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Before
After
1. b 2. a 3. b 4. c 5. d
Number Correct
6. b 7.b 8.b 9.a 10. d
Number Correct
Case
Case 5.1: Comparing Co-Workers against Each Other:
Does This Motivate Employees?
Rigid rankings hinder the teamwork and risk-taking Holiday shopping, year-end deadlines, and emo-
necessary for innovation. But what combination of tional family dramas aren't the only stresses in
methods works best?
December. 'Tis the season for companies to embark
138
Chapter 5 Motivation 139
on that dreaded annual rite, the often bureaucratic
and always time-consuming performance review.
The process can be brutal: As many as one-third of
U.S. corporations evaluate employees based on
systems that pit them against their colleagues, and
some even lead to the firing of low performers.
Fans say such "forced ranking” systems ensure
that managers take a cold look at performance. But
the practice increasingly is coming under fire. Fol-
lowing a string of discrimination lawsuits from em-
ployees who believe they were ranked and yanked
based on age and not merely their performance,
fewer companies are adopting the controversial
management tool. Critics charge that it unfairly
penalizes groups made up of stars and hinders col-
laboration and risk-taking, a growing concern for
companies that are trying to innovate their way to
growth. And a new study calls into question the
long-term value of forced rankings. “It creates a
zero-sum game, and so it tends to discourage coop-
eration,” says Steve Kerr, a managing director at
Goldman Sachs Group Inc., who heads the firm's
leadership training program.
Even General Electric Co., the most famous pro-
ponent of the practice, is trying to inject more flexi-
bility into its system. Former Chief Executive Jack
Welch required managers to divide talent into three
groups-a top 20 percent, a middle 70 percent, and a
bottom 10 percent, many of whom were shown the
door. More than a year ago, GE launched a proac-
tive campaign to remind managers to use more com-
mon sense in assigning rankings. “People in some
locations take [distributions] so literally that judg-
ment comes out of the practice," says Susan P. Peters,
GE's vice president for executive development.
Striking that balance between strict yardsticks
and managerial judgment is something every com-
pany, from GE to Yahoo! to American Airlines, is
grappling with today. But finding a substitute for a
rigid grading system is not an easy task. It drives
truth into a process frequently eroded by grade in-
flation and helps leaders identify managers who are
good at finding top talent.
That's one reason GE isn't abandoning its system.
But it has removed all references to the 20/70/10 split
from its online performance management tool and
now presents the curve as a set of guidelines. The com-
pany's 200,000 professional employees tend to fall into
Welch's categories anyway, but individual groups are
freer to have a somewhat higher number of "A"
players or even, says Peters, no "bottom 10s.” Even
those low achievers are getting kinder treatment, from
a new appellation—the "less effectives"—to more
specific coaching and intervention than in the past.
The changes are key for a company trying to
evolve its culture from a Six Sigma powerhouse to
one that also values innovation. Tempering such
rigid performance metrics, says Peters, "enables in-
dividuals and organizations to be more comfortable
with risk-taking and with failure." To drive that
point home, the company's top 5,000 managers were
evaluated for the first time this year on five traits,
such as imagination and external focus, that repre-
sent the company's strategic goals.
Separating stars from slackers remains a long-
standing part of GE's performance-driven culture.
But for most companies, especially those without
such cultures, the benefits of adopting a forced rank-
ing system are likely to dissipate over the long term.
A recent study lends hard data to that theory.
Steve Scullen, an associate professor of management
at Drake University in Des Moines, Iowa, found
that forced ranking, including the firing of the bot-
tom 5 percent or 10 percent, results in an impressive
16 percent productivity improvement—but only over
the first couple of years. After that, Scullen says, the
gains drop off, from 6 percent climbs in the third
and fourth years to basically zero by year 10. “It's a
terrific idea for companies in trouble, done over one
or two years, but to do it as a long-term solution is
not going to work,” says Dave Ulrich, a business
professor at the University of Michigan at Ann
Arbor. "Over time it gets people focused on compet-
ing with each other rather than collaborating.
Yahoo!, too, was looking for better dialogue and
less demoralizing labels when it substantially changed
its rating system, which compared employees' perfor-
mance to an absolute standard rather than to each
other. Libby Sartain, Yahoo!'s senior vice president
for human resources, knew that review discussions at
the Sunnyvale, California, tech leader frequently in-
cluded the wink-wink "I wanted to put you here, but
I was forced by human resources to do something dif-
ferent" comment that discredits so many appraisals.
Yahoo! stripped away its performance labels, partly in
hopes that reviews would center more on substance
and less on explaining away a grade.
