There are several different types of employee performance appraisals. However, one of the most favored by large organizations with thousands of employees is "forced distribution." Many employers think it is the best way to evaluate employee performance. Others hold strong views in opposition.
Jack Welch, former CEO of General Electric and author of the business management treatise "Winning," almost single-handedly made forced distribution appraisals famous. While at General Electric, Welch's take on business was that employers should reward the top performers, attempt to develop the middle category of employees and dismiss employees whose performance is ranked in the lowest category. This system is sometimes referred to as "rank and yank," meaning, you rank employees then yank out the worst ones.
According to a forced distribution performance appraisal, an employee is judged on his own accomplishments. This is rewarding for an employee who values individual achievements over teamwork and team-based goals.The method by which the employee is ranked may include "management by objectives" or MBOs, which are goals and objectives the employee and her manager identify at the beginning of the evaluation year. At the conclusion of the evaluation year, the objectives completed are ticked off, and the employee is rewarded for the amount and quality of work performed to reach those goals.
Experts, including Welch, estimate 20 percent of the workforce falls into the A range. A-range employees are often rewarded generously and groomed for leadership positions with the company.
The majority of employees are said to belong in the B category, as employees who simply meet expectations but may have potential to move up to become A-range employees. For employees ranked B, there are performance improvement plans put into place or a different set of MBOs implemented or even a mentor assigned to an employee who shows promise for improvement. The expectation is for the average performers to be given an opportunity to improve or eventually move into the top ranking. The employee is often coached by her manager, or the company might invest in professional development activities to assist in her improvement.
The lowest ranking in a forced distribution performance appraisal is C. C-range employees are not meeting performance standards according to their managers. Either the MBOs established early on are woefully incomplete, or the employee simply isn't a good fit for the organization.
In his article, "The Case For 20-70-10," Welch admits, "More typically, when a person has been in the bottom 10% for a sustained period of time, the manager starts a conversation about moving on." This is the yank part of the equation in a forced distribution employee performance appraisal.
The forced distribution appraisal has firm guidelines and is usually a time-sensitive occurrence since bonuses are likely to be given out at the end of the year. For these reasons--regimented, timely and overly formal--the forced distribution type of appraisal method has been criticized. And, since forced distribution appraisals do not promote an exchange or discussion between the employee and her manager, the forced distribution critics see this type of appraisal, which advocates unilateral decisions, as steeped in favoritism.
The overwhelming feeling about performance evaluations is that employees and managers alike dread them. Employees believe their efforts won't be recognized and evaluated fairly, and managers may sometimes be reluctant to provide candid feedback to help the employee perform her job successfully.
In this case, there are benefits to a forced distribution appraisal. Large organizations with thousands of employees and managers are aware of the forced ranking that's necessary during appraisal time. With this in mind, managers tend to use careful detail in evaluating employees--especially in the A and B range.