Forced Distribution. How can the Performance Management block Innovations? creative HRM
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1 Forced Distribution How can the Performance Management block Innovations?
2 Executive Summary The forced distribution is the most controversial rule in the Performance Management process. The managers cannot evaluate freely, they have to follow strict differentiation rules. Primarily, it was introduced to drive the differentiation among employees. However, it usually results in differentiation among visible and less-visible employees. The forced distribution of performance ratings allows the organization to differentiate among employees, allocating training budgets to top performers. The promotions should be allowed just to top performers. However... Today, the key growth driver is innovation. The forced distribution cannot coexist with innovation successfully. The innovative employees usually do not rank best. The employees, who are visible to the management, usually rank best. The innovative employees take risks, they have many failures. They think about products and services. The innovative company cannot use the forced distribution for the performance appraisals. It should also consider the total elimination of the formal performance management process.
3 Content About What is the forced distribution? Benefits of Forced Distribution Weaknesses of Forced Distribution Forced Distribution and Innovation Download
4 About
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6 Forced Ranking
7 Appraisal Ranking Distribution Organization sets clear and strict guidelines for managers how the expected distribution of performance ranking should look (forced distribution, forced ranking or stacked ranking) 60 % Managers cannot rate employees freely, they have to meet the forced distribution Organization runs calibrations on a company level to reach the internal equity Better performing teams can get the advantage over low performing teams in the distribution The organization invests into the development of the best top rankings and acts on the lower rankings No Investment Act on low performers 5 % 15 % 15 % Talent Development Training Sessions Salary Increases Higher bonuses Unsatisfactory Improvement Needed Meets Expectations Exceeds Expectations Superior 5 %
8 Who uses forced ranking? The key users are multinational companies, which need to drive and manage the performance management process globally They require consistent and comparable results of performance appraisals as the HQ is able to plan international career paths of top talents The forced ranking changes the environment in the organization. The employees become more competitive and focused on the delivery of results (or being visible) The large organization runs the difficult calibration process as all managers meet the rating requirements The forced distribution allows to identify the top players who will lead the company in the future. It is aimed to secure the position of the company on the market
9 Benefits
10 Key Benefits of Forced Rankings The forced distribution is a simple and consistent methodology. All managers understand the principles. The employees are clearly divided into different groups and HR can target training courses, development programs for talents and manage the salary review process. The forced distribution does not allow the inflation of good and excellent performance ratings. The managers are required to act on low performers. The low performance are given the individual plan to increase their performance. They are required to meet the performance standards.
11 Weaknesses
12 Weaknesses of Forced Ranking Quotas can push the excellent employees down just because the manager needs to meet the distribution curve The strong manager can lift the distribution curve for his or her department The calibration does not depend on results achieved; it strongly depends on the visibility of the employee among others Forced distribution can limit creativity, risk taking; it can weaken the ethics and negatively impact the corporate culture The teamwork can be negatively impacted by the forced distribution; employees do not want to share ideas
13 Innovation and Rankings
14 Innovation//Forced Ranking Innovation Forced Distribution Unblock creativity Support teamwork Inspire and get inspired by others Cross your responsibilities Open and honest discussion required No results delivered on a daily basis Less presenting, more thinking Be visible to your boss and the boss of the boss Join all strategic initiatives Present results of the team Sell yourself Report your progress regularly Focus on networking Be careful in making decisions
15 What does innovation need? Innovation creates the open and supportive corporate culture. The forced distribution is not compatible with the supportive environment. Innovation is not about the competitiveness; it requires employees to collaborate. Innovative employees require different performance management system. It has to be based on the instant feedback. The overall yearly performance evaluation does not support their creativity. Innovative organization is about less presentations and it is more about innovative experiments. It is about some successes and many failures. The forced distribution manages costs of the company; innovation drives sales revenues and profitability.
16 What is next?
17 Your next steps? Do you need to drive innovations in your company? You should leave the forced distribution as soon as possible. It is tough managerial decision, but it is worth it. How to evaluate the performance of employees? Check all possibilities for saying the immediate feedback. There are many online services focused on the instant feedback and thank-you available. Do you need to manage your cost carefully? You should stay with the rigid performance management system. It is the best tool for the management of costs. Do I identify my talents? That is the excellent question.
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