To do peer ranking or not to do peer ranking..?

To do peer ranking or not to do peer ranking….

A recent post from Lance Haun at TLNT covered the results from a survey performed by a corporate networking organisation called ic4p. Titled “As Pay-for-Performance goes up, forced ranking is going down“, in this article Haun makes a good analysis of why the reasons for implementing pay-for-performance matter and make a difference between high performing organisations and the rest of companies.

He also rejoices in the fact that companies that do forced ranking are now less than 10% of those surveyed (Predominently large US and multinational corporations I suppose – but not being sure, I asked the question in their comments section. I’ll update my post if I get an answer).

Now, I do agree that forced ranking is not necessarily a solution to performance issues in an organisation. Blindly comparing person-to-person and adhering to a strict distribution curve does not work and has numerous drawbacks. As is described in a 2010 post on Harvard Business Review (don’t forget to read the comments, they add a lot of value), it destroys trust between team members, goes against collaboration and hinders innovation and learning as you have to face the risk of failure in order to do something new -not good for your prospective ranking at year-end.

However, I also don’t accept that performance can be best evaluated in absolute terms only. I believe that there is a dose of healthy competition which can help really bring the best out of an organisation. Hint : the operative word here is “healthy”.

But most importantly, I’d like someone to explain to me how they can move from no distribution curve at all to a proper pay-for-performance approach. And I would love to really get in the detail of how they are ensuring equity and fairness in the organisation, if the percentage of high performers is disproportionately higher than the actual overall company performance and/or if the bonus or salary increase budget is tight and does not allow for much differentiation in pay-for-performance if most people are deemed “top performers”. If someone can convince me and make me change my mind, I’ll be happy to post a follow-up article explaining these compelling reasons, so please share your views in the comments section 🙂

3 main reasons for me to support some form of peer ranking :

  1. It is human nature to want to recognise effort and give a good rating to all employees that are “working hard”, focusing more on process than on output/result. So if a company does not have some form of ranking or distribution, it will take very experienced and mature managers to naturally differentiate between their team members in a meaningful way.
  2. While I don’t believe in pure forced ranking, I do believe in guided distribution curves, where a range is given to the manager for each rating. Then the manager can apply it appropriately to his team. And if he has performance-managed his team properly during the year, any good organisation can recognise that he may not have to “stick to the curve”.
  3. Peer ranking, in order to be done properly, requires a conversation about performance between leaders. When they sit for a “moderation review” or “calibration meeting”, managers in a Division or Unit have to agree on what they consider to be high performance and what they mean by lower performance. After a few rounds/years, they eventually get to have similar expectations  and this supports a culture where employees in different parts of the business are all given the same chance to shine, irrespective of whether their manager was initially someone “lenient” or someone “strict”.

In the Middle East for example, a culture of recognising individual performance and naming and working on performance shortcomings is not frequent. There is a lot of expectations about face-saving and not mentioning when things are not going so well. So it is not rare, when there is no guideline, to see 40% or more of employees rated as “above expectations”. Well, unless the company has been doing significantly better than its business plan was setting at the beginning of the year, this can’t be “really” true, can it ? In that case, how would you ensure that the real high achievers are recognised and that a true pay-for-performance is applied ? Because your real high performers know who they are, and expect to be differentiated against peers that they know do not deliver the same value to the organisation.

A guided distribution curve, applied with common sense, therefore helps to create a culture of differentiation and supports the implementation of meaningful pay-for-performance.

It may not be perfect, and yes, the comparison exercise is not always a pleasant one, but if your organisation is not mature and able to reach a relevant evaluation of team members, you need the outside guidance.

It’s just a shame that thereafter, HR gets blamed when managers don’t really have the courage or knowledge to handle employees that are disappointed by their rating (a common occurrence in the region, where I have seen first-hand many people rating themselves as “outstanding” even right after having had a “you need to improve your performance and here’s how we will support you” discussion with their manager)….


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  1. Very interesting insight Sandrine. However in a cost center and govt set ups, forced ranking along the Bells curve does partially work. Not to say that I agree with this approach.

    • Deepak Kamath says

      Whether there is forced distribution or not..the rank ordering is always a responsibility of line manager. Had they done the job well then this debate would not be necessary.
      All perfromance reward approaches try to fix the Manager issue by different tools like tieing the managers hands.
      So in my mind we are trying to fix the problem by catching the wrong end of the tail because we do not know how to get the Manager to be reaponsile for this act.
      So it’s not a forced distribution or guided distribution issue.

      • It’s true that at the core, this is a managerial issue. However I don’t think there is anything wrong with putting in place a tool to help managers be truly accountable for differentiating performance. But, as you say, this is only one part of the issue. The organisation should also focus on educating managers and reinforcing messages about its expectations about how performance should be handled.

  2. Ahsan Qureshi says

    Hi Sandrine
    Always love the way you write. Thank you for sharing.☺☺☺

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