Making Forced Ranking Work, Part Four

By Dick Grote

Dec. 7, 2005

Here, from Appendix B to the book, is a set of frequently asked questions about the forced ranking system. This FAQ was originally developed by the author as part of the development and implementation of a forced ranking system for a large consumer goods company, here also called Acme Services Co.

The document has been revised both to eliminate any references to the original organization and to make the questions and answers appropriate for any company that is implementing forced ranking. The term that Acme has chosen to use for its forced ranking process is “Leadership Assessment Process.”

This set of frequently asked questions is intended to provide a workable template for an organization to use in developing both their own FAQ document for publication to the workforce. It will also be useful in considering the questions that are likely to arise in the course of developing and installing the system.



Frequently Asked Questions

What is the Acme Leadership Assessment Process?
The Acme Leadership Assessment Process is a procedure in which each member of the senior leadership team of the Acme Services Company will be assessed against four criteria: EXECUTE WITH EXCELLENCE, PASSION FOR RESULTS, SUCCEED WITH PEOPLE, and MAKE TOUGH DECISIONS. Each individual being assessed will be assigned into one of three categories: the top 20 percent of all Acme leaders; the vital 70 percent; and the bottom 10 percent.

Why are we doing this?
    In our very competitive industry being good or being profitable isn’t good enough. We must strive to be a high performing, best in class organization. This starts with the leadership of the company. A disciplined, structured review process aggressively develops top leadership talent, and in some cases deselects others. A process such as this is necessary to ensure that the leadership stays sharp, is of the highest caliber, does not become satisfied with mediocrity and continues to move forward and grow the Company.

Is this fair to do?
    Yes. The leadership and employees of Acme have known for many years that “how” we get things done is as important as “what” is accomplished. It is entirely fair to hold the leadership responsible for a higher standard of performance not only in the delivery of operating results, but also in the demonstration of key leadership competencies. That’s what we are doing. The criteria to be used in the Leadership Assessment Process are a reflection of our Vision and Values. There is nothing new here other than holding the leaders accountable for operating to those values, judging which executives do it the best, and determining which do it the worst. Thousands of people both inside and outside of the Company rely on the leadership to lead successfully. It would be unfair to them not to hold our leaders accountable for the best leadership skills.

Is this something that will benefit Acme?
    There is no question about it, yes. While this is a difficult process, the net result is that the development of our leadership will get special emphasis. We need to know that the individuals who are directing the business have all the tools and experiences necessary to deliver on their leadership responsibilities.

    Another benefit is that the overall caliber of the leadership at Acme will rise. Some good performers of the past may not measure up to a raised bar of expectations, but they will be treated fairly and with dignity. But those individuals who are up to the challenge will in fact be given increased opportunities to lead and will reap the resulting rewards. Those who are not up to the challenge and competition will exit the organization. The ultimate result is that we will be a better-led, more successful enterprise.

Is this going to be done annually?
We expect to do another iteration of the process in about 12 months. At that point we will evaluate the timing of the Leadership Assessment Process and determine what the on-going frequency should be.

How is the assessing being organized?
    A number of assessment sessions will be conducted between May 8th and May 10th. In the first one our CEO will evaluate his staff. After that meeting, the project consultant, an external industry expert in performance management, will facilitate a meeting with our CEO and his immediate staff as they assess all employees at Salary Grade Level 6 and above. On subsequent days, 4 additional facilitated assessment sessions will occur. They will be conducted by a panel of Vice Presidents serving as assessors. The 4 facilitated sessions are as follows:

  • Sales and Marketing

  • Manufacturing

  • Engineering, Purchasing, and Finance

  • Human Resources, Information Services, and Legal

Who is doing the assessing?
    The CEO and the Senior Vice President – Human Resources will be assessors for all assessment sessions. Senior Vice Presidents and divisional Vice Presidents will be assessors in the review sessions for their functions. Additionally, HR professionals who support the various divisions will be in attendance at sessions when their client groups are being assessed.

Are the assessors qualified to make these assessments?
    Yes. Our consultant, a recognized industry expert in processes such as this, has trained all individuals participating in the assessment meetings. Each assessor has completed a review of study material and has engaged in significant discussions about the process.

Isn’t this just a guise for a RIF?
    No. First of all this process looks at individuals, not at jobs. Secondly, individuals who leave the organization will be replaced, which will frequently result in advancement opportunities for people lower in the organization.

