I heard of a company (which will naturally go unnamed, because it’s either a client or a potential client) that implemented “forced quartiles” as part of its performance reviews. A quarter of employees had to be rated in the top quartile, a quarter in the second, a quarter in the third, and a quarter at the bottom.
What happened?
Employees schemed: “Shoot! We’ve gotta figure out who will be in the bottom quartile this year. I tell you what: I can do with a little less pay this year. But I’m getting married next year, and I’ll really need a bonus. I’ll be bottom quartile this year, as long as you’ll take the fall next year.”
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So much for honest rankings of who’s good and who’s bad.
It might be worse at top-tier law firms.
On the first day of law school, the dean announced: “Fifty percent of you are going to be in the bottom half of the class.” That couldn’t possibly be true, even though it seemed to have a certain arithmetic truth to it.
But you prevailed! You were top 10 percent! You landed a job at a top law firm!
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And now 25 percent of the new associates are going to be in the bottom quarter.
The firm is going to offend a quarter of its work force. And the firm will probably lose some fraction of those people, who both don’t care to be insulted and have flexibility. Maybe the firm is happy to lose those people, but maybe training new lawyers is expensive.
Corporations that have more rational regimes for evaluating performance suffer, too.
If corporations don’t insist that supervisors grade on a curve, then every employee is a “4” on a “1” to “5” scale. We live in Lake Wobegon: All the children are above average. The employee is pretty good at his or her job. It’s not worth having a tough conversation about performance. So hand out 4s to everyone. It’s easy, and it’s human nature.
Or corporations can insist that each department grade on a curve, and the average score must be a 3.
This doesn’t work either. Of course nobody’s a “2.” Those people are on the way out the door. (And the idea of a “1” is inconceivable. You let those people go long ago.) Everybody who’s left in the department is either a 3 or better.
It’s pretty damn hard to curve to a 3 when the bottom rating is 3 and the actual scale runs from 3 to 5.
Not only that: Suppose managers are doing their job correctly. The department was in fact a little weak three years ago, when the manager was hired. Maybe employees in the department really did deserve an average rating of 3.
But the manager has changed things over time. The manager has gotten rid of the under-performers and hired some really gifted people; people in the department now deserve an average rating of 4.
Sorry; you can’t do it.
The system demands a 3 average.
Even if you cheat and give too many 4 ratings, your cheat comes back to haunt you: The available bonus money assumes that the average rating will be 3. If you award too many 4s, there isn’t enough bonus money to go around.
I don’t see a good answer to this. I’ve heard about firing the bottom 10 percent of employees every year, and that may be fine for a big company taken as a whole. There surely must be a bottom 10 percent somewhere. But big companies consist of smaller departments. If you have 10 people on your team, and you’re lucky enough to have landed good people, you shouldn’t be forced to fire one of them.
If you did fire someone, you’d have to go out and hire a replacement employee. The hiring process is both expensive and a crapshoot. You might easily hire someone who’s worse than the employee that you were forced to let go.
If someone solves this puzzle, please speak up.
Those of us in the corporate world need you desperately.
Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at [email protected].