Examples of the Forced Distribution Method

Companies turn to the forced distribution method of assessing workers' performance in an attempt to prevent the "grade inflation" that often develops in employee job reviews. More commonly known as forced ranking or stack ranking, forced distribution makes it impossible for managers to simply rate all of their workers as excellent, good or even average. It requires them to specifically identify the best performers and, more important, the worst performers.

Former General Electric CEO Jack Welch is widely credited with popularizing the forced distribution method. The version he instituted at GE has become known as the "bell curve," after a pattern commonly seen in statistics. In this method, all workers are placed into one of three groups. Most are in the middle group -- average workers who meet expectations. Some of those may be a little above average and others a bit below average, but all are doing an acceptable job. The second group consists of the top performers, those who exceed expectations. The third group is the underperformers, those who don't meet expectations. In bell curve systems, managers are required to assign a specific percentage of employees to each group, such as 10 percent at the top, 80 percent in the middle and 10 percent at the bottom.

In a "totem pole" system, the company ranks every employee in order of ability or value to the company. If the company has 100 workers to evaluate, everyone will be assigned a ranking from 1 to 100. The best-performing worker is at the top of the totem pole, the worst worker is at the bottom. Everyone else is somewhere between the two extremes. The totem pole is better suited to smaller companies where there's a level of differentiation between workers -- meaning no "faceless masses" all doing the same job -- and where top managers are more likely to be familiar with all the employees they're ranking.

In a quartile system, company managers must divide their employees evenly among four groups -- 25 percent to each group. Workers within each quartile are typically further subdivided into top performers, middle performers and bottom performers. The top quartile will consist of the highest achievers, the next two quartiles will be the good-enough middle, and the bottom quartile will be the laggards. People at the top of a quartile may be encouraged to "step up their game" to make it to the next level, while those at the bottom may get a warning that they're slipping.

In forced ranking systems, the workers identified as top performers usually get better raises and promotions. Those in the middle get moderate raises. Those identified as being at the bottom may be lucky just to hold onto their jobs. Welch famously encouraged firing the bottom 10 percent every year. Advocates of forced distribution says it prevents grade inflation, keeps employees and their managers from getting complacent and prunes the dead wood that inevitably appears in any company. Critics of the practice say it creates an atmosphere of infighting, suspicion and sabotage -- one in which employees have an incentive not only to look good but also to make others look worse.