Absolute vs. Relative Employee Evaluation Systems

Traditional performance rating systems call on managers to assess employees’ performance via comparison with ideal standards. This is considered an absolute rating system in that, at least in theory, it situates the rating within a scale that has fixed points. A traditional rating system is retrospective; that is, it focuses on performance over a past period. By contrast, forced ranking or forced distribution systems are relative; that is, they require managers to assess a group of employees in relation to one another, leading to rankings and sometimes to automatic classifications (Grote, 2003; Gómez-Mejía, Balkin, & Cardy, 2012).

Forced-ranking systems are used as the basis for distinguishing between top performers who will be rewarded, developed, and promoted; the middle majority who will be eligible for typical rewards and opportunities; and bottom performers who will be subject to discipline, training, and/or termination (Grote, 2003; Hazels & Sasse, 2008). Forced distribution has come to some prominence over the past 20 years, being used by Fortune 500 firms such as GE, Ford, and Microsoft (“Forced-Ranking,” 2011; Hazels & Sasse, 2008). Its focus is prospective, addressing employees’ anticipated future contributions (Grote, 2003).

Both types of evaluation systems have faults as well as virtues. The most common criticism of a traditional rating system is that it makes it easy for managers to tolerate poor performance. Under an absolute system, most (or even all) employees can be rated as above average (Grote, 2003). Nevertheless, Hazels and Sasse (2008) discussed several drawbacks associated with relative evaluation systems, three of which are worth noting here. First, the size of the bins is arbitrary. As a result, forced ranking ignores differences in performance between units; a poor performer in a high-performing department might actually be comparable to a high performer in a poor-performing department. Second, relative evaluation can provide disincentives to teamwork, as individual employees look out for their own interests rather than sharing with others for the good of the company. Finally, making termination a routine can prevent the correction of errors in recruitment, selection, and training systems. As a result, procedures that allow poorly skilled or motivated employees to join the workplace repeat themselves.

The two approaches to evaluation also have virtues. Forced ranking gives managers incentives to deal with poor performers (Hazels & Sasse, 2008). Additionally, it helps to identify top performers whose departure should be averted (Grote, 2003; Hazels & Sasse, 2008). Absolute ranking, on the other hand, allows for excellence to be recognized regardless of how it is distributed within the organization. Furthermore, it may be more apt to lead to remediation of weaknesses.

Hazels and Sasse (2008) are careful to note that forced ranking is not appropriate for every organization’s culture or developmental stage, and that its useful effects dwindle over time. Even Grote (2003), in the midst of strong advocacy for forced ranking, appeared to convey that it should complement traditional performance evaluation. A wise manager will thus seek to employ available tools at the right times and for appropriate purposes. A Christian manager should remember that in managing human resources, he or she is not merely influencing the future of the organization, but touching people made in the image of God (James 3:9). This is a high responsibility—one not to be taken lightly.

References

Forced-ranking systems. (2011). In W. D. Folsom (Ed.). Encyclopedia of American Business (Rev. ed., Vol. 1, pp. 338–339). New York: Facts on File. Retrieved from http://go.galegroup.com.ezproxy.liberty.edu:2048/ps/i.do?id=GALE%7CCX1980900401&v=2.1&u=vic_liberty&it=r&p=GVRL&sw=w&authCount=1

Gómez-Mejía, L. R., Balkin, D. B., & Cardy, R. L. (2012). Managing human resources (7th ed.). Upper Saddle River, NJ: Pearson Education.

Grote, D. (2003, July). Forced ranking. Executive Excellence, 20(7), 6–7. Retrieved from http://search.proquest.com.ezproxy.liberty.edu:2048/docview/204611392

Hazels, B., & Sasse, C. M. (2008). Forced ranking: A review. S.A.M. Advanced Management Journal, 73(2), 35–39. Retrieved from http://search.proquest.com.ezproxy.liberty.edu:2048/docview/231246704

Newell, E. (2012, April 18). Welcoming wellness. Govexec.com. Retrieved from http://go.galegroup.com/ps/i.do?id=GALE%7CA286969519&v=2.1&u=vic_liberty&it=r&p=ITOF&sw=w&asid=cb3e87a61377413254e774b92afe15cd

Overman, S. (2010, March). Prescribing wellness. HRMagazine, 55(3), 49–50, 52, 54. Retrieved from http://search.proquest.com.ezproxy.liberty.edu:2048/docview/205071243

Wells, S. J. (2012, February). Wellness rewards. HRMagazine, 57(2), 67–69. Retrieved from http://search.proquest.com.ezproxy.liberty.edu:2048/docview/920318328

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