Forced Ranking of Employees a Bad Idea, Lawler Tells NCEO Meeting

At the NCEO annual conference in April, keynote speaker Ed Lawler, the dean of organizational development scholars, said that he is particularly unenthused about "forced ranking" of employees, a practice made famous by Jack Welch at GE, where all employees had performance reviews and the bottom 10% were fired every year. Welch argued it made companies get rid of dead wood, but Lawler argued that his research showed some strikingly negative effects. Employees tended to be very competitive with one another, fearful of helping a colleague because it might elevate their performance rating over their own. Managers said they sometimes hired employees they knew they would fire just to meet the numbers. These and other problems meant the system created more problems than it solved. While GE has been a successful company, Enron also used forced ranking, Lawler pointed out.

In general, Lawler told the audience that the most productive organizations practice a very open-book management style of information sharing and push decision making down to employees and employee teams whenever possible. In fact, Lawler's findings were very much in line with what researchers have found about what makes employee ownership companies successful. Lawler's findings are discussed in his new book Treat People Right.