The timing of this discussion is pretty good considering we have not one but two hot conversations happening in Open Items as we speak; one person was "forced to resign" from the Big 4 after just 6 months, while another person asks if anyone has been or knows anyone who has been coached out. You will see momentarily what this has to do with forced rankings but for now, let's pull an old article out of the archive from Francine McKenna:
Both Deloitte and KPMG admitted last fall that job cuts were made for economic reasons, removing the taint of “performance issue” from that wave. It’s a small thing, making up for over-hiring, under-managing risks, and sucking in new recruits only to cut them loose a year later.
But layoffs continue and are occurring in greater numbers at all firms. Are there still so many “performance problems?” How can a “business” that only hires top graduates, puts them through one, sometimes two, internships, an extensive interview process, and programs such as “Mass Career Customization,” still have so many “not performing” or “not a fit?”
The answer, says Francine, is forced ranking.
Think of forced ranking like this: you are a swinging single guy or gal and you decide to go on 10 dates. Instead of rating the quality of your date based on certain objective criteria such as income, nice teeth, ability to hold a conversation and alignment of personal goals such as family or religion, you rank the dates from 10 down to 1, with the date at the bottom automatically crossed off the list. Even if you liked them all, even if you thought they all had nice teeth and made a good amount of money, even if you could see yourself dating all of them to find out more about them and decide who to continue dating based on other objective factors.
The last we discussed forced ranking around here, multiple sources at EY said forced ranking was not only alive and well but claiming victims and Francine says it is "embedded in the Big 4."
But now we have an article courtesy of Deloitte, boldly titled "It's Official: Forced Ranking is Dead."
Dead, you say? Well, for others at least.
Forced ranking, the performance appraisal system championed by Jack Welch in the 1980s, has long sparked controversy. Even as many large companies began adopting the practice of using a bell curve to rank employees against each other, critics maintained forced ranking crushed morale, stifled innovation, and led to unscrupulous competition among workers.
Despite the criticism and the fact that several high-profile companies including GE and Microsoft abandoned the practice over the years, many still employ some form of forced ranking. But at what cost?
You can see where this is going. Deloitte isn't saying one way or another whether they themselves employ forced ranking, just that it's an antiquated practice of little value. As we all know, that realization has zero impact on how large accounting firms choose to manage human capital.
Forced ranking can be particularly damaging inside corporate IT organizations and at talent-intensive companies—whether tech startups or tech stalwarts—that thrive on specialized skills and innovation. “Regardless of whether they work for banks or software companies, technology professionals are expected to innovate, work effectively in teams, and adapt to an ever-accelerating rate of change,” says [Lisa] Barry, global Talent, Performance, and Rewards leader for Deloitte Touche Tohmatsu Ltd. “They need incentives to collaborate and be creative, yet forced ranking typically produces the opposite behavior.”
Again, no mention of Deloitte's own strategy here. Although we can't help but recognize a pattern we are all too familiar with:
Moreover, by requiring managers to divide staff year after year into fixed percentages of underperformers, average performers, and high performers, forced ranking may eventually move high performers into lower rankings and push many solid performers into the bottom, according to Stacia Sherman Garr, vice president of Talent Management Research for Bersin by Deloitte, Deloitte Consulting LLP. In the process, forced ranking ends up inadequately rewarding high performers while neglecting to motivate average workers, which can lead both groups to look elsewhere for work, she adds.
“Forced ranking may help companies weed out underperformers during a restructuring but, if implemented each year, organizations risk demotivating essential staff and cutting too deep,” says Garr. “The practice seems particularly shortsighted during a global talent shortage, when companies are fighting to recruit and retain professionals with specialized technical skills.”
OH, you mean like how accounting firms of all sizes hire heavy then can everyone at the bottom when they realize they have too many warm bodies and not enough profit? Lather, rinse, repeat.