Research Proposal: Performance Appraisal or Forced Ranking?

Topics: Performance appraisal Pages: 8 (2088 words) Published: March 6, 2011
Research Proposal: Performance Appraisal or Forced Ranking?
A review and recommendation of methodologies
Patricia Bosnyak




ABSTRACT This document examines the differences between forced ranking and performance appraisal reviews, with the goal of recognizing the better of the two. The paper discusses possible method and design for research study, as well as whom the writer "thinks" would participate in the research study. It closes with ways the results might be analyzed and the expected outcomes.



INTRODUCTION Leaders can go about reviewing their employees in several different ways. Some are true believers in forced ranking while most others practice traditional performance appraisal reviews. Regardless of the preferred practice, this paper looks at both methodologies to decipher which one really is superior and has the greatest impact on the bottom line. It is the writers’ belief that performance appraisals are better, but she may find that forced ranking is the way to go.

BACKGROUND ON PERFORMANCE EVALUATION SYSTEMS The purpose of any performance evaluation system is to “provide information about work performance” to employees (Ivancevich, Konopaske, & Matteson, p. 180). Performance appraisals set out to inform an employee on their development, commend them on goals achieved or succeeded, and to discuss any areas for improvement. In essence, it is based upon how the individual did in comparison to the goals of the organization. Conversely, forced ranking compares individuals against one another, and ranks them from number 1 to last place. Big corporations, such as GE, Yahoo, American Airlines, Microsoft, Cisco Systems, Hewlett Packard, and Sun Microsystem, all utilize forced rankings. Dick Grote indicates that GE uses a 20/70/10 split, with the bottom 10 being terminated. In the same article, Forced Ranking: Behind the Scenes, he indicates “HP uses a 1-5 scale with 15% receiving the best grade of 5 and 5% receiving 1’s. Microsoft uses a 2.5-to-5 scale.” These companies use forced rankings with great success, retaining and rewarding the most talented.



LITERATURE REVIEW In a 2006 BusinessWeek article, author Jena McGregor discusses the struggle to measure performance. “As many as one-third of US Corporations evaluate employees based on systems that pit them against their colleagues, and some even lead to the firing of low performers”. Utilizing forced ranking can open a door to discrimination lawsuits from employees who feel they were fired based upon their age, race, or gender versus their actual performance. Because of the litigious nature, many companies shy away from this methodology. Steve Kerr, managing director at Goldman Sachs Group states, “it creates a zero-sum game, and so it tends to discourage cooperation” (McGregor). Many critics tend to agree with Mr. Kerr in that it (forced rankings) can stifle innovation in a day where companies are up against a tough economy. One of the major advocates of such a system was Jack Welch, former CEO of GE. His system placed all employees into three groups, with the bottom ten percent terminated, year after year. Although this has been a part of GE’s culture for quite some time, it may not be as beneficial for other organizations. According to a study conducted by Drake University in Des Moines, they discovered that “firing of the bottom 5% or 10%, results in an impressive 16% productivity improvement -- but only over the first couple of years.” The study also indicates that improvements decline over the next several years, falling to near zero at the tenth year. Dave Ulrich, business professor at University of Michigan at Ann Arbor stated, “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...

References: Donaldson, C. A. (2004). Performance Management: Forced Ranking. Retrieved February 16, 2011, from Menu of Interventions: Grote, D. (2002). Forced Ranking: Behind the Scenes. Across the Board, 40-45. Ivancevich, J. M., Konopaske, R., & Matteson, M. T. (2011). Organizational Behavior and Management (9th ed.). New York: McGraw-Hill. McGregor, J. (2006, January 9). The Struggle to Measure Performance. Retrieved February 16, 2011, from Bloomberg Businessweek: Nickols, F. (2007). Performance Appraisal: Weighed and Found Wanting in the Balance. The Journal for Quality & Paricipation, 30(1), 13-16. Nickols, F. (2010, May 5). Performance Appraisals: A Final Criticism. Retrieved February 26, 2011, from Articles by Fred Nickols:
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