Why stack ranking is a bigger problem for your employee engagement than you think

Imagine a workplace where colleagues see each other as allies, not rivals. Where collaboration thrives and innovation isn't stifled by internal competition. Sounds dreamy, right? Unfortunately, the harsh reality of stack ranking often paints a different picture.

While proponents hail it as a meritocratic force, the truth is far bleaker. This seemingly objective ranking system, with its forced distribution and fixed quotas for low performers, can wreak havoc on your employee engagement.

But hey, don't just take our word for it. This blog delves deep into the hidden dangers of stack ranking, exposing its impact on employee morale, collaboration, growth and overall engagement. We'll unveil how the constant pressure to stay ahead breeds anxiety, distrust, and even burnout.

So, buckle up and get ready to rethink your approach to performance management. Because it's time to unleash the full potential of your workforce, and stack ranking simply won't cut it.

Stay tuned for insights, data, and real-world examples that will challenge your perspective and empower you to create a truly thriving workplace!

What is a stack ranking management style?

Stack ranking, also known as forced ranking or rank-and-yank, is a performance management method where employees are evaluated and ranked against each other based on their performance, often resulting in a predetermined distribution of high, average, and low performers within a team or organization.

This approach gained popularity particularly in the 1980s and 1990s, notably implemented by companies like General Electric under former CEO Jack Welch.

In a stack ranking system, managers are typically required to categorize their team members into fixed percentages, such as the top 20% as high performers, the middle 70% as average, and the bottom 10% as low or poor performers. This distribution is sometimes referred to as the "vitality curve" or "bell curve."

What are stack ranking appraisals?

Stack ranking appraisals, also known as rank and yank, are a performance appraisal method where employees are evaluated and ranked against each other based on their performance, often using a numerical or categorical scale.

Stack ranking employees is typically done relative to their peers within the organization, with some employees designated as top performers, some as average, and others as low performers. The focus is on identifying and rewarding top performers while addressing performance issues with low performers.

This appraisal system is characterized by a fixed distribution of ratings, often following a bell curve or similar distribution, where a certain percentage of employees are designated as high performers, a larger percentage as average, and a smaller percentage as low performers.

The rankings are used to make decisions regarding promotions, bonuses, and sometimes even terminations or layoffs.

Why some performance management strategies like stack ranking don't work?

These days, the talent market favors flexibility, professional development, and a supportive but challenging workplace. But stack ranking encourages traits seemingly antithetical to these: lack of innovation, increased turnover, and problematic workplace culture.

Here's a closer look at some of the main problems with stack ranking. Stack ranking has garnered criticism for several reasons, leading to its widespread rejection by many organizations:

Dip in employee morale

Stack ranking can demoralize employees who consistently find themselves ranked at the bottom, regardless of their actual performance. This can lead to decreased motivation, job dissatisfaction, and even resentment towards colleagues and management.

Limited growth opportunities

The rigid nature of stack ranking can limit opportunities for career advancement and professional development for low-performing employees, especially for employees who are consistently ranked lower.

This can result in talented individuals seeking opportunities elsewhere, leading to a loss of valuable talent for the organization.

Dysfunctional competition

The competitive nature fostered by stack ranking can create a cutthroat environment where employees are more focused on outperforming their colleagues rather than collaborating and working together towards common goals. This can lead to a toxic work culture marked by internal conflict and hostility.

Inaccurate assessments

Stack ranking process relies on subjective evaluations and comparisons among employees, which may not accurately reflect individual performance or contributions. Biases, favoritism, and politics can influence rankings, leading to unfair outcomes and undermining trust in the appraisal process.

Negative impact on morale and engagement

Constantly being pitted against coworkers and fearing being labeled as a low performer can significantly and negatively impact employee morale and engagement.

This can result in decreased productivity, higher turnover rates, and ultimately, diminished organizational performance.

Stifled innovation and creativity

The emphasis on individual performance and competition in stack ranking can discourage collaboration and innovation.

