Human Resource Management International Digest

Emerald Article: Spotlight on Dick Grote Interview by Sarah Powell

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To cite this document: Interview by Sarah Powell, (2007),"Spotlight on Dick Grote", Human Resource Management International Digest, Vol. 15 Iss: 2 pp. 42 - 45 Permanent link to this document: http://dx.doi.org/10.1108/09670730710735780 Downloaded on: 17-05-2012 To copy this document: permissions@emeraldinsight.com This document has been downloaded 1365 times.

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Spotlight on Dick Grote

Interview by Sarah Powell

ick Grote is Chairman and CEO of Grote Consulting Corporation in Dallas, Texas and the developer of the GroteApproach web-based performance management system. For more than 20 years he was adjunct professor of management at the University of Dallas Graduate School and for ve years he was a commentator on life in the workplace for National Public Radios Morning Edition program. Mr Grote was awarded a medal for his work in creating the National Security Agencys performance management system.

Dick Grote

Dick Grote is the author of numerous articles and essays and is a regular speaker at human resource and general management conferences. His books Discipline Without Punishment and The Complete Guide to Performance Appraisal have recently been translated into Chinese and Arabic. His most recent book is Forced Ranking Making Performance Management Work.

What are the main differences between standard performance appraisal and forced ranking?
Forced ranking is simply one technique in that whole area of talent management. There are two questions that I believe every single person in any organization wants answered: rst, what do you expect of me, and second, how am I doing at meeting your expectations? The rst question would be answered at the beginning of the year when a manager should have a conversation with each member of staff to discuss what needs to be accomplished. The second question is typically answered through a conventional end-of-year performance appraisal system which sees the manager evaluate how the employee has done in meeting his or her goals and objectives. But thats only half of the picture. The other half is not about how well one person did in meeting his or her goals and objectives, it is about how good a job that person did compared with others. Thats where the forced ranking comes in. A key difference between conventional performance appraisal and forced ranking is that conventional performance appraisal uses an absolute comparison basis how good a job George did against the objectives. One problem here is that if the managers goals are set low enough and he or she tends to be lenient, then anyone can be evaluated as exceeding expectations. Forced ranking, on the other hand, is a relative comparison process. In this process we ask not how good a job George did against the goal, but how good a job he did compared with other people. It is entirely possible for someone to be rated as superior in terms of meeting goals but to be listed in the bottom half of performers when compared with other people who did an even better job. This is the rationale for this forced ranking process. Another key difference between standard performance appraisal and forced ranking is that standard performance appraisal is entirely historical, i.e. it focuses on how well George performed over the past twelve months. The forced ranking process not only assesses

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VOL. 15 NO. 2 2007, pp. 42-45, Q Emerald Group Publishing Limited, ISSN 0967-0734

DOI 10.1108/09670730710735780

performance but also potential, i.e. how well did George do in the past and how much stretch does he have for the future? There is one other important point. While conventional performance appraisal tends to apply to everybody in the organization, typically forced ranking is concentrated at the top, among the management population.

Where a long-established company has traditionally used a fairly easy-going performance appraisal system, does not the introduction of forced ranking move the goalposts, which will be resented?
This is true and my advice to any company would be to start with performance appraisal and then, if necessary, introduce forced ranking. I wouldnt start with forced ranking because, as you point out, it is a disruptive process. This is because managers in general want to get along with their people and performance appraisal is frequently used as a way of making people feel good about what theyve achieved. There is discomfort over forced ranking because in this process managers can no longer claim that all their people are above average. If you have 100 people and youre introducing a top 20 percent, vital 70 percent, bottom 10 percent ranking, only 20 people can be in the top 20 percent. This forces managers to recognize talent variations, and many of them are uncomfortable with that. I should point out here that the 20 percent, 70 percent, 10 percent mix is the basic distribution that I recommend because it takes into account that there are more talented people at the top end of any organization than there are weak performers at the bottom.

What are the origins of the forced ranking process?

Im not sure certainly Ive been using it for over 30 years, since working with PepsiCo where we used forced ranking as part of our talent management/performance management processes. The process only became noteworthy in the USA in the year 2000 when Jack Welch wrote his now famous nal stockholders letter, describing how General Electric not only used forced ranking, but also used it annually, and considered it necessary to release the bottom 10 percent.

