University Name Title of your Essay Subtitle Your name Paper Due Date Business Week: Yahoo's Latest HR Disaster: Ranking Workers on a Curve A new policy put in place at Yahoo calls for managers to rank employees on a normal distribution curve and then fire all those who fall in the lower end of the bell curve…
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General Electric Company’s CEO, Jack Welsh is one of the most vocal proponents of this policy by claiming that this method weeds out the individuals who are a bad fit with the company. He is not alone in his support, 30% of Fortune 500 companies have similar policies including Ford Motor, Conco, Sun Microsystem, Cisco Systems, EDS and Enron (Lawler). They all systematically remove the bad employees on a regular basis and thereby send a strong message to the employees that there is little tolerance for poor results. Hence this forced ranking system has a big impact on the overall industry. Such a system of performance appraisal also provides information about the employees that other systems do not provide, especially when it comes to their place in the company performance spectrum (Lawler). It also promotes a culture in which employees believe that the company expects nothing but the best and those who fail to adhere to this standard will be fired. This causes the employees to continually work hard and exceed their past performance (Blume, Rubin and Timothy T. Baldwin). Managers generally avoid having difficult and painful conversations with their employees over their bad performance and try to minimize the conflict. This system literally forces the managers to address the issue of the employees thereby formalizing the management processes which only benefits the entire company (Lipman). A study published in an issue of the academic journal of Personnel Psychology tried to answer the question of whether a forced ranking system will improve the quality of the work force. In their model of 100 companies with over 100 employees, they employed the system of forced ranking and found out that there was noticeable improvement in the work force potential over the first several years. This improvement also included lowered voluntary turnover (Grote). However, there are many cons associated with the practice of forced ranking. It has been said to lower employee morale, teamwork and collaboration. If there is no compelling difference between the employees in the lower end who were fired and those who were not fired, it will spread a sense of injustice (Grote). This would lower morale and the system would be viewed in a negative light. Such a system also creates a very stressful and risky work environment. This can prevent high potential employees from joining the said company as they would try to avoid that work environment (Grote). Employee performance patterns do not generally follow a normal distribution and hence identifying the bad performers is a difficult matter (Lawler). According to the news article, most employees are slightly worse than average hence there is always the danger of satisfactory employees being identified as bad employees. Some departments are better staffed than others and the ‘poor performers’ in that group might as well be employees who were average but were surrounded by good employees and hence paled in comparison (Lawler). By repeating this process year after year, the lower quartile is eventually filled with employees who are average rather than ‘bad performers’. This can again lower the employee morale as they would feel that average employees are being misidentified and discriminated against (Donaldson). Such companies are also prone to legal challenges. Legal rulings state that a performance related
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