Friday, March 01, 2013

Something Sure Is Rank

Recently I ran across a few articles discussing the not-uncommon corporate HR practice of stack ranking.  Frankly, my jaw dropped when I read that that practice has a lot of traction in the corporate world.  The premise is so flawed that I cannot believe so many people swear by it.

For those not familiar, stack ranking is the practice of ranking a set of employees in a linear fashion, from worst to best, and then marking the top 20% as excellent, the middle 70% as adequate, and te bottom 10% as failures, and suitable for dismissal.  It assumes that the population follows the familiar bell curve.

So let's take a look at the problems with this.  First the technical ones

1) Sample Size
The bell curve ( or normal curve) is the expected distribution is valid only for sufficiently large populations.  Most workgroups are not nearly large enough that they would match the normal curve in the distribution of ability.  Use of stack ranking on small groups can incorrectly mark people of lesser ability as part of the bottom 10%.

2) Random Selection
The normal curve also assumes that there is no skewing influence on the population.  Most companies proclaim that they are selective in their hiring, so they should not have any poor performers.  Moreover, if the company has run any rounds of performance-based layoffs, the population of employees is no longer normally distributed.  Once you remove the lower 10% of the population, there is no longer a "lowest 10%" to choose from.

And now the social reasons against stack rank:
3) Arbitrariness
Since most people are aware of the basic fact that statistics requires large groups of people, they know that in a small group there can't be a bottom 10%.  So when one of them has to be sacrificed as the goat, they begin to see all the rankings are either arbitrary or bogus, so they become cynical as to the merit of the evaluations

4) Gaming the system
Once employees know that they are ranked against each other and avoiding being in the "bottom 10%" is vital, they will start to alter their behavior to try and avoid being the low man.  This leads to anti-social activities such as information hoarding, sabotage, and grandstanding.  They stop trying to further the group goals in favor of their own.

Given all this, I cannot understand why this is favored by corporate management except as a means to instill fear in the employees and enable the rewarding of those liked by the managers.

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