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March 20, 2001
Forced Ranking Systems Prompt Employee Suits
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rowing number of companies are turning to forced employee ranking appraisal systems as a way to make sure managers are honestly evaluating their employees.

Forced ranking appraisal systems require managers to rank their employees from best to worst, apply the rankings to a bell curve and use the results to determine pay as well as who to fire.

General Electric's chief executive, John Welch Jr., has been a long-time a proponent of forced ranking appraisals. At GE, supervisors must identify the top 20 percent and the bottom 10 percent of their employees every year. Last month, Welch told shareholders, "A company that bets its future on its people much remove that lower 10 percent and keep removing it every year, always raising the bar of performance and increasing the quality of its leadership."

But the New York Times reports this week that the new technique is prompting employees to file lawsuits charging discrimination. Over the past year, employees at Microsoft, Ford Motor Company and Conoco have files suits claiming forced ranking systems are unfair and favor some groups over others, such as white males over blacks and women and younger managers over older or foreign workers.

The Times reports that critics of the system also argue that companies should not apply a bell curve, in which a small number of employees get the highest and lowest rankings and a much larger number are grouped in the middle. The bell curve model assumes a normal distribution among a very large group of random individuals, not small groups.

Also, employees who belong to an effective group will suffer if a certain number of them must be given poorer grades than they would get in another unit where others may not be as effective.

"You end up with dysfunctional results," Edward E. Lawler III, a business professor at the University of Southern California, was quoted in the story.

  • Click here to read the complete story in the New York Times (Registration may be required).

  • What do you think of forced ranking appraisal systems? Cast your vote in this week's poll!
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