Read Case Study 5.1 and answer the following three questions:

1. Cite and support two reasons from the case study which have led to the shift from evaluating performance.
2. What are two significant reasons for forced ranking?
3. What are the data that support the shift?

Case study Reading is coming from book Organizational Behavior & Management by. Robert Konopaske, John M. Ivancevich, & Michael T. Matteson Case study 5:1 pg. 127-129

receives a higher salary ing outcomes (e.g., asking the supervisor for a pay raise) c, changing inputs (e.g., putting less time in at work) d. Both b and c are correct. REALITY CHECK ANSWERS Before 1. b 2. a 3. b 4. c 5. d After Number Correct 6. b 7. 6 8.b 9.a 10.d Number Correct Case Case 5.1: Companies Are Shifting from Evaluating Performance to Developing Talent: Will It Motivate Employees? Rigid rankings hinder the teamwork and risk-taking necessary for innovation. But what combination of 'Tis the season for some companies to embark on that dreaded annual rite, the often bureaucratic and always methods works best? time-consuming performance review. The process can Holiday shopping, year-end deadlines, and emo- be brutal: As many as one-third of U.S. corporations tional family dramas aren't the only stresses in December. evaluate employees based on systems that pit them 127128 Part Two Understanding and Managing Individual Behavior and with failure." To drive that point home, the com. pany's top managers were evaluated for the first time against their colleagues, and some even lead to the fir- on five traits, such as imagination and external focus ing of low performers. that represent the company's strategic goals. And more Fans say such "forced ranking" systems ensure that managers take a cold look at performance. But the recently, GE announced plans to do away with annual practice increasingly is coming under fire. Following a performance reviews all together, focusing employee string of discrimination lawsuits from employees who evaluations on frequent discussions and ongoing believe they were ranked and yanked based on age and coaching by supervisors via a new app called "PD@ not merely their performance, fewer companies are GE"-performance development at GE. adopting the controversial management tool. Critics Separating stars from slackers remains a long. charge that it unfairly penalizes groups made up of standing part of GE's performance-driven culture. But stars and hinders collaboration and risk-taking, a grow- for most companies, especially those without such cul- ing concern for companies that are trying to innovate tures, the benefits of adopting a forced ranking system their way to growth. And a new study calls into ques- are likely to dissipate over the long term. tion the long-term value of forced rankings. "It creates A recent study lends hard data to that theory. Steve a zero-sum game, and so it tends to discourage coopera- tion," says Steve Kerr, a managing director at Goldman Scullen, an associate professor of management at Drake Sachs Group Inc., who heads the firm's leadership University in Des Moines, Iowa, found that forced rank- training program. ing, including the firing of the bottom 5 percent or 10 Even General Electric Co., the most famous propo- percent, results in an impressive 16 percent productivity nent of the practice, is trying to inject more flexibility improvement-but only over the first couple of years. into its system. Former Chief Executive Jack Welch re- After that, Scullen says, the gains drop off, from 6 percent quired managers to divide talent into three groups-a climbs in the third and fourth years to basically zero by top 20 percent, a middle 70 percent, and a bottom 10 year 10. "It's a terrific idea for companies in trouble, percent, many of whom were shown the door. A few done over one or two years, but to do it as a long-term years ago, GE launched a proactive campaign to re- solution is not going to work," says Dave Ulrich, a busi- mind managers to use more common sense in assign- ness professor at the University of Michigan at Ann ing rankings. "People in some locations take Arbor. "Over time it gets people focused on competing [distributions] so literally that judgment comes out of with each other rather than collaborating." the practice," says Susan P. Peters, GE's vice president for executive development. Yahoo!, too, was looking for better dialogue and Striking that balance between strict yardsticks and less demoralizing labels when it substantially changed managerial judgment is something every company, its rating system, which compared employees' perfor- from GE to Yahoo! to American Airlines, is grappling mance to an absolute standard rather than to each other. with today. But finding a substitute for a rigid grading Libby Sartain, Yahoo!'s senior vice president for hu- system is not an easy task. It drives truth into a process man resources, knew that review discussions at the frequently eroded by grade inflation and helps leaders Sunnyvale, California, tech leader frequently included identify