The Evils of 'Stack Ranking' And What Companies Should Do Instead

The practice of ranking employees and firing the lowest ten percent can kill employee morale fast. Here are five ways companies can create a better system.

There are many ways that HR departments have cooked up to motivate employees. And while some are better than others, there is one that needs to be eliminated fast.

There is no good reason to rank employees or what is known as stack ranking. Stack ranking refers to the performance appraisal process where employees are not only ranked but also typically the lowest 10 percent are automatically fired. In my experience, all that does is create internal competition among employees who vie to not be among the infamous 10 percent.

While the purpose of ranking is to motivate employees to perform better, it only devalues the performance of those not at the top. On the one hand, companies spend time and money recruiting and hiring the very best and then through ranking tell most employees they are average. It defies logic.

An office environment needs to build positive reinforcement into every job. While it may be counter intuitive, the evidence is clear that only positive reinforcement brings out the best in people. Negative reinforcement and punishment is sometimes needed but in a high performing company it should be rare, not a commonplace event as it still is in many companies.

Unfortunately, organizations often view employees en masse, comparing employee A to employee B. That type of invidious comparison is about as helpful as being compared to your more successful brother, sister, cousin, etc.

What should organizations do instead?

1. Make leaders responsible.

The onus must be on managers to ensure that their employees perform to the best of their ability. The value of a supervisor or manager should be determined by his/her ability to do that. If the employee doesn’t perform, management hasn’t managed.

2. Create a system where all employees can win.

Identify performance criteria that all employees have the opportunity to meet, not just a certain percentage. When you rank, you grade individuals on a curve, ensuring that some are at the bottom. If you identify criteria for employees to meet, and reward them for doing so, employees become focused on performing as well as they can.

3. Always examine behavior.

Ask yourself "Am I getting the best and most desirable performance from my employees?" If not, identify the behavior you want and deliver positive reinforcement to the employee when you see him/her doing something right. The fastest path to improvement is one where positive reinforcement is present at every step.

4. Set many, mini goals.

Break big goals into smaller, more easily achievable ones. Positive reinforcement accelerates performance and therefore, the more reinforcement opportunities available, the more that are earned, and the faster and greater the improvement.

5. Consider a pay-for-performance system.

 

By establishing pay-for-performance based on profit sharing, you will keep the organization whole while keeping salaries at current levels. By having a well structured, pay-for-performance system, you also make people aware of what it takes to get to that profit.

Aubrey C. Daniels, Ph.D., is founder and chairman of Aubrey Daniels International and Aubrey Daniels Institute. He can be reached at info@aubreydaniels.com. He is the author of Bringing out the Best in People.

[Image: Flickr user Håkan Dahlström]

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