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Appraisal Case

Rank and Yank at General Electrics

Forced ranking is a performance appraisal system popularized by Jack Welch when he was CEO of
General Electric. It was a system that has been the derogatory label of “rank and yank” by its critics.
The intend of the forced-ranking system is to improve the performance level of an operation by getting rid of the bottom 10 percent of performers and hiring replacements who will perform at a high level.
Ranking judgments can be made in a variety of ways. For example, a forced distribution can pre-assign a set of percentage of employees that must be placed into categories such as “most effective”,
”average” and “needs improvement”. Alternatively, a simple ranking of workers from best to worst can be used. Top performers may be rewarded and offered promotion or training. Low performers may be given a warning or terminated.
Forced ranking has been employed by a number of companies, but some legal challenges have been made. For example, Microsoft successfully defended several discrimination suits challenging its use of a forced ranking system. Ford Motors campany implemented a forced ranking system in January 2000 and ended up paying an award of 10.5 million dollars as a result of class action suits charging that the system has a disparate impact on some subgroups of employees. Ford has since shelved its forceranking system. Overall however, there have been relatively few legal challenges to the forced-ranking system. It remains a controversial management practice.
A potential downside of forced ranking is increased competitiveness among workers. Under a forced ranking system, workers can become less focused on common or collaborative tasks. Instead, workers might focus on their individual performance and ranking. The net result can be less teamwork and a negative effect on productivity.

1. Do you think forced ranked system is a good performance management system? Why or why not? 2. Part of the forced raking label reflects the intent to force distinctions among the performance level of workers. In an absolute rating system, everyone could be rated “above average,” not so with forced ranking. Does the difference between the absolute and relative rating approaches mean that the absolute performance judgments are wrong?
3. Can you devise an absolute rating system that would guarantee differentiation among workers? Why or why not?
4. As a manger would you refer to rely on an absolute performance rating system or a relative system such as forced ranking? Why?

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