NCPA - National Center for Policy Analysis

Merit And Accountability In The Workplace

May 30, 2001

Many large U.S. companies are turning to ranking systems to identify workers who perform poorly -- with the aim of replacing them with more promising talent. The systems will also allow companies to identify top performers and reward them.

Some critics see the new top-to-bottom ranking systems as unfair; and they are being met with a wave of lawsuits, including age and race discrimination and reverse discrimination lawsuits. Conoco has even been hit with a rare citizenship discrimination lawsuit.

Undeterred, many large companies are pursuing rankings. Here are some examples:

  • Last year, Ford Motor Co. graded all of its 18,000 managers thus: broken into groups of 30 to 50, 10 percent of each group was assigned an A, 80 percent a B, and 10 percent a C -- although the C group was later reduced to 5 percent, without the possibility of a pay raise and with either termination or demotion likely if performance doesn't improve in two years.
  • After dividing its employees into groups of about 30, Sun Microsystems warned about three in each group that they had 90 days to improve - those who didn't could resign and take severance pay or stay on with a commitment to improve (and be terminated without severance if they don't.)
  • Cisco Systems has had a goal of getting rid of one in every 20 employees each year -- even when it was growing so fast it could not fill new positions.
  • General Electric identifies the top 20 percent, the middle 70 percent and the bottom 10 percent of its 100,000 managerial and professional employees, with the bottom-ranked given a brief time to improve.

GE chairman Jack Welch says those workers would eventually be fired anyway -- and delaying the inevitable until they are in mid-career is "a form of cruelty."

Source: Del Jones, "More Firms Cut Workers Ranked at Bottom to Make Way for Talent," USA Today, May 30, 2001.

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