Imagine you’re the VP of human resources for a Fortune 100 company. You’ve spent your entire career attempting to enhance the workplace for employees to support their productive work in the organization. While you understand that bottom-line decisions often dominate many of the matters you have to address, you’ve worked hard to ensure that employees were treated with respect and dignity in all interactions that affected them. You aligned the hiring process to serve the strategic needs of the organization, as well as implemented an effective performance management system. You truly believe in the progress you’ve made in helping the organization achieve its goals. You simply couldn’t imagine doing things differently. However, concern that the performance management process is becoming less effective because managers are inflating employee ratings has led 15 percent of all large organizations to adjust their performance management process to what is frequently called “rank and yank.” 

Under such a system, managers are evaluated as a 1, 2, 3, or 4, with 1 being the highest rating and 4 the lowest. In many cases, managers are required to give a 4 rating to the lowest 10 percent of employees each year. Those individuals receiving a rating of 4 for two consecutive years are often let go from the organization. The intent behind this system is that throughout the two-year process, evaluators are to meet frequently with the four employees, counsel them, and provide necessary development opportunities. 

Employees in organizations that employ such a performance management system often view this process as unbearable. They view the performance management process as punitive, one in which the organization is attempting to rid itself of higher-paid older workers. In at least one case, Ford Motor Company employees have filed a lawsuit to stop this practice—and prevailed. Ford removed the punitive nature of its evaluation system—and focused it more on counseling and performance improvement of the lowest rated employees rather than elimination from the organization. 

What long-term effect does a performance management system that focuses on rank and yank have on the organization? Only time will tell.

Questions:

1. What type of evaluation process would you say is being used in this case? Describe the elements to support your position. 

2. What effect, if any, do you believe rank and yank evaluation systems have on managers? Do you see these effects as positive or negative? Defend your position. 

3. What role does such a system have in distorting performance appraisals?