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Human Resource Management International Digestmerald Article: Spotlight on Dick Grote

nterview by Sarah Powell

rticle information:

cite this document: Interview by Sarah Powell, (2007),"Spotlight on Dick Grote", Human Resource Management International

gest, Vol. 15 Iss: 2 pp. 42 - 45

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p://dx.doi.org/10.1108/09670730710735780

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Spotlight on Dick Grote

Interview by Sarah Powell

Dick 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 five 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 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 andforced 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: first, what do you expect of me, and second, how am I doing at meeting your

expectations? The first 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 notabout 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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Dick Grote


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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-goingperformance 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 talentedpeople 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 final 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 benefits of this system of talent management?

My answer will come as a surprise because everybody seems to assume that the major

benefit to companies is sacking the bottom 10 percent, which is not the case. In my

experience there are two major benefits. One is identifying the top 20 percent, but the

second and real benefit 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 benefits comes from doing the ranking, i.e. learning aboutthe profile 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 benefit 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 forcedranking but that both Ford and Dow Chemical introduced and later discontinued thesystem. 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 five 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 knowingthat 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 reflects 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 thecourse 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 fire the bottom 10 percent.

Forced ranking sounds not dissimilar from the sort of process used in selection andretention in officer assessment and promotion in the armed forces, progression inperformance-oriented firms and government divisions and, of course, promotion insport. In these cases the system has apparently neither needed a name nor beenparticularly 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 financial organizations in the city, in accountancy

firms 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 first 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.

For more information, see www.GroteConsulting.com

This interview first appeared in the January issue of Emerald Now, http://www.

emeraldinsight.com/info/about_emerald/emeraldnow/index.jsp

Keywords:

Performance appraisal,

Management development,

Manpower planning

VOL. 15 NO. 2 2007 jHUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST j PAGE 45

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