What will happen to me if I am assessed in the lowest 10 percent?
    These individuals will be told of their status, as will all assessed employees. Obviously, this is bad news, but these individuals will be told truthfully that they do not have a leadership future at Acme and will be able to immediately consider changes in their career plans. They will be told that a separation package will be made available, as well as outplacement services should they opt to accept the initial separation package.

    If any individual identified in the lowest 10 percent believes that the assessment is inaccurate, he or she will be given a period of time up to 90 days to demonstrate that their assessment was in fact inaccurate, after which their leadership capability will again be assessed against the four competencies. If, at the end of this period, they are still assessed as a lower 10 percent individual, they will be exited with a separation package only. Additional consideration offered earlier may not be available at this point.

What does this process mean to me and my development?
    For the great majority of Acme leaders — the 90 percent —it will mean that a greater emphasis will be placed on their development. For those individuals who are part of the top 20 percent it will mean very specific and rigorous development.

Will I be told where I came out in the process?
    Yes. Beginning on May 13th and no later than by the end of June, there will be individual discussions between assessors and the people that were assessed.

Do other companies do this?
    Yes. A large number of very well managed companies, including GE, PepsiCo, Microsoft, Sun Microsystems, Intel, and many others utilize management processes such as this.

Will the people who are exiting the organization now through the early retirement program be considered as part of the lower 10 percent?
    No. Individuals in Salary Grade Level 14 and above who indicated a decision to retire as part of the early retirement Program will not be part of the population being assessed, regardless of the timing of their retirement.

Some departments have routinely been aggressive in weeding out poor performers. Won’t those departments be disadvantaged by beginning this process now?
    No. Such departments have typically used Acme’s performance management system and other tools quite effectively, and this should continue. But the Leadership Assessment Process is not focused on individuals who are considered to be “performance problems”. Almost universally, the individuals who are being assessed are rated good or above.

    This process specifically measures Acme leaders against four key leadership criteria and forces the assessors to identify the best. In this process the lower 10 percent of the individuals are just that — relatively weaker leaders. They may be adequate in other organizations, but as we raise the standard for leadership at Acme, they do not meet that standard here.

What if my department has more than 10 percent lower rated individuals? What if we end up with less?
    First, the assessment is not done on a department basis. In each assessment session, a good-sized grouping of executives, as described earlier, is being discussed. That said, there will be 10 percent of individuals identified from each of the sessions. Assessors could identify more.

What if my department has more than 20 percent top performers? What if we end up with less?
    Again, the assessment process is not done on a department basis. That said, there will not be more than 20 percent top performers identified in any session, as we want to identify the best of the best. This permits a targeting of somewhat limited development time and resource to the best leaders

Will the lower 10 percent be let go on one particular date? If so, what if we don’t have a backup?
    An exit strategy for each person identified in the lower 10 percent will be established on an individual basis. In all instances the dignity and respect for the individual will be maintained. Not having a ready backup is not an adequate reason to maintain a weak leader in a leadership role.

What if I am recognized as a top 20 percent one-year and not the next? Will my development be affected?

Are managers going to be held accountable for ensuring that development plans for the top 20 percent are actually formulated and executed?
    Yes. Senior management will be directly monitoring the progress of top 20 percent individuals. Additionally, managers of top 20 percent individuals are also assessed in the Leadership Assessment Process. One of the four criteria on which they are judged is “Succeeding With People” which directly speaks to their efforts in the development of people.

Shouldn’t all employees have been put on notice that this would be done, so that they could concentrate on demonstrating the behaviors, which are all of a sudden so important?
    Acme expects every employee at every level to demonstrate excellence from the day he or she is hired. All employees were specifically informed of the our Mission, Vision and Values at the time that they were hired. These statements have been an on-going part of our business and a part of all of our performance management systems and activities.

    Employees have regularly been told that the way in which they meet their objectives is as important as what is achieved. All employees have been told that they are responsible for how they get work done. It is perfectly acceptable to hold leadership accountable to demonstrate leadership excellence at a higher level than the company would expect of anyone else. In fact one could argue that any leader who was not exhibiting the values and now is seeking a reprieve in order to exhibit them was withholding what they knew to be the highest level of effort and leadership, and should be removed from the organization.

Don’t you run the risk that some of the individuals who are being assessed will be assessed by people who don’t know them, particularly for some individuals from small departments that provide services across the company?
    Assessors will be asked to directly assess the people that they know the best. Usually, that equates to the people who report to them in their respective divisions, and those in related areas. In the assessment sessions, when one assessor is discussing an employee, the other assessors will be expected to ask probing questions, pressing for clear examples, and generally ensuring that the rigor of the process is applied consistently.

