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Forced Ranking: On The Wane?

by Tom O'Connor on December 17th, 2013

The house that Jack built - is on somewhat less firmer foundations today.

GE’s Jack Welch, voted Fortune Magazine’s CEO of the century in 1999, has seen his halo slip somewhat in recent years.

The company’s outsized gains in market capitalisation, recorded during his time in charge, is now very much subject to a revisionist take.

Much of the credit can now be attributed to the overall stockmarket bubble that occurred in the run-up to the millenium – & to a colossal debt mountain in GE Capital, which left the wider corporation dangerously exposed come the 2008 debt crisis.

The GE stock price that had risen 100-fold, during Jack’s 30-year reign as CEO, to a high of $57 in July 2000, plummeted to a low of around $6 in March, 2009.

Similarly, his views on performance management are being seriously questioned as well – in an era where internal competition is seen as a barrier to innovation.

Many of the companies that followed his lead by force-ranking their employees along a bell curve are now giving up on the practice – with the case for its abandonment, as set out by UCLA’s Professor Samuel Culbert in his 2010 book, Get Rid of the Performance Review, taking firm hold.

Especially noteworthy is Microsoft’s announcement in early November that they would be moving away from forced ranking employees  “to reflect an emphasis on teamwork”.

More generally,  the Institute for Corporate Productivity report that the proportion of US companies using forced ranking has dropped from 42% in 2009 to just 14% in 2012.

However the jury is out on whether the changes being made merely reflect a rebranding of the practice to something less perjoratively sounding, eg. talent mangement, or whether we are witnessing a more radical departure to something along the lines of the Performance Preview model proposed by Professor Culbert.

Still, Jack isn’t giving up without a fight, as evidenced by his rant in the Wall Street Journal on hearing the Microsoft news – though he is prepared to concede changing the name to differentiation.

Thus, he declares:

One … criticism … of differentiation is that it destroys teamwork. Nonsense. If you want teamwork, you identify it as a value. Then you evaluate and reward people accordingly. You’ll get teamwork, I guarantee it.”

To Jack, teamwork is simply something you can ram through from the top, holding fast to his notion of the omnipotent CEO.

What do you think?

PS1. For related Torc articles, please click on the following links: 
1. The Leader as Teacher
2. Performance Evaluations … Unplugged
3. Flow, Mojo & Drive

PS2. For related Torc Training programmes click on the following links: 
1. Performance Management & Appraisal
2. Performance Management Case Study

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