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Force Ranking to Fire Employees Every Year

IMG_4696When I first read many years ago about Siebel’s practice of force ranking employees and firing the bottom 5%, I loved it.  If you are an angry, aggressive guy like me, you always feel like there is deadweight in the organization and the opportunity to improve.  Knowing that every year, some of that deadweight leaves the building and will be replaced by the new new thing always seemed exciting to me.

Now, of course, lots of people hate it.  The idea of being compared to your peers and judged against them rather than judged against your job description can be terrifying and some claim it leads to nasty in-fighting in organizations.

I always thought that that process of renewal might be something that would be really important to me when I went off and did the next thing, so I recently did some research into force ranking.

The big objections:

  • Legal risk: Apparently, some people sue and win because it is hard to demonstrate that the force ranking process was accurate.  Much like how big companies like Time Warner find the exercise of documenting poor performance and firing people incredibly onerous, demonstrating that you identified the poorest performer could potentially be difficult in a court of law.

My conclusion: Kill lawyers.  This whole strategy, conceptually, was about identifying people who may be hard to fire for poor performance, but perform poorly nonetheless.

  • The poor performers may be distributed in strange ways across departments.  A department may consist of superior performers, but it is still forced to cut.

My conclusion: Management has to manage that.

  • People that need to be fired might be “hoarded” for cut time, resulting in sub par performers being kept around longer than they should.

My conclusion: Far more frequent is the situation where people let someone linger around for years and years because s/he does his/her job just well enough to be hard to fire.

Let me be clear, this is not a death sentence.  If I fire one innocent and get ten poor performers, I think that is morally OK.  Bummer that I got an innocent, but I can live with it.

What actually put me off from this was a study they did on the effectiveness of this policy.  There were a few conclusions that came away from the study:

  • A big cut is better than a small cut.  If 5% is good, 10% is even better!
  • After several years of this, the effectiveness declines (the worst people are gone and given that the replacements are a blend of bad and good, there become fewer and fewer really poor performers.)
  • The system works.  No lie, cutting the bottom X% of your workforce improves your workforce.

One conclusion you could take away from this is that you should just do a cut every few years.  This may feel “Lay-off-ish”.  But maybe it feels that way no matter what you do.

So the conclusion I reached was that doing a surprise bottom 10% cut every other or every third year is a really good exercise.  Maybe every year for a year or three then stop for three.  You get the idea.  Surprise 10% cut.  That is healthy.  Scary?  Probably.

Have I gone off the deep-end?

4 Responses to “Force Ranking to Fire Employees Every Year”

  1. Mike Subelsky Says:

    I admire the cleverness of this, but it seems like a mechanical gimmick to substitute for plain-old leadership. I think the Netflix approach, documented in this link:

    is WAY better. They are aggressive about firing poor performers but give them generous compensation.


  2. brent Says:

    That is a great, great, great slideshow. As always, the true challenge is maintaining internal discipline. Also, I wonder how easily or not easily they can coach out mistakes as they grow in size. I know at most big companies, it is very challenging.

    Would love to see what their best practices are in aligning people against their goals and strategy.

  3. Cogblog » Blog Archive » Laying Off Layoff Discourse Says:

    […] let me caveat this with a few things people should know.  I am on the record as saying, “Laying off a few people sounds pretty good.“  I have the bias of coming from the knowledge worker industry and was only part of a […]

  4. Manager X Says:

    We practice this at our organization. We do not have a hard line 5% or 10% number but we remove the lowest performers every year. This was our 4th year of this practice and our talent pool is getting deeper. It does get harder and harder each year to identify the lowest performers and hopefully this year we will be able to retain our entire workforce.