Why classify employees according to performance decline
Bill Michael, the former president of KPMG, told staff “Stop whining” at a virtual meeting in February, one of the issues they were complaining about was the “forced distribution” model for assessing their performance. This way of valuing people is a zombie idea. To the extent that it is deplorable to the company’s culture or morals, it refuses to die.
Generally, “forced distribution” or “stack classification” methods divide employees annually by a certain percentage of the highest-performing, average, and lowest-performing workers. In the UK’s top civil service, for example, proportions were fixed 25, 65 and 10 percent respectively, until the system was renewed in 2019.
The idea is to avoid “grade inflation” and force managers to have honest conversations with people with an underlying pair. Jack Welch, former CEO of General Electric, he said in 2013 he couldn’t understand why people thought he was cruel. “We grade kids at school, they are often between 9 and 10 years old, and no one calls that cruel. But somehow adults can’t take it? Explain that to me. ”
There are circumstances in which it works. A former accounting practitioner said he was willing to accept long hours and grinding jobs if he was to be promoted. “You need to know in that context whether you’re in the 25th percentile or the 75th percentile,” he told me.
But there are many examples where the method fails, even in its conditions. The serious problem is that it confuses someone’s absolute performance with their relative performance with peers. You may be able to meet all of your goals, for example, however, be ranked in the bottom positions and be designated a “low-performing” team. Sarah Nickson, a think-tank researcher at the Institute of Government, said she had found the UK government’s “deep immersion” in the forced distribution system for civil servants that “many people below 10% do not perform well”.
In addition to being unfair to the employee, the line manager feels uncomfortable. “It was hard when you had to meet people’s expectations, with level 3, but because there were 1, 2 and 3 so many, there was pressure to give 4 and put in place an improvement plan,” a former director told the accounting firm.
In many organizations, online managers assign interim grades and then eliminate the overall distribution in “moderation” meetings with other managers. But it’s hard to objectively classify white-collar people who do different things objectively. “You’d barely know people sitting in a room comparing apples to pears,” said a second director at another company.
Some online managers told me they would play the system. People who had just joined the group would be placed in the bottom row because they were easier to sacrifice. Or, badly, they tried to hold on to the bad performers, put them at the bottom and protect everyone else.
The system can also discourage teamwork. Microsoft Compulsory Distribution Classification System (since its dissolution) they accused him it stifled innovation by creating a toxic culture in the early 2000s. Good interpretations complained of working together for fear of suffering in the rankings. People quietly sabotaged colleagues.
In the end, these systems tend to be morally corrosive, which damages the levels of performance they want to improve. Research shows that feedback has a positive effect on average performance, but decreases performance in one-third of cases. The key is to make people feel that their opinion is fair.
Employees who express positive emotions after giving feedback work better in the future and those who express negative feelings continue to do worse. In a forced distribution, only those who are better ranked than average will feel particularly happy. Nickson points out that this is by definition a minority. “It’s nice for your ego when they tell you you’re high-performing, [but] I think the question is, does this benefit outweigh the disadvantages for everyone else? “
Microsoft suspended the mandatory distribution in 2013. He continued to serve the UK’s top public service in 2019. KPMG told me that it intended to “move away” from the system, “in order to have much greater flexibility.”
Human resources departments have had to rethink many old ways of thinking since the pandemic. The counterproductive pseudo-science of forced distribution should ultimately be an idea that remains dead.