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ABSTRACT
Some organizations, such as General Electric, currently use or have used forced distribution performance evaluation systems in order to rate employees' performance. This paper addresses the advantages and disadvantages as well as the legal implications of using such a system. It also discusses how an organization might assess whether a forced distribution system would be a good choice and key considerations when implementing such a system. The main concern is whether the organizational culture is compatible with a forced distribution system. When a company implements such a system, some important issues to consider include providing adequate training and ongoing support to managers who will be carrying out the system and also conducting adverse impact analyses to reduce legal risk.
Keywords: human resource management, performance management, performance system, performance appraisal, forced distribution, legal risks
There has been some controversy over the recent adoption of forced distribution performance evaluation systems by many large global corporations. A plethora of terms exist which essentially describe the same type of relative performance ratings, that is, a performance evaluation system that is used to rate and rank employees. Some of these terms include: forced distribution, forced ranking systems, bell curve, group ordering, or normal distribution. The term 'forced distribution' will be used throughout this paper. Jack Welch, former CEO of General Electric (GE), pioneered the idea of forced distributions in corporate America due to his belief that the bottom 10% of the workforce should be removed every year. Estimates suggest that up to 20% of all US business organizations and up to 25% of Fortune 500 firms use some type of forced distribution performance evaluation system (Bates 2003; Gary 2001; Meisler 2003; Osborne & McCann 2004). One study conducted by the Jacksonville Business Journal found that 60% of respondents indicated that their companies used a forced ranking system (Hadden 2004). The list of organizations that use or have used such systems include such firms as General Electric, Cisco Systems, Hewlett-Packard, Microsoft, Lucent, Intel, Goodyear Tire, Ford, Goldman Sachs, American Express, Sun Microsystems and Conoco (Bates 2003; Guralnik, Rozmarin & So 2004; Meisler 2003).
Forced distribution systems can be carried out in multiple ways. First, managers may rank employees by comparing each employee's individual performance against each other (e.g., ranking...