Firms re-evaluate employee rating systems

Rank and yank is tough language for a tough system. It’s the employee evaluation method that rates some workers lower than their peers and fires them.

Some say the regular housecleaning dumps deadwood, makes room for innovative, new employees, and motivates workers.

Others say rating systems, whether they involve numbers or phrases such as “meets expectations,” are morale killers, don’t motivate and take way too much time and money to administer.

In many companies, rank and yank is dead or dying. Microsoft, Adobe, Deloitte, The Gap, Accenture, Google and Yahoo are among major employers that are changing, if not eliminating, formal employee appraisal systems.

Many employers are concluding that employee ratings often tell more about the rater than the rated. Want to make your department look like it’s full of top producers? Want to get rid of a thorn in your side? Want to keep a star performer from job hopping? Putting people in certain ratings categories can do the trick.

A raft of social scientists have found that performance rating systems generate malaise for the majority of workers. “Satisfactory” is a career killer if a co-worker is “outstanding.” While the toprated employees get raises and bonuses and the lowestrated employees get axed, the big group in the middle plods on, unmotivated by being told they’re doing OK.

The challenge: Any fix for evaluation systems requires a clear, fair way to allocate compensation. For countless employers, rankings are the tool to decide pay, not to improve performance.