Stack Ranking: Brilliant Management or Inherent Absurdity

Ray Johnson
MGMT E-4000 Organizational Behavior

1 August 2012

Abstract

Employee stack ranking is a performance measurement system that requires every manager to rank its employees from excellent to poor. Stack ranking was popularized by Jack Welch at General Electric in the 1980’s. Since that time it has become a popular management technique. The use of stack ranking has many demonstrated successes, but many managers and business analysts are beginning to questions its value to an organization. In this paper I will examine from a critical perspective both the good and bad aspects of stack ranking in an attempt to determine its long term viability as an organization behavior.

Stack Ranking: Brilliant Management or Inherent Absurdity

Introduction

Stack ranking, sometimes referred to as forced distribution, is a popular performance measurement (appraisal) tool. The concept behind stack ranking is to rank all employees within a given statistical set, all first line supervisors for example, from best to worst. In its most common iterations managers rank, or stack, workers into one of the three groups. The highest performing 20% (sometimes 10%) are ranked as top performers. This top tier group of employees is considered to be the future leaders of the company. They are rewarded with bonuses, raises, promotions stock options and other perks. The middle 70% of the group are considered to be “solid” or steady but average performers. The rewards provided to the middle are often limited to cost of living raises, training opportunities and encouragement to improve for the top tier. The bottom 10% contribute the least amount to the team and are considered to be the lowest performing employees in their statistical set. They are given no bonuses and in many corporations, this group is