The End of Rank and Yank: Management Practices Revisited

What is rank and yank?

“Rank and yank” is a term used to describe an employee evaluation practice. When conducting a rank-and-yank assessment, companies rank and compare employees. The lowest-ranking employees are terminated.

Rank and yank is also known as “stack ranking,” “set distribution,” “forced ranking” and “vitality curve.” Simply put, it’s when you rank employees by performance and terminate employees at the bottom.

This assessment method was developed by Jack Welch when he was CEO of General Electric in the 1980s (though the legal profession practiced it well before that). Stack ranking requires managers to rate subordinates in a hierarchy from top to bottom. Those at the bottom aren’t necessarily poor performers; they’re just ranked that way because, well, somebody has to be.

Notably, Amazon once used a stack ranking process to cull “underperformers” (at least in comparison to higher-ranked peers). 

While a rank-and-yank evaluation sets performance goals and metrics and provides a way to dole out incentives, it also promotes individuals over the team, discourages collaboration and can demoralize underperformers.

Pros and cons of rank and yank

Like all management theories and styles, rank-and-yank practices have pros and cons. 

Pros

• Rank and yank allows employers to establish a standard for all employees.
• Rank and yank can help you create incentives, such as employee bonuses for those who perform well.
• Rank and yank helps accurately report employee performance.

Cons

• Rank and yank demoralizes underperformers. Those who don’t perform quite as well as others (even if they still perform well) will always worry about losing their positions.
• Rank and yank promotes looking out for oneself above working as a team.
• Rank and yank’s spirit of workplace competition can undermine employee morale overall.

What rank-and-yank defenders say 

Rank-and-yank defenders say this practice helps align employee performance with company objectives and business goals. They say this practice is indeed an ineffective management practice as commonly defined – but it’s vastly misunderstood. The problem is that the term is misapplied to a management practice that does work to benefit workers and management.

According to Jack Welch himself, “Most experienced businesspeople know that ‘rank and yank’ is a media-invented, politicized sledgehammer of a pejorative that perpetuates a myth about a powerfully effective real practice called (more appropriately) differentiation.”

Welch explained that employee differentiation comes from a place of business transparency and honesty. “Unlike ‘rank and yank’ – I hate even using that term – differentiation isn’t about corporate plots, secrecy or purges,” Welch wrote. “It’s about building great teams and great companies through consistency, transparency and candor. It’s about aligning performance with the organization’s mission and values. It’s about making sure that all employees know where they stand.”

Welch insisted that differentiation, unlike its media portrayal, is a time-proven and successful technique. “Differentiation is nuanced, humane, and occasionally complex, and it has been used successfully by companies for decades,” Welch noted. “Maybe that’s not as headline-worthy as you-know-what, but reality rarely is.”

What rank-and-yank detractors say 

Rank-and-yank detractors say this management practice is outdated and ineffective for the following reasons: 

• Rank and yank is often mismanaged. The idea behind employee rating systems is to purge dead wood and make room for more innovative, motivated workers. However, managers who don’t understand how to be true leaders can easily abuse ranking systems for the following reasons: 
  • To make themselves look good (by trying to get the largest percentage of high rankings, regardless of actual merit)
  • To get rid of someone they perceive as a threat to their position
  • To punish insubordination
  • To keep a star performer from job hopping by giving a good but not top evaluation
• Rank and yank lets good employees slip through the cracks. Rank and yank often forces managers to sacrifice good employees to protect those considered more essential. Employees who, for whatever reason, end up in the bottom rankings are fired under the assumption that the company must continually allow the cream to rise to the top. But while the cream may rise, too many otherwise good workers are left to sour. 
• Rank and yank contradicts today’s workplace focus. Generally, rank and yank’s tenets contradict current workplace trends that promote work-life balance, remote work and employee collaboration. Today’s offices often incorporate on-site gyms, office pets, yoga classes and other creative perks that improve morale to boost employee retention and attract top candidates. 

Alternatives to rank and yank

Many employee measurement approaches can replace rank and yank and support more effective outcomes. Consider the following performance review models: 

360-degree performance review model

One alternative approach is 360-degree appraisals, where superiors, peers and subordinates rate employees. The idea is that everyone receives feedback to understand their strengths and weaknesses better. However, this approach has the following downsides:

• Personal prejudice: Feedback is sometimes based on personal prejudice instead of objective evaluation.
• Reluctance to criticize peers: Peers might be reluctant to say anything “bad” about each other, particularly in cases where 360 evaluations are not confidential and are shared among employees.
• Fear of reprisal: Criticizing a manager, even constructively, carries the risk of retaliation from subpar managers. In many organizations, ineffective managers have more power to affect their subordinates than the other way around.

Calibration

Calibration is a performance review method that works on a ranking system, but with checks and balances at play. Various managers who oversee groups similar to one another all review each other’s employee performance ratings. This way, the rankings and the reasons behind them are all discussed and debated to ensure there aren’t any prejudices, biases or personal reasons for a specific ranking.

Management by objective

Peter Drucker, a renowned management consultant, was the first to utilize this management and review style. Essentially, the manager and employee sit down together to set employee performance goals and agree on how they want these goals to materialize. The performance review is based solely on how that employee can achieve the goals set forth.

Since the goals and desired results are determined ahead of time by the employee and manager, the employee is fully aware of performance expectations. There aren’t many excuses that can explain a failure to deliver on those expectations.

Peer review

This approach has some middle- and high school energy to it. With a peer review, co-workers review and comment on an employee’s performance. This method might present more issues than the others listed above. Still, employees may receive more tailored reviews, insightful performance improvement plans and personal tips based on their strengths and weaknesses.

The importance of evaluating employees

Every organization must evaluate employee performance. Not every employee will be stellar; at some point, you may have to deal with unproductive workers, toxic employees, excessive employee absenteeism and employees who lack the proper skills to do the job. You may also have to address good workers who are in a slump or need direction.

A consistent, respectful employee evaluation process is essential for the following reasons: 

• Evaluating employees can boost team morale. When you address and take action to correct situations with ineffective and toxic employees, your team morale will improve. Your team will see that you’re in control of the workplace and that bad behavior won’t be ignored or rewarded.
• Evaluating employees brings accountability. When employees understand their job expectations and know they’re responsible for meeting them, they’re more likely to put in the necessary effort to do their best. 
• Evaluating employees allows for self-correction. Evaluating employees – even via informal feedback – allows you to point out mistakes and behaviors a worker may be unaware of or that result from a temporary situation. Communicating your concerns and giving the employee time to improve fosters trust. Additionally, salvaging an employee relationship means saving the money, time and downtime involved in recruiting, training and onboarding a new employee.
• Evaluating employees helps you modify company goals. If you do a department-wide employee evaluation and see that many employees have fallen short, it’s time to reevaluate your business goals. You may have set unrealistic targets, or changing market conditions may have rendered current goals impossible. Your evaluations will help you set attainable and realistic goals. 
• Evaluating employees helps you identify training gaps. Let’s say an evaluation shows that new employees (or even existing employees) are struggling to understand company processes, policies or products. If this result is pervasive, it indicates that you need to improve your employee training. 
• Evaluating employees helps you share positive reinforcement and rewards. Employee evaluations aren’t just for weeding out and correcting underperformers; they also help identify and reward the best performers. Your entire team will be motivated when you offer rewards ranging from recognition to internal promotions. 

Jennifer Dublino contributed to this article.