Forced Distribution Performance Evaluation Systems: Advantages, Disadvantages and Keys to Implementation

By Stewart, Susan M.; Gruys, Melissa L. et al. | Journal of Management and Organization, March 2010 | Go to article overview

Forced Distribution Performance Evaluation Systems: Advantages, Disadvantages and Keys to Implementation


Stewart, Susan M., Gruys, Melissa L., Storm, Maria, Journal of Management and Organization


ABSTRACT

Some organizations, such as General Electric, currently use or have used forced distribution performance evaluation systems in order to rate employees' performance. This paper addresses the advantages and disadvantages as well as the legal implications of using such a system. It also discusses how an organization might assess whether a forced distribution system would be a good choice and key considerations when implementing such a system. The main concern is whether the organizational culture is compatible with a forced distribution system. When a company implements such a system, some important issues to consider include providing adequate training and ongoing support to managers who will be carrying out the system and also conducting adverse impact analyses to reduce legal risk.

Keywords: human resource management, performance management, performance system, performance appraisal, forced distribution, legal risks

There has been some controversy over the recent adoption of forced distribution performance evaluation systems by many large global corporations. A plethora of terms exist which essentially describe the same type of relative performance ratings, that is, a performance evaluation system that is used to rate and rank employees. Some of these terms include: forced distribution, forced ranking systems, bell curve, group ordering, or normal distribution. The term 'forced distribution' will be used throughout this paper. Jack Welch, former CEO of General Electric (GE), pioneered the idea of forced distributions in corporate America due to his belief that the bottom 10% of the workforce should be removed every year. Estimates suggest that up to 20% of all US business organizations and up to 25% of Fortune 500 firms use some type of forced distribution performance evaluation system (Bates 2003; Gary 2001; Meisler 2003; Osborne & McCann 2004). One study conducted by the Jacksonville Business Journal found that 60% of respondents indicated that their companies used a forced ranking system (Hadden 2004). The list of organizations that use or have used such systems include such firms as General Electric, Cisco Systems, Hewlett-Packard, Microsoft, Lucent, Intel, Goodyear Tire, Ford, Goldman Sachs, American Express, Sun Microsystems and Conoco (Bates 2003; Guralnik, Rozmarin & So 2004; Meisler 2003).

Forced distribution systems can be carried out in multiple ways. First, managers may rank employees by comparing each employee's individual performance against each other (e.g., ranking all employees in order of best performers to those that are performing least well). A second way to implement a forced distribution system is to have managers rate individual employees' performance against performance standards of some type, but then only allow a certain percentage of individuals to fall within a given category of performance (e.g., to be classified as 'Superior'). This forces managers to go back and compare the ratings of the individual employees to one another. In comparing every employee's individual performance to other employees, the system strives to identify above average, average and below average performers.

Though forced distribution systems are very popular within organizations, they have largely been ignored in the research literature (Schleicher, Bull & Green 2008). Scullen, Bergey and Aiman- Smith (2005: 2) state, 'Given the intense interest in FDRS, it is surprising that there is virtually no published research that can inform practitioners about their effectiveness.' This paper will: (1) evaluate the advantages and disadvantages of forced distribution performance evaluation systems; (2) address legal ramifications and implications of using such a system; and (3) discuss what can be done to administer this type of system most effectively. Our hope is that this review will serve as a point of departure for future inquiry by both academicians and practitioners alike. …

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