Summary
- Stack ranking is a performance evaluation method that measures employees against one another and forces them into categories of top, middle, and bottom performance.
- Positives of stack ranking include that it celebrates high-performers and reduces potential bias.
- Potential downfalls of stack ranking include unhealthy competition, an absence of core values assessment, it can create an anxious workplace, there is often a lack of consideration of additional performance factors, and it can lead to high turnover costs.
- Best practices include transparency and fairness, clear performance expectations, and communication.
Among the many performance evaluation method options, such as management by objectives, performance rating scales, a behaviorally anchored rating scale, or 360-degree feedback, the stack ranking method is the most controversial. Also known as forced ranking, rank and yank, or the vitality model, stack ranking was originally introduced by Jack Welch, CEO of GE from 1981-2001. The general purpose was to incentivize and praise the top-performing employees, motivate the adequate performers, and remove the bottom performers. Though stack ranking has come under fire in the modern workplace, it is said that roughly 30% of Fortune 500s actively use stack ranking today.
What is Stack Ranking?
Stack ranking is a performance evaluation method that measures employees against one another and forces them into categories of top, middle, and bottom performance.
By measuring performance efforts against one another, not against a standard set of objectives, employees are ranked from best to worst performance and are typically further divided into the top ~20%, the middle, or adequate, ~70%, and the bottom ~10%. Sometimes, it is company standard to fire the bottom 10% while providing raises, bonuses, or some other reward to the top performers. It is recognized that the middle majority group, though not top performers, is ‘vital’ to the business and should be motivated by the rewards given to the top-performing employees.
Why Use Stack Ranking?
In organizations with thriving workplace cultures that value merit and embrace transparency, stack ranking can be a viable performance evaluation method. The list below shares the advantages of this approach.
1. It celebrates high-performers.
For the employees who are putting in the dedicated time and effort to reach and exceed their goals, stack ranking does a great job of highlighting their efforts. This process focuses on end results and, therefore, gives credit where credit is due. In healthy company cultures, this can be motivational to the adequate or bottom performers to strive for greater results. An added benefit of stack ranking is that it brings clarity to the performance efforts of everyone in the organization so no employee is left feeling confused on where they stand.
2. It reduces potential bias.
When evaluations are purely measured against the performance of all team members, there is no room for potential conscious or unconscious bias to sneak in. Subjectivity cannot be present in the evaluation because individual results are compared against one another.
The Downfalls of Stack Ranking
In today’s workplace, there is a general emphasis on the value of teamwork, collaboration, and the individual’s unique talents and contribution to the team. When not done strategically, stack ranking works against these core principles. The list below details the major disadvantages of this evaluation method.
1. Unhealthy competition– Stack ranking creates a focus on internal vs external competition. Employees find themselves constantly measuring their efforts against the efforts of their colleagues as opposed to working together to beat their product or service’s actual competitors.
2. Absence of core values assessment- The forced ranking method emphasizes performance above all else. This can result in rewarding high-performing employees with low culture fit who do not exemplify the company’s core values. This dynamic can lead to a negative culture where as long as you are a top performer, your workplace behaviors either matter less or do not matter at all.
3. Anxious and tense workplace- When employees know that no matter how hard they work, there is a high probability they will be forced into either the adequate or bottom-performing categories, it can stir feelings of anxiousness at work each day. For the majority, this is demotivating and ultimately results in an unengaged or disengaged workforce.
4. Lack of consideration of additional factors- The background information on why an employee is or is not performing well is important in the evaluation method. For example, what type of manager coaching and support is being given? Are training opportunities available to the employee? How often is the employee having goal progress conversations in a one-on-one setting? The type of environment the employee is working within is critical to understanding performance results.
5. High turnover costs- If an organization is fully embracing the traditional stack ranking method, then eliminating the bottom ~10% of performers leads to high turnover which is quite expensive. According to a study by SHRM, employers will need to spend the equivalent of 6-9 months of an employee’s salary to find and train their replacement.
6. Managers forced to categorize– In stack ranking evaluations, managers often find themselves in a dilemma- they have to rank employees on a bell curve even if it is not the most accurate reflection of employee performance. Though rare, stack ranking also gives license for bad managers to categorize people incorrectly and influence the bell curve by falsely ranking people.