What in your view are the major benets of this system of talent management?
My answer will come as a surprise because everybody seems to assume that the major benet to companies is sacking the bottom 10 percent, which is not the case. In my experience there are two major benets. One is identifying the top 20 percent, but the second and real benet to a company comes in knowing who are your best and most talented people, making sure you retain them, and ensuring that these are the people who get the rewards. This is much more important than getting rid of the bottom 10 percent. The other big pay-off and this is something that almost never gets talked about is to the people who are doing the ranking as opposed to those being assessed, i.e. those tasked with identifying where the talent in the organization lies. Senior management in turn will identify which managers are best at this talent spotting and who has the courage to stand up and challenge his or her peers and can articulate what makes somebody successful.

Surely if one of the major benets comes from doing the ranking, i.e. learning about the prole of top performers, this will also enhance the future recruitment process?
It certainly does. It drives a talent mentality into the organization and this shows up in promotion processes and also in recruitment and selection processes. The organization knows what it is looking for. It is seeking more people who look like A players and fewer who look like C players.

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Another benet relates to investment in training and development. The mistake organizations frequently make is to use training and development as a damage control strategy to shore up the weaknesses of those who are not doing well. That is a mistake. Its a bad use of corporate assets. Training and development need to be directed towards the best performers, i.e. to polish diamonds not polish coal.

You have noted that GE under Jack Welch was an enthusiastic champion of forced ranking but that both Ford and Dow Chemical introduced and later discontinued the system. Can you comment on these differing experiences?
At GE under Jack Welch, at PepsiCo, Sun Microsystems, Microsoft and so on, it is simply part of the culture its the way they do business. Early in my career I worked for ve years each for both General Electric and PepsiCo. Both were highly meritocratic and competitive in the healthiest way. The system worked well because we took it for granted that we were continuously under evaluation. People joined these companies knowing that they might not have a long-term career there but that the skills and talents they would develop would make them highly employable elsewhere. Ford, meanwhile, had always told all of its people that they were doing well, even though the company was losing its competitive edge. When forced ranking was introduced by Jacques Nasser there was a rebellion against it and Nasser was the casualty. Dow Chemical, meanwhile, had used forced ranking for over 30 years an incredible time span for the process. According to Dows Dr Steve Constantin, the reason for stopping the process was that Dow Chemical had very talented people, and no poor performers. To my mind, that reects one of the basic misunderstandings about forced ranking, i.e. that the people who are rated in the bottom category are necessarily poor performers. Theyre not they may be fully acceptable performers, but theyre simply not as good as the rest. With such examples in mind, my advice has always been: dont think about forced ranking as a permanent process; think about it as a short-term solution to the need to drive a talent management culture work it for a year, look at the results, which are probably going to be pretty good; use it for another year, consider the results, theyll still probably be pretty good; but by the third or fourth year, youve probably had most of the mileage out of the system. It should also be pointed out that, while conventional wisdom assumes that it is par for the course to terminate and replace the people who are ranked in the bottom category, this is not the case. Many organizations implement forced ranking primarily for educational and development purposes, and they dont re the bottom 10 percent.

Forced ranking sounds not dissimilar from the sort of process used in selection and retention in ofcer assessment and promotion in the armed forces, progression in performance-oriented rms and government divisions and, of course, promotion in sport. In these cases the system has apparently neither needed a name nor been particularly contentious why should it be different elsewhere?
I agree that it sounds not dissimilar but I think there is a good answer to that. Yes, this has been done for a long time in the military, in nancial organizations in the city, in accountancy rms and so on, but it takes place on a casual, informal, off-the-record, over-the-water-cooler basis. In my view its far more ethical and rigorous to make this a formal process, ensuring that the criteria for promotion are clear and that managers enunciate the reasons for ranking one person ahead of another. We must shine the light of day on decisions that potentially have a profound impact on an individuals future. In schools when ten- or 11-year-old kids make up teams for a football game, a couple of kids are always the rst to be chosen because they are the best at the sport. Then come a large number who play reasonably well. Finally there are one or two who are always the last to be chosen because, frankly, theyre not very good football players. But the kids in this last

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category may, of course, end up winning the Booker Prize. Not being good at football doesnt mean youre not very talented at something else. With forced ranking all were saying is: given the needs of this organization, you arent one of the best. Its a kindness to help these people understand this, even though they may disagree, so that they can try and identify where they can pursue a happy and successful life. Keywords: Performance appraisal, Management development, Manpower planning For more information, see www.GroteConsulting.com This interview rst appeared in the January issue of Emerald Now, http://www. emeraldinsight.com/info/about_emerald/emeraldnow/index.jsp

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