And according to Dick Grote, president of Grote Consulting and author of Forced Ranking: Making Performance Management Work, 60 percent of Fortune 500 companies engage in some form of forced or stacked ranking, including Microsoft, Dell, Accenture and Deloitte. The process, managed by HR departments, requires that managers rank their employees according to one of three categories:
- Top 20 percent. These people are the "A" players — potential stars-in-the-making who will lead the company in the next generation. They typically receive the largest raises and stock options and the most extensive training.
- Middle 70 percent. The "B" players, these employees make up the bulk of an organization's staff. They’re the “steady eddies” who perform their jobs, do what is expected of them and don't rock the boat. They typically receive smaller bonuses tied to tenure, and the bulk of management’s time is usually directed here, encouraging good employees to become great.
- Bottom 10 percent. These employees contribute the least to the organization, even if they meet company expectations. They’re either given training in order to improve, encouraged to resign or fired.
Grote believes that classifying employees in this manner is "a very good thing for any organization with 10 employees or more," as it makes it easy to identify and retain the top performers.
2. Avoid complacency.
The fruit of failure is sowed in the seeds of success — there's a human tendency to think that what we did yesterday is good enough to get by today. Complacency is the enemy of every organization, fostering an environment of groupthink and an aversion to risk-taking. As Edwin Land, inventor of the Polaroid Camera, said, "It's not that we need new ideas, but we need to stop having old ideas."
In hindsight, Land’s company would have been well-advised to seek out engineers such as Steven Sasson, who invented the digital camera two years after his graduation from Rensselaer Polytechnic Institute in 1973. Land's company, Polaroid Corporation, failed to recognize the new direction photography was headed in and instead focused upon an expensive and obsolete technology for movie cameras. As a result, the company was forced to file for bankruptcy in 2001 and is now merely an administrative shell.
3. Create incentive.
The growth of bureaucracy is an ever-present danger in any organization. It replaces innovation and initiative with stagnant hierarchies, defensive managers and formalized rules and procedures, all of which are intended to protect the status quo. A program of systematic renewal that stimulates regular turnover through promotions and terminations ("up or out") in all areas, particularly management levels, ensures an environment of constant opportunity and motivation for remaining employees.