Best Practices for Implementing Stack Ranking
It is important to state that WorkDove does not recommend implementing stack ranking evaluation practices as the disadvantages far outweigh any potential benefits. However, if your organization has fostered a healthy, collaborative workplace culture that thoughtfully utilizes the stack ranking method, there are a few best practices to keep in mind.
- Transparency and fairness– It is critical that dedicated conversations between managers and employees happen regularly. Simply relying on stack ranking evaluations once or twice a year with no performance discussions in between results in unmotivated and defeated employees. Employee performance should be transparent throughout the year with one-on-one check-ins, goal updates, and employee sentiment pulse checks.
- Clear performance expectations- The organization’s performance expectations must be clearly defined. Employees should have no question as to what is required of them in their specific job role. These expectations may be standardized for teams or departments, or individualized for each employee.
- Communication- The stack ranking process has to be communicated, and even over-communicated, from the top. To avoid stifling teamwork or employees only looking out for themselves, the organization must explain the process in painstaking detail to establish ground rules of fairness and trust, highlighting the benefits to stack ranking.
Alternatives to Stack Ranking
Today’s top-performing organizations recognize that continuous performance management is the most effective method for higher productivity, employee satisfaction and engagement, and overall business results. Continuous performance management means that feedback and evaluation conversations occur throughout the year, as opposed to once or twice for a formal, scheduled review period. Continuous feedback includes consistent one-on-one performance check-ins, employee recognition, integrated performance reviews, and 360-degree feedback.
Read more about these continuous performance management practices as an alternative to stack ranking below.
Performance Check-Ins
This practice encourages employee-led performance conversations that occur at a regular frequency between the employee and the manager. They are designed to be brief, casual coaching conversations discussing the employee’s top priorities, goals, and addressing any performance challenges or needs. WorkDove’s check-in tool incorporates action items and records and tracks trends in employee sentiment to recognize turnover risk and increase retention.
When done correctly, these check-in conversations ensure objectives and behaviors are aligned to the company mission and vision and they further inform the final performance review, eliminating bias and increasing rating accuracy.
Employee Recognition
A digital employee recognition tool allows organizations to build a healthy culture by recognizing team players based on company core values. Though recognition is not a replacement for evaluating performance, it does highlight the positive workplace behaviors displayed by employees so performance evaluations capture both performance and cultural fit appropriately.
Integrated Performance Reviews
An ideal performance management software will integrate employee performance check-ins, goal attainment, peer feedback, and recognition so the manager is better equipped to provide an accurate assessment of employee efforts. In this approach, there is a standard set of objectives and core values the employee is responsible for and the manager gives a final evaluation based on the employee meeting, not meeting, or exceeding expectations. This is approach is different from stack ranking in that the employee is measured against previously identified performance standards, not against their colleagues.
WorkDove’s Performance-Values Matrix evaluates the performance and value fit of employees, teams, and managers by plotting them on a matrix for a visual representation of overall efforts. This allows leaders to easily drill down and roll-up the data by department and other factors.
360-Degree Feedback
Best-in-class multi-rater feedback gathers upward, peer, and external feedback to identify specific areas for improvement and power employee development. Whether used singularly or in tandem with other forms of feedback, 360 feedback is an effective alternative to stack ranking as it considers multiple perspectives and offers a holistic view of employee performance, workplace behaviors, and their peers’ perceptions of/experiences with them.
WorkDove’s 360-feedback tool allows leaders to filter and analyze data from 360 reviews to improve employee performance, develop team members, and make informed personnel decisions through summary reports and informative dashboards.
Is Stack Ranking Right For You?
Stack ranking is certainly not for every organization. However, high-performing organizations that choose this evaluation method are thoughtful and strategic in their forced ranking approach by encouraging frequent manager and employee performance conversations, clearly defined performance expectations, and emphasizing the value of candor that leads to winning together.
For CHROs and other HR leaders who are deciding if stack ranking is the right approach, we highly recommend first conducting a general evaluation of your current performance evaluation system(s). What emphasis is placed on documenting important performance conversations? Are there performance standards in place? Are performance expectations and core values/workplace behaviors clearly defined and aligned with the company mission and vision? Is your company culture amenable to high levels of transparency and candor? How you answer these questions will guide you in the direction you should go. Ultimately, you know your people best! Keeping your employees’ needs front and center will lead to the right performance evaluation method for your organization which will lead to increased business results.
