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Tripp Babbitt

Quality Insider

The Needs of the Many Outrank the Needs of the Few

There’s not a good reason to rank or assess your employees’ performance.

Published: Wednesday, April 28, 2010 - 19:06

Like there isn’t enough politics in the workplace! Command and control managers love to rank employees; there needs to be forced ranking by assessment of performance to be considered a good manager and have a well-run company.

Some rank to give bonuses or incentives, and others rank to RIF employees (have to get rid of the bad ones). I never have found a good reason to rank and always advise against it. It is a bad practice that leads to waste and suboptimization.

I won’t dispute that in any entity, there is always someone at the top and someone at the bottom in terms of performance. However, the waste of performance appraisals, competition, back-stabbing, and manipulation far outweighs any conceivable benefit. Money and morale is lost with these activities.

The distribution of people and their performance is typically bell-shaped:

 Figure 1: Winners get bonuses, losers get cut

The diagram above indicates that the winners get the bonuses and the losers get fired. But what if we take a different approach, and instead of focusing on forced distribution, we focus on improving the design and management of the work?

Figure 2: A small shift in the system and all benefit

Instead of a select few we make the work better for everyone. All benefit, including the company. A small shift in a system improvement of performance always outweighs moving a few of the “high performers.”

In working with a client recently that “ranked and rated” employees, I was told that this ranking is what made the company so great. But when we looked at actual performance, it was atrocious; the customers we spoke with told us so. The company didn’t know how bad their performance was until we started studying customer demand. This organization swore by the ranking and rating that “made their company great;” when in fact, they were successful in spite of the ranking and rating, not because of it.

You see, there are three scenarios that typically separate employee performance:

  1. They really have a better method or are a better match for the job. In this case, why would you want to have forced rating, where competition for incentives and bonuses keeps employees from sharing with each other? The end result is that the individual wins and the company loses. If the person is a better fit than others, organizations need to learn this and feed it back to the hiring process. Personality (Myers-Briggs Assessment) might be helpful in assessing differences.
  2. There is manipulation at play. Employees learn to game the system by cutting corners and cheating. When rewards or your job is at stake all is fair.
  3. There is no difference in performance. Throughout the past 20 years, I have found this is usually the case. Very few times do I find a better method. When the incentive to manipulate is taken away, I usually find very little difference in performance.

So how do we know if we have a difference? We chart performance if data are collected. If no data exist, then your ranking is subjective and political, and a huge waste of resources. There is no objective performance appraisal system despite all the consultancies that sell software to do so.

In my most read article, “Service Metrics: What You Need to Understand,” I outline how to analyze data. You can do the same with employees’ performance when data are present. It may look something like this:

Figure 3: Call-data average moving range

If any data are within the limits (44 and 155), then performance is attributable to the system. This means that working on the system is your biggest opportunity for improvement. The system is comprised of the work design, structure, technology, management thinking, etc.

Our greatest opportunity to improve is to design better work and learn better ways to manage. 

The old thinking of command and control, ranking and rating is flawed, and too many organizations have succumbed to it. If you are looking for a competitive advantage, this may be the one opportunity not to miss.

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About The Author

Tripp Babbitt’s picture

Tripp Babbitt

Tripp Babbitt the managing partner for The 95 Method - Executive Education and Advisors. The 95 Method is about giving organizations a method to use new theories to grow business.  Babbitt can be reached at tripp@the95method.com. Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt

Tripp also does two podcasts: The Deming Institute Podcast and The Effective Executive podcast.