managers who are good at finding top talent. the wink-wink "I wanted to put you here, but I was GE has removed all references to the 20/70/10 split forced by human resources to do something different" from its online performance management tool and now comment that discredits so many appraisals. Yahoo! presents the curve as a set of guidelines. Individual stripped away its performance labels, partly in hopes groups are freer to have a somewhat higher number of that reviews would center more on substance and less "A" players or even, says Peters, no "bottom 10s." Even on explaining away a grade. those low achievers are getting kinder treatment, from But that doesn't mean Yahoo! went all Pollyanna on a new appellation-the "less effectives"-to more spe- its employees. To do a better job of finding and show- cific coaching and intervention than in the past. ering top performers with the rewards necessary to The changes are key for a company trying to evolve keep them from jumping ship in talent-tight Silicon its culture from a Six Sigma powerhouse to one that Valley, the company also instituted a "stack-ranking" also values innovation. Tempering such rigid perfor- system to determine how compensation increases are mance metrics, says Peters, "enables individuals and distributed. It asks managers to rank employees within organizations to be more comfortable with risk-taking each unit-a group of 20 people would be ranked 1 through 20, for example-with raises and bonusesdistributed accordingly. During reviews, employees are Chapter 5 Motivation 129 told how their increases generally compare to those of others. should go to people who set aggressive goals and come close to achieving them. Some Yahoo! managers are livid about the new sys- tem. "It's going to kill morale," laments one senior en- Adjust Goals along with Grades gineering manager who says he's getting a stronger While many companies use "calibration" sessions to f motivation message to cull his bottom performers. Yahoo! says its check that performance assessments level out among new program doesn't automatically weed out a bottom different managers, less than 10 percent fine-tune group and was designed specifically to reward its stars. up-front goals across groups, according to Hewitt Indeed, what Yahoo! has introduced in place of its Associates. old system shows how hard it is for companies to find Choose Words Wisely ways to foster merit-driven cultures that coddle stand- outs while staying tough on low performers. Whether a Whether or not you strip the labels off your perfor- company calls it stack ranking, forced ranking, or dif- mance reviews entirely, as Yahoo! has, faint-praise terms such as "fully satisfies" make essential B-players per El ferentiation, "there's no magic process," says Sartain. feel like also-rans. Try "strong" or "successful" to "We just want to make sure we're making our bets and drive home their value. that we're investing in the people we most want to keep. That's what this is all about." Build Trust With so much focus on the tools and tricks of perfor- Best-Practice Ideas mance management, it's easy to lose sight of what re- Ou ally matters: the conversation. The University of Review season is here, with all the time-consuming bu- Michigan's Dave Ulrich suggests putting three simple words-"help me understand"-in front of difficult y reaucracy and stress that come with it. Here are five ideas to help put performance back into the process: feedback. Meet More Often Questions Time-strapped managers may sound a collective groan, 1. What's your opinion regarding forced ranking per- but year-end reviews on their own are hardly enough. formance appraisals? Do they motivate employees? The best managers meet at least three times a year, if Explain. not four-once to set goals, once or twice for an up- 2. How would equity theory explain some employees' date, and finally, to review-with many informal negative reactions to forced rankings? Explain. check-ins in between. In this quickly shifting economy, 3. Based on Chapter 5, if you decided not to use forced goals may change, and fewer surprises will surface at rankings at your company, how would you motivate year-end. employees? Make Room for Risk Sources: Max Nisen, "Why GE Had to Kill Its Annual Performance Reviews after More Than Three Decades," Quartz, http://qz.com, accessed March As innovation trumps efficiency, some companies are 16, 2016; "It's Official: Forced Ranking Is Dead," The Wall Street Journal, putting some wiggle room into their rankings and rat- http:/deloitte.wsj.com, accessed March 16, 2016; Sarah Boehle, "Keep ings. But more flexible guidelines have to have teeth, Forced Ranking Out of Court," Training 45, no. 5 (June 2008), pp. 44-46; Paul Falcone, "Big-Picture Performance Appraisal," HR Magazine 52, no. too: Low-performing units shouldn't get more than 8 (August 2007), pp. 99-100; Jena McGregor, "The Struggle to Measure their share of top grades, for example. Exceptions Performance," BusinessWeek, January 9, 2006, pp. 26-27: in JIMrw 11/ 8