Forced Ranking

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When I was back in business school, I recall one of my Japanese friends telling me about a friend of hers who was studying at Harvard Business School being suicidal. Horrified, I asked her what she thought the problem was. It was then I learned that Harvard has a system where the bottom 10% of the people in each class automatically are given a failing grade. “This is especially hard for foreign students, who are at a disadvantage due to not being native speakers of English,” my friend told me. “My friend fears that she is in danger of being kicked out of school due to her low grades, and it’s driving her to despair.” I never heard more about this person, and I hope that everything turned out alright for her. But this was one of my first exposures to a forced ranking rating system. My immediate reaction was that it seemed rather harsh. My feeling was, at a school like HBS that is so careful about who it admits, and is charging them so much money to study there, such a system seemed really quite excessive. And at the same time, likely it would significantly impact the entire atmosphere of the school in a negative way.
I had heard that people at Harvard were very competitive in a cutthroat way, and this kind of system would surely exacerbate that.

Later, I learned that such systems are not unusual at corporations in the United States. GE in particular is famous for firing the bottom 10% of its managers every year, regardless of absolute performance.

Evidently, Microsoft was also using a similar system, which it called “stacked ranking.” Each business unit’s management team had to rate employees’ performance, and rank a certain percentage of them as either top performers, average or poorly performing. A manager who has a group comprised of all excellent employees would still have to rank some of them as poorly performing. It is said that this gave rise to a “cannibalistic culture.” In an attempt to create a more collaborative atmosphere in the company, Microsoft recently announced that it was changing its evaluation system to get rid of ratings and eliminate the forced curve.

Yet, right on the heels of this announcement, it has come out that Yahoo has recently adopted such a system, and has recently used it as the basis to fire about 600 people. Yahoo’s CEO Marissa Mayer already has the reputation of bucking the trends and being rather harsh in her approach to HR based on Yahoo’s elimination of its telecommuting option. Yahoo’s embrace of stacked ranking seems like another reason to label her an HR contrarian.


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