Week 5, 9 September 2010
Topic: Should organizations “rank-and-yank”?
No. I do not believe that organizations should “rank-and-yank” and see that as a solution to evaluate and improve the performance of their employees, simply because it motivates risk-taking at both ends of the performance spectrum. Organisations, using a “rank-and-yank” system, are effectively encouraging their employees to take on a high-risk behaviour. Employees who are doing very well and have an excess of slack resources may tend to take mid-to-high risk as they seek to better themselves, seeing that should they lose, they will still be safe from the yanking. On the flip side, employees who are looking at survival will tend to play up their risk, seeing that since they are already at the survival stage, it is “do or die” for them.
The presence of a time-bound goal with the “rank-and-yank” system only aggravates the situation of excessive risk taking by employees. When top performers see that time is limited, they tend to think that they will probably not lose much by taking on higher risk. Conversely, low performers facing termination would take on very high risk to “put in their best fight”. Only employees who are doing average have minimized risk taking behaviors.
This will, of course, bring to light the question of whether risk is good for an organization. Many a time, we see organizations trying their very best to diversify risk. They develop new markets for existing products and venture into new areas of business – all in a bid to minimize their risk. It is hence ironic to see that they are actually adding on the element of risk – something they have tried very hard to curtail. Perhaps the “rank-and-review” is probably a much better option for organizations like GE and AIA to consider.
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