In Defense of Differentiation

Cory Foy has posted on JoS that his company is moving to a system of forced ranking, where each employee is classified as an A, B or C performer.  (Aside:  This practice is known as Differentiation and was famously used by Jack Welch during his tenure as the CEO of GE.  Differentiation was most recently discussed in Welch’s book Winning.  Note that I am not an Amazon affiliate and make no money if you click that link, but I will say that I liked the book and encourage you to check it out.).  Cory is curious if such a system has ever worked out well.  The comments that follow Cory’s post skew against forced ranking, more commonly known as Differentiation.  This is no surprise, as most employees are unaware of one very important fact:

Your company is already ranking people, whether you know it or not.

Let’s be real here – is there a manager alive who can’t tell you who his star performers are?  Is there a manager alive who can’t tell you who his problem employees are?  Of course not.  Once you have those two data points, deriving the third (average performers) is a snap.  Is there anybody who really, truly believes that management treats every employee the same way?

Speaking for myself, if management is already differentiating employees into groups based on performance, I’d much prefer to have it be a codified, publicly-revealed policy than have it be a behind-closed-doors affair.  When it’s all out on the table, the employee at least has a chance to know where he stands and to find out how he can improve (or at least maintain) his performance.

In order to make differentiation work, you can’t just rank employees and let that be that.  You need to a) make sure every employee knows where he stands, b) set crystal-clear, measurable and attainable performance benchmarks and c) provide sufficient resources and coaching to give every employee a chance to hit his marks.  If you simply rank your people and then later punish them based on their ranking, you have just engaged in “gotcha!” management, and I have no respect for that.  But if you come up with good metrics, rank your people, and provide the feedback and guidance needed to let an individual work his way out of the Cs and into the Bs, or let a falling A correct himself to remain an A, you’ve done everyone a good turn.

Think about it.  If you differentiate with clear metrics and sufficient resources, when it is time to fire someone there are no surprises.  The employee is not living with an inflated estimation of his performance.  The manager has actual data to back up his decision.  The employee, presumably receiving feedback the whole time, will be aware that his performance has either been sinking or not making the cut, and will have had an opportunity to psychologically prepare himself, maybe even polish up his resume before the axe falls.  It is, in short, a much more humane experience than most firings.  An anonymous reply to Cory’s post reads:

Well, that sounds awful.  So basically it removes all incentives to help your coworkers?  So instead of helping someone when they have a question, you just blow them off because helping them out might bump you down a ranking?

In any well-thought-out system, helping your fellow co-worker should increase your ranking, not hurt it.  We’re not talking about Lord of the Flies here.

Case in point:  almost 3 years ago, I was laid off from a job.  It was a good job – I had interesting work to do, I was being paid well, I liked my co-workers.  It wasn’t perfect – no job ever is – but it was good.  At every feedback encounter, I was told that I was a high performer.  So far, so good.  So imagine my surprise when, in the second of three layoff rounds, I received a pinkslip along with several co-workers whom I had heard spoken of as not-so-good performers.  I was shocked.  A thought came to mind:  maybe I wasn’t really a top performer.  Maybe I’d been having smoke blown up my backside.  Either way, I had no way to know that I was even a candidate for layoff.  And of course, no company will tell you why they axed you after the fact, so to this day I have to wonder.  I’ve heard scuttlebutt that it was purely about salary, as the company was allegedly bleeding cash, but I’ll really never know, because that company did not practice a policy of open communication with employees regarding where the employee stood.  If there was anything I could have adjusted performance-wise to avoid being sacked, I never knew it.  If there was nothing I could have done to avoid being sacked, I never knew that either.  Does this sound like a humane way to handle such matters?  What makes this even more astounding is that the company built enterprise tools to help Fortune 500s manage the performance of their employees.  Oddly enough, these tools were not used in-house – we didn’t eat our own dog food.  If our own products had been used in-house, a number of people might have been a lot less surprised to be laid off.

To this day, when clients complain about employees not doing what they should be doing, I encourage them to make their performance expectations completely clear, because the sad fact is that employees often get in trouble for things that they did not know they were responsible for.  This is patently unfair.  I have even helped clients to create customized tools that help management and employee alike set goals reasonable goals together and come up with plans to achieve them.  It only seems right.

Given a choice between “gotcha!” management or properly practiced open differentiation, I’ll take a numeric ranking and a performance plan 100 times out of 100.

Wouldn’t you?