Stack ranking is a method of talent management that was pioneered by the CEO of General Electric, Jack Welch, back in the 1980s. It is not used much today though HR managers vouch for the method’s effectiveness.
Some, though, view the method as aggressively competitive and destructive. Here, we will get to know the pros and cons of this employee ranking system.
What Is Stack Ranking?
Also popularly known as the forced distribution method, employees are ranked on a bell curve based on their performance in this approach in stack ranking. The top, middle, and bottom are three distinct zones on the vitality curve.
The top performers are exemplary, the middle ones meet expectations, and the bottom or low performers are those who require improvement. In this method, employee performances are compared with one another.
The method is conceptualized as a 15/75/10 curve where:
- About 15% of employees are high performers
- 75% are in the middle zone, denoting meeting expectations, and
- About 10% are low performers who either get laid off or go in for performance improvement programs.
Forced Distribution Method Advantages and Disadvantages
Pros of Stack Ranking Employees
A meritocracy is an approach in which employees advance in their professional lives and grow based on their abilities and achievements. The approach believes that employees should progress in their careers based on their performance rather than their connections or status. Many believers of the stack ranking system vouch for it because the system promotes meritocracy.
Stack racking brings in an ecosystem of transparency between leaders and team members. Employees are informed what the company expects of them and then ranked on the achievement percentage of these expectations.
An important part of stack ranking is about focusing on low performers, not just high-performers. Unlike other review systems, in this case, the bottom performers are not left unguided or ambiguous about what to do next. Instead, such employees are either shown the door and given the same reasons or put into performance improvement programs.
Employees feel appreciated and motivated
It is a moment of joy for high performers because their hard work is appreciated, and they feel motivated. For low performers, too, there is direction wherein goals are assigned by their managers, giving them the avenue to improve their performance and productivity.
HR managers who favor the ranking method of performance appraisal feel that with direction comes purpose, and in no time, the employee starts to discover self-worth rather than being pushed into oblivion or ambiguity.
Stack ranking helps make the organizational culture strong
It is clear that organizations that use stack ranking value hard-working employees and reward them. Identifying people aligned with the company goals and delivering top performance helps build a strong company culture.
Cons of the Bell Curve Method Of Performance Appraisal
The results are subjective
Most of the results that forced ranking in performance management are arbitrary and based largely on the managers’ perception of the employees. Thus, it has been called out for promoting favoritism and bias.
Low performers can feel shamed
There is always the risk of low performers being made fun of and even shamed at the workplace. The basis of stack ranking is a comparative analysis of performance. People who are ranked higher can indulge in brick batting, hurting the morale of employees who are not up to the mark.
Negative work culture is propagated
Many feel that the forced distribution method of performance appraisal triggers negative behaviors like backstabbing, low morale, etc. Such people also believe that the method does not encourage transparency; rather gives rise to doubts and fears.
Forced Ranking Examples
Let us now look at a few stack ranking examples and check out whether these companies are still using the method and why.
Example 1: Amazon
One of the biggest e-commerce marketplaces, the HR at Amazon, used stack ranking for performance appraisals years back. The underperformers were sent for a performance improvement plan. However, Amazon continued with the forced ranking method until 2016, when it announced that it would use a new annual review process.
The reason quoted was that the company preferred a simplified appraisal system that identified employees’ strengths rather than focusing on the weaknesses.
Example 2 – Facebook
Another Fortune 500 company using the Stack Ranking System was Facebook, the biggest social media platform today. Coincidentally the company still uses the method even though the purpose is to identify top performers.
The system is called the Performance Summary Cycle, where employees are reviewed by their peers and followed by their managers. Finally, the managers evaluate the reviews for individual employees to understand if the employee should be promoted or not.
Is Stack Ranking Good or Bad?
It is best to incorporate forced ranking with other performance appraisal methods for best results and outweigh the cons associated with the conventional bell curve method.