Employees may be reluctant to share ideas or work together on projects for fear of jeopardizing their own stack rankings or benefiting colleagues who could potentially outperform them.

Difficulty in differentiating performance

In some cases, stack ranking fails to adequately differentiate between employees, especially when a large number of individuals are in stacked ranking and performing at a similar level.

This can lead to arbitrary distinctions and unfair treatment, further exacerbating dissatisfaction and disillusionment among employees.

Lack of focus on development

Stack ranking promotes and tends to prioritize short-term performance over long-term growth and development. Employees may be more focused on meeting immediate targets and impressing superiors rather than investing in their own skills and capabilities for future success.

Damage to organizational culture

The implementation of stack ranking can damage the overall organizational culture by promoting individualism over teamwork, fostering distrust among employees, and undermining the values of fairness and collaboration.

This can erode employee loyalty and tarnish the organization's reputation in the long run.

Legal and ethical concerns

Stack ranking may raise legal and ethical concerns related to discrimination, as certain groups or individuals may be disproportionately affected by the ranking process.

Additionally, the practice of "rank and yank," where low performers are systematically terminated, can lead to legal challenges and damage the organization's reputation as an employer of choice.

While stack ranking may have been a powerful performance management tool in the past as a means of performance evaluation, its disadvantages outweigh its benefits in many modern workplace environments, leading organizations to explore alternative performance management strategies.

How can stack ranking even lead to employee attrition?

Stack ranking can contribute to employee attrition through various mechanisms:

• Demotivation and disengagement: Employees receiving consistently low rankings may become demoralized and disengaged, leading to a decline in motivation and commitment to the organization.
• Loss of trust and morale: The perception of arbitrary or biased rankings can erode trust in the fairness of the performance evaluation system and process, negatively impacting morale and increasing turnover as employees seek environments where their contributions are valued.
• Limited career growth: Barriers to advancement for employees with lower rankings can prompt talented individuals to seek opportunities elsewhere, where their potential for growth is not constrained by the ranking system.
• Negative peer comparisons: Constant evaluation and comparison to peers can create feelings of inadequacy or inferiority, fostering a competitive and hostile work environment that drives employees to seek more supportive workplaces.
• Impact on work-life balance: Pressure to perform well to avoid low rankings can lead to increased stress and burnout, affecting overall well-being and prompting employees to seek environments that prioritize a healthier work-life balance.
• Attrition of high performers: High-performing employees may leave if they perceive stack ranking as hindering their career progression or witness its negative impact on colleagues, seeking environments where their contributions are recognized and rewarded more equitably.

These factors collectively contribute to increased employee attrition in organizations that rely on stack ranking as a performance evaluation method. As we'll find out below, stack ranking also has an element of bias involved that might influence decisions.

How can unconscious bias play a major role in stack ranking amongst leaders?

Unconscious bias can significantly influence the outcomes of a stack ranking system, particularly when it comes to leaders evaluating their team members. Here's how:

Employee performance evaluation

Unconscious biases can affect how leaders perceive and evaluate the performance of their employees.

For example, leaders may unknowingly favor employees who share similar backgrounds, personalities, or communication styles, leading to inflated ratings for those individuals and lower ratings for others who don't fit these preconceived notions of success.

Subjectivity in ranking employees

Stack ranking often involves subjective assessments of employees' performance, which leaves room for unconscious biases to creep in.

Leaders may inadvertently rank employees higher or lower based on factors such as gender, race, age, or personal relationships, rather than solely on objective performance metrics.

Halo and horns effects

When stack ranking, unconscious biases such as the halo effect (attributing positive qualities to individuals based on one outstanding trait) or the horns effect (allowing one negative trait to overshadow all other qualities) can distort leaders' perceptions of their employees' overall performance.

This can result in unfairly high or low rankings, skewing the distribution curve and impacting the entire team's outcomes.

Similarity bias

Leaders may unconsciously favor employees who resemble them in terms of background, experiences, or interests.