But that doesn't mean Yahoo! went all Pollyanna
on its employees. To do a better job of finding and
showering top performers with the rewards necessary
140 Part Two Understanding and Managing Individual Behavior
to keep them from jumping ship in talent-tight
Silicon Valley, the company also instituted a “stack-
ranking” system to determine how compensation
increases are distributed. It asks managers to rank
employees within each unit—a group of 20 people
would be ranked 1 through 20, for example—with
raises and bonuses distributed accordingly. During
reviews, employees are told how their increases gen-
erally compare to those of other's
into their rankings and ratings. But more flexible
guidelines have to have teeth, too: Low-performing
units shouldn't get more than their share of top
grades, for example. Exceptions should go to peo-
ple who set aggressive goals and come close to
achieving them.
Adjust Goals along with Grades
wmle many companies use "calibration" sessions to
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140 Part Two Understanding and Managing Individual Behavior
to keep them from jumping ship in talent-tight
Silicon Valley, the company also instituted a "stack-
ranking” system to determine how compensation
increases are distributed. It asks managers to rank
employees within each unit—a group of 20 people
would be ranked 1 through 20, for example—with
raises and bonuses distributed accordingly. During
reviews, employees are told how their increases gen-
erally compare to those of others.
Some Yahoo! managers are livid about the new
system. “It's going to kill morale," laments one
senior engineering manager who says he's getting a
stronger message to cull his bottom performers.
Yahoo! says its new program doesn't automatically
weed out a bottom group and was designed specifi-
cally to reward its stars.
Indeed, what Yahoo! has introduced in place of its
old system shows how hard it is for companies to find
ways to foster merit-driven cultures that coddle
standouts while staying tough on low performers.
Whether a company calls it stack ranking, forced
ranking, or differentiation, there's no magic pro-
cess," says Sartain. "We just want to make sure we're
making our bets and that we're investing in the people
we most want to keep. That's what this is all about."
into their rankings and ratings. But more flexible
guidelines have to have teeth, too: Low-performing
units shouldn't get more than their share of top
grades, for example. Exceptions should go to peo-
ple who set aggressive goals and come close to
achieving them.
Adjust Goals along with Grades
While many companies use "calibration" sessions to
check that performance assessments level out among
different managers, less than 10 percent fine-tune
up-front goals across groups, according to Hewitt
Associates.
Choose Words Wisely
Whether or not you strip the labels off your perfor-
mance reviews entirely, as Yahoo! has, faint-praise
terms such as “fully satisfies” make essential B-players
feel like also-rans. Try "strong" or "successful” to
drive home their value.
Build Trust
With so much focus on the tools and tricks of per-
formance management, it's easy to lose sight of
what really matters: the conversation. The Univer-
sity of Michigan's Dave Ulrich suggests putting
three simple words—"help me understand”—in
front of difficult feedback.
Best-Practice Ideas
Review season is here, with all the time-consuming bu-
reaucracy and stress that come with it. Here are five
ideas to help put performance back into the process:
Meet More Often
Time-strapped managers may sound a collective
groan, but year-end reviews on their own are hardly
enough. The best managers meet at least three times
a year, if not four-once to set goals, once or twice
for an update, and finally, to review—with many
informal check-ins in between. In this quickly shift-
ing economy, goals may change, and fewer surprises
will surface at year-end.
Questions
1. What's your opinion regarding forced ranking
performance appraisals? Do they motivate
employees? Explain.
2. How would equity theory explain some employ-
ees' negative reactions to forced rankings? Explain.
3. Based on Chapter 5, if you decided not to use
forced rankings at your company, how would you
motivate employees?
Make Room for Risk
As innovation trumps efficiency, some companies-
including GE-are putting some wiggle room
Source: Adapted from Sarah Boehle, "Keep Forced Ranking Out of
Court," Training 45, no. 5 (June 2008), pp. 44-46; Paul Falcone, "Big-
Picture Performance Appraisal," HR Magazine 52, no. 8 (August
2007), pp. 99-100; and Jena McGregor, “The Struggle to Measure
Performance," Business Week, January 9, 2006, pp. 26-27.
CHAPTER
SIX
Job Design and
Performance
Learning Objectives
After completing Chapter 6, you should be
Compare the job design concepts of range
able to:
and depth.
Give examples of how managers can influ-
• Describe the relationship between job
ence how employees perceive their jobs.
design and quality of work life.
• Explain the differences between job rota-
• Summarize the key components in the
tion, job enlargement, and job enrichment.
general model of job design.
Discuss how quality is being designed into
• Identify the key elements linking job design
jobs today.
and performance.
Earlier chapters have described several factors that may affect job performance:
Skills and abilities, perceptions, attitudes, emotions, and personality characteris-
tics
ual differences that play a role
in shaping performance. Additionally, the direction intensity, and persistence of
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