Pros and Cons of the Stack Ranking Method in Employee Performance Evaluation

The stack ranking method, also known as the forced distribution method, is a controversial approach used by some organizations to evaluate employee performance. This technique involves ranking employees within a specific percentile range, typically from 10% to 90%. While it has its advantages, the potential drawbacks should not be overlooked.

Pros of Stack Ranking

Clear Performance Standards

One of the primary benefits of the stack ranking method is its clarity. It provides a structured framework for evaluating employee performance, making it easier to identify top performers and those who need improvement. This transparency can help managers and employees alike understand expectations and goals more clearly.

Encourages Competition

Stack ranking can foster a competitive environment, which often motivates employees to perform better and strive for higher rankings. This competitive nature can drive productivity and innovation, as employees aim to outperform their peers.

Identifies High Performers

Another advantage of stack ranking is its ability to help organizations identify and reward top talent. This can be beneficial for succession planning and talent development, as it allows organizations to recognize and invest in their best-performing employees.

Simplifies Decision Making

In large organizations with numerous employees, stack ranking can simplify the process of making difficult decisions regarding promotions, bonuses, and layoffs. By providing a clear distribution, it can help management make more informed and equitable decisions.

Focus on Accountability

The stack ranking method emphasizes accountability, as employees are aware that their performance is being compared to their peers. This can encourage individuals to take responsibility for their work and strive for excellence.

Cons of Stack Ranking

Potential for Decreased Morale

The competitive nature of stack ranking can lead to decreased morale among employees, especially if they feel pitted against each other. This can create a hostile work environment and reduce team cohesion.

Collaboration Undermined

Stack ranking may undermine teamwork and collaboration, as employees might prioritize individual performance over group success. This can lead to a focus on individual achievements at the expense of collective goals, which can harm overall team performance.

Arbitrary Rankings

The forced distribution involved in stack ranking can result in arbitrary rankings. Good employees might be rated poorly simply because they fall within a distinct percentile range, even if they have made substantial contributions to the organization.

Short-Term Focus

Employees may focus on short-term results to secure higher rankings, potentially neglecting long-term goals and initiatives. This short-sighted approach can hinder organizational growth and development in the long run.

Increased Turnover

High-performing employees may leave organizations that use stack ranking if they feel undervalued or perceive the system as unfair. This constant churn can create a negative cycle, with organizations facing high turnover rates and the associated costs of recruitment and training.

Bias and Subjectivity

Performance evaluations can be influenced by bias, leading to unfair rankings that do not accurately reflect an employee's contributions. This can create a sense of dissatisfaction and unfairness among employees, further eroding morale.

Conclusion

While the stack ranking method offers some benefits in terms of clarity and accountability, it is crucial for organizations to carefully consider the potential downsides, particularly concerning employee morale and collaboration. Many organizations have recognized these shortcomings and have moved towards more holistic and continuous performance evaluation approaches. By adopting a more balanced and fair system, organizations can foster a positive work environment that encourages both individual and collective success.