This similarity bias can lead to higher rankings for individuals who share commonalities with the leader, while those who are perceived as different may receive lower rankings, even if their performance objectively warrants a higher assessment.

Attribution bias

Unconscious biases can influence how leaders attribute success or failure to individual employees. For example, leaders may attribute success to internal factors such as skill and effort for employees they favor, while attributing failure to external factors beyond the employee's control.

Affinity bias

Leaders may unconsciously gravitate towards employees with whom they share a personal connection or rapport.

This affinity bias can lead to higher rankings for favored employees, regardless of their actual performance, while others may be unfairly overlooked or underrated due to the lack of a similar connection with the leader.

Confirmation bias

Once leaders have formed initial impressions or opinions about their employees, they may unconsciously seek out information that confirms these preconceived notions while ignoring or discounting evidence that contradicts them.

This confirmation bias can reinforce existing biases and lead to inaccurate or unfair rankings within the stack ranking system.

Unconscious bias can truly play a significant role in how leaders assess and rank their employees within a stack ranking system.

Recognizing and addressing unconscious biases is essential for creating a more equitable and objective performance evaluation and performance management process throughout.

What are some better alternatives to stack ranking your employees?

• Continuous feedback: Implementing a system of continuous feedback allows for regular, ongoing communication between managers and employees. This approach promotes transparency, as continuous performance management fosters development, and enables timely recognition of achievements or areas for improvement.
• Performance goal setting: Establishing clear, measurable performance goals aligned with organizational objectives helps employees understand expectations and focus their efforts on achieving meaningful outcomes. a performance improvement plan Regularly reviewing progress towards these goals allows for constructive discussions and adjustments as needed.
• Development plans: Creating individualized development plans based on employees' strengths, areas for improvement, and career aspirations can support their professional growth and skill development. Providing resources, training opportunities, and mentorship helps employees enhance their performance and advance their careers.
• Strengths-based approach: Emphasizing employees' strengths and leveraging them in their roles can maximize engagement and productivity. Encouraging managers to identify and capitalize on each employee's unique talents fosters a positive work environment and enhances overall team performance.
• Peer recognition programs: Implementing peer recognition programs allows employees to acknowledge and celebrate each other's contributions. This fosters a culture of appreciation and camaraderie, boosting morale and motivation throughout the organization.
• Flexible performance reviews: Moving away from rigid, annual, performance standards and reviews to more flexible and frequent check-ins enables managers to provide timely feedback and support to their team members. This approach facilitates dialogue, promotes accountability, and allows for adjustments in real-time.
• Competency-based assessments: Conducting competency-based assessments focuses on evaluating and ranking employees' skills, knowledge, and behaviors relevant to their roles. This approach ensures that performance evaluations are objective, relevant, and aligned with organizational needs.
• Employee development conversations: Encouraging open and honest conversations about career aspirations, growth opportunities, and development needs empowers employees to take ownership of their professional development. Providing guidance and support helps employees navigate their career paths within the organization.
• Team-based recognition: Recognizing and rewarding team accomplishments fosters a collaborative and supportive work environment. Acknowledging collective efforts and contributions encourages teamwork, collaboration, and a shared sense of purpose among employees.

By adopting these alternative approaches, organizations can cultivate a culture of continuous improvement, collaboration, and employee development, leading to enhanced performance and satisfaction across the workforce.

Conclusion

Forced ranking, or rank and yank, has been a topic of considerable debate. While it aims to differentiate employee performance and foster a competitive culture, its drawbacks include demoralization, biased evaluations, and a negative impact on morale.

Alternative approaches such as continuous feedback, individualized development plans, and a focus on strengths-based assessments offer more effective and equitable methods for managing employee performance.

Looking to transform your performance management approach? Explore CultureMonkey's innovative solutions for fostering a positive work culture, effectively measuring employee performance, providing ongoing feedback, and empowering employee development.

Let's cultivate a workplace where every individual can thrive and contribute to organizational success. Join us on the journey to building a more engaged and high-performing team.