If an individual is simply not very well known (or possibly unknown to the panel of assessors), will this person automatically be placed in the bottom ten percent?
    An individual who is simply not known, even by their department Vice President, will default to the “vital 70 percent”. Under no circumstances would such an individual, as described in this question, be placed in the top or bottom grouping.

    However, it should be pointed out that it is highly unlikely that this could occur, what with the composition of the assessor groups, the preparation leading up to the assessment session, the oversight by HR, and the professional facilitation.

Is it fair to compare people at salary level 16 (from whom presumably greater leadership is expected) against people at salary level 14 (from whom presumably a somewhat lower level of leadership is expected)?
    This is a very good question. It is not so much a matter that “greater leadership” is expected from one job versus another, but rather the degree to which a person exhibits the leadership that his or her position calls for. For example, a person who holds a salary grade level 14 who absolutely nails the leadership expectations associated with their role will fare much better than a person at a salary grade level 16 who does not, even though the person at salary grade level 16 is in a position of greater responsibility. In this respect, it is fair and equitable to compare individuals based on observable behaviors irrespective of their salary grade level.

If we are going to do this every year, is it really fair to assess the people who replaced last year’s bottom ten percent? Won’t they be too new? Wouldn’t it be better to do this every other year?
    Generally speaking, a newly appointed individual will default to the “vital 70 percent”, to allow the individual time to exhibit their leadership. In our Leadership Assessment Program next year, the assessors may choose to leave a person in the middle grouping, or they may feel that adequate time has elapsed that permits them to make a valid assessment and place the individual in a different category. Generally, if an individual has been in a position less than 6 months, we will consider that time as too short to make an assessment.

What role will EEO considerations play in the assessment?
    The final composition in each session of the three groupings (top 20 percent, middle 70 percent, lower 10 percent) will be based exclusively on the leadership criteria used. There will be no quota based on age, sex, race, or any other criteria than leadership. The rigor of treating all individuals fairly, observing them through the same lens and measuring them against the same yardstick will be consciously and strictly observed.

Ford did this and had to stop because of employee backlash. Is that true?
    Ford attempted to use a review process somewhat similar to ours as part of its overall Performance Management process covering over 18,000 employees, which we are not doing. The Leadership Assessment Process is independent from our performance appraisal process. Acme is taking very careful and deliberate action to insure that fairness and rigorous review criteria are being adhered to.

Isn’t this illegal?
    No. There is nothing illegal about evaluating how well people perform against the company’s expectations that they display Acme’s four leadership competencies. In addition, the entire Leadership Assessment Process has been reviewed by both our internal and outside legal counsel.

The evaluation of people’s performance against Acme’s leadership competencies is just the subjective opinion of the assessors. This seems unfair.
    The Acme Leadership Process has been specifically designed to remove subjective opinion. Every one of the assessors has been specifically trained. Assessors will only discuss people whose performance they are directly familiar with. In addition, assessors who do not have direct, first-hand knowledge of the individual under review are instructed to make sure that other assessors provide examples of actual performance and not just unsupported opinion.

    Finally, it is far more fair for the performance and potential of individuals to be discussed by senior management out in the open, in a controlled and structured environment, against specifically defined criteria, than in any other less rigorous and less objective way.

If I am told by my assessor that I came out on the lower end of the 70 percent group, will I be at risk for being placed in the bottom group when the assessment process occurs next year?
    You will certainly be at risk if you don’t do anything about the feedback you received and wait until next year’s assessment. Openness and candor are one of the pluses of this program. If your manager tells you that you ended up in the middle 70 percent group, but that the discussion was such that you were clearly identified as being on the borderline of being placed in the lowest 10 percent group, you have some serious decisions to make. You can work with your manager to execute better against the leadership criteria and develop yourself, or you can ask yourself the question, “Is Acme it the right place for me”?

Isn’t this an example of Acme not caring about the people that work here?
    Absolutely not. Having the right leadership that can execute in the best possible way to successfully move the company forward is one of the best ways Acme can show that it cares for its people. There are thousands of employees at Acme, and countless thousands that directly and indirectly depend on Acme and the effectiveness of its leadership. By using this process, Acme will have a higher caliber leadership. This is evidence that Acme cares about its long-term health, future, and its people.

Appendices A and B excerpted from Forced Ranking: Making Performance Management Work, by Dick Grote. Excerpt copyright 2005 by Harvard Business School Press. Reprinted by permission of Harvard Business School Press from Forced Ranking: Making Performance Management Work, copyright 2005 by Dick Grote. All rights reserved.

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