World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version - Page 78

additional content usually set in the human resources department, and is often opaque to everyone else. People may work as hard and as cleverly as they can, but they still don’t know if this will get them a higher rating. That’s because the rankings reflect not just their individual performance, but their perceived contribution compared to a cohort of their peers. If everyone is performing optimally but the manager can reward only the top 10 percent with the highest ranking, the employee’s sense of control is thrown out the window. 3. Autonomy. When a student gets a poor grade at school, there is generally a clear path to improvement—a path that may involve studying harder or seeking extra help. Whatever it is, the individual has some control. In an organization, a clear path is not always evident. Improvement may depend on factors (such as customer response to a product or the willingness of others to collaborate) that employees feel they cannot control or even influence. Though workers may actually have more influence than they think, the ratings trigger a sense of lack of autonomy. They reinforce the perception that the employee is neither trusted nor empowered. Moreover, in most PM systems, the focus is on past performance, not on future potential. This sends an unconscious message to employees: Their capacities are fixed and may never change. If those workers have not had much autonomy, or experienced it in the past, they are unlikely to see that change in the future. 4. Relatedness. If only one person can be given the top rating and get the best bonus, suddenly employees have good reason to undermine one another’s ratings, rather than to collaborate. “We spend performance season getting battle ready,” explains 76 world monitor one manager. “Two weeks before my review, I begin to prepare my attack.” In one celebrated case, Microsoft’s ranking system (since discontinued) was blamed for the company’s decline in performance. Although Microsoft did not apply ranking quotas to individual small teams, a Vanity Fair article quoted a programming staff member who clearly believed the company did, and who said, “It leads to employees focusing on competing with each other rather than competing with other companies.” A similar unintended consequence occurs up the hierarchy. If employees feel that their bosses are comparing them against their peers, they will not openly share information that might compromise their ranking. 5. Fairness. A CEB study showed that at least two-thirds of the people paid as top performers are not actually seen by their peers as contributing the most to the enterprise. Perhaps that’s why another survey, this one from the research firm i4cp, found that 75 percent of the respondents believed performance systems were not fair. This represented a threefold increase since 2008, when it was only 25 percent. Unfairness is perhaps the biggest problem with forced ranking, because the system is set up in a way that makes the decisions seem more arbitrary every year. In most companies, after several years of a forced ranking system, poor performers have already left. Everyone who remains performs above expectations, almost by definition. But managers are still forced to rank their subordinates on a 20/70/10 scale, and the bottom 10 percent are required to leave. Thus, every year, at least one highly motivated, highly capable employee is ranked as a bottom performer. This ends with the employee exiting the company, and the manager deeply frustrated. Of course, all these factors reinforce one another in ways that worsen the effect. For example, when people feel that others were ranked more highly without merit, and have no recourse to complain, the combined lack of fairness and autonomy can generate a much stronger emotional reaction than either would alone. The result of all this? People feel unappreciated. They become more conservative. They set their goals low to ensure that they are seen as succeeding. They retreat from candid conversations about development, because the whole issue of progress and feedback is so emotionally charged. The experience becomes one of “ticking a box.” There is little of the type of conversation that actually promotes personal growth. The rating system is particularly harsh on those who conduct the appraisals. Supervisors feel pressure to continue to show improvement, raising some people’s rating over time. They also feel pressure to differentiate, leading them to scapegoat some of their subordinates as poor performers. Steven Rice, executive vice president of human resources at the technology company Juniper Networks, explains why it deliberately shut down its forced ranking system: “The critical practice of letting someone know where their performance authentically stood became hijacked by artificially categorizing individuals into forced ratings in order to meet a fixed compensation budget. The process lost its integrity. In the majority of situations, it rendered the performance feedback incongruent with compensation and the rating. Ironically, an HR process designed to drive fairness resulted in mistrust.... Managers blamed it for tying their hands and wrote the whole process off as unhelpful.”