compliance rating patterns, etc.)

Step 2: Design or relook at how the ranking system has been designed. 20:70:10 based on the GE model, Complex six steps of Enron, Generic 1-5 (Microsoft), Quartiling as PepsiCo did some time ago, 10:80:10. Have we got the clustering numbers intact and the like? Get the statistical inference in order.

Step 3: Instil a performance culture where people can manage a ranking system.

Step 4: Coach the people constantly.

The heart of the matter

Many negate that we are working with human beings. In addition we forget that the geographical centricity factor in Asia that involves ‘niceness’ hinders the application of any system that reprimands people. Either way, given that the legal system does not permeate the bottom 10% of the employees be removed, forced ranking in Sri Lanka is about how to distribute the benefits and increments.

The discussion above originates from years of practical exposure. Its realisation by people managers would help build a healthy culture for our entities. After all, any system that you choose must be an enabler – not a disabler of work and heart. Make your employees feel strong and empowered.

(The writer – B.Bus (Mgt) (HRM), MBA, MAHRP, NLP Master Practitioner, BELBIN – is a Past President of the Association of Human Resource Professionals.)