1. Alternatives to Appraisals
MANA 4328
Dr. George Benson 1

2. Arguments Against Appraisals

3. Alternatives to Appraisals

4. How to Deal with Poor Performance
Appraisals seldom provide good support for termination.
Managers tend not to give poor reviews
Language in reviews is often ambiguous
Alternatives:
Document specific performance problems and incidents
Use a review system for only those ready to terminate.
Forced ranking systems?

5. Forced Ranking Systems
Gained popularity following GE
Up to 20% of companies
Used by:
Conoco
Capital One
Sun Microsystems
Cisco
EDS
Hallmark Cards
Used and abandoned by:
Ford
Goodyear
Microsoft
Hewlett-Packard
Intel
Texas Instruments
Enron

6. When managers have discretion:
They tend to give “Above average” ratings.
They prefer to give uniform ratings regardless of performance.
They tend not to use the ends of the rating scale.
“Range Restriction”
“Central-tendency Error”

7. What Expectations are Appropriate?
Tom Peters on appraisal: “Employee evaluations should reflect perform-or-else principles...”
Simply showing up and doing what you are told is not enough...
Continuous improvement means doing more with less year after year...

8. How to Evaluate? Absolute Measurement
Employees are all measured strictly by absolute performance requirements or standards of their jobs.
Performance compared to set goals
Avoids conflict among workers
May decrease differentiation
Relative Assessment
Employees are measured against other employees .
Ranking allows for comparison of employees but does not shed light on the distribution of employee performance.
Forces a distribution among workers
May create false distinctions and competition

9. “A company that bets its future on its people must remove the lower 10% and keep removing every year – always raising the bar of performance and increasing the quality of leadership.”
Jack Welch, former GE CEO

10. The “Vitality Curve” “The bottom 10” “The top 20” “The Vital 70”
Jack Welch “Jack: Straight From the Gut” 2001

11. Forced Ranking Systems Assume….

12. Why Conduct Forced Rakings?

13. Why NOT Conduct Forced Rankings?

14. Evolution of Ford’s Policy
July 1998: Ford begins buyout offers
U.S. salaried employees designated by as "low performers" or "limited potential.”
Offers go to less than 2,000 employees with around 1,000 accepting.
January, 2000: Ford begins new performance evaluation policy
Top 20,000 managers
10% of the executives will get A's, 80% will get B's, and 10% will get C's.
C’s are not eligible for bonuses. Two C's in a row are grounds for dismissal.
Quota for C’s later reduced to 5%
July, 2001: Ford eliminates the "A," "B," and "C" ratings in favor of "top achiever," "achiever," or "improvement required.” Quotas dropped for employees to be ranked as "achiever" and "needs improvement."
December, 2001: Ford agrees to pay $10.5 million to settle lawsuit
620 employees
Mostly older, white men
April, 2002: Ford revises its performance review system to “focus on creating bonds between managers and employees”, and will have no ranking quotas.