Joseph Grenny is author of three bestselling books, Influencer, Crucial Conversations, and Crucial Confrontations.
Dear Crucial Skills,
Our company has a review policy called the 70/20/10 rule. This means that 70 percent of my staff must be rated “Meets Expectations,” only 20 percent can be rated “Exceeds Expectations,” and worst of all, 10 percent must be rated “Needs Improvement.”
I find this rating system unmotivating and unfair for many obvious reasons. Specifically, at the present, I don’t have anyone I’d describe as “Needs Improvement.” However, I must come up with two people to fit this category.
At the other end of the spectrum, more than 20 percent are exceeding expectations and deserve commensurate rewards—yet I must arbitrarily leave people out so I don’t exceed the quota.
I raised my concerns over this policy but was told I should always be able to find 10 percent who “Need Improvement.” This seems like a losing battle, but I’d like to encourage the decision-makers to rethink this policy.
Sincerely,
Frustrated Reviewer
Dear Frustrated,
I find the performance appraisal system you’re describing to be as unjust as you do. However, I believe it was designed to address an even more egregious injustice.
Forced rating systems have been imposed on managers for decades because managers were failing to manage. The heart of good management is the speed and effectiveness with which managers hold crucial conversations. However, they typically put off holding crucial conversations for many months and, even when holding them, tends to gloss over the most fundamental messages.
I believe that forced ranking systems have been imposed on managers primarily because senior leaders believed that, without the compulsion of these systems, managers would continue to shrink from their responsibility to deal candidly, ethically, and professionally with performance problems. Managers are now being governed by unjust systems because so many failed to exercise ethical and leadership responsibilities in addressing performance problems willingly.
Now, with that said, most system responses to behavioral problems are doomed to fail. They produce unintended consequences of the kind you describe. They are brute force solutions to entrenched influence problems. Those familiar with our work on influence know that problems exist because there are six sources of influence that are perfectly aligned to produce the negative results you’re experiencing. To change those results, you must affect four or more of those sources of influence—nothing less will do.
Okay, soapbox aside, here are some thoughts as you decide how to be an ethical manager, a loyal employee, and a decent human being at all once.
1. Keep the spirit of the law. Given that the 70/20/10 system’s intent is good, first make sure you are not fooling yourself about the quality of your team and are stepping up to crucial conversations scrupulously—both in the interest of your organization and in the interest of your team members. You lose the moral authority to claim there is a “better way” than the 70/20/10 system if you aren’t an example of that better way yourself. For example, if you conclude that 40 percent of your team is in serious need of development, you should acknowledge that just as honestly as when you believe 40 percent deserve a rating of “Exceeds Expectations.”
2. Choose only from ethical options. When considering my options in confronting value conflicts in organizations, I distill them down to three. I can quit, stay and accept, or stay and influence. In other words, I could conclude that I would be a hypocrite to stay in an organization whose practices so conflict with my values. If you take this option, I’d suggest you use your exit as an opportunity to exert influence. In a clear and respectful way, detail what you admired in the company and all of the reasons you are reluctant to leave. Add your concern with this system and the inequities it made you participate in. One strong and clear voice like this can be remarkably effective at influencing change. It may not happen overnight, but it can plant seeds of doubt that spur reflection after you leave.
Second, you can stay and accept the circumstances. The only ethical way to do this is to decide to loyally fulfill your duties, even though you personally disagree with the system. If you stay in your current position at this company, carry out the 70/20/10 system as you are bound to do, and avoid badmouthing the system or the leaders who choose to continue with this program.
Third, you could stay and influence. You could, for example, decide that you are remaining only contingent on your success at influencing the system. If you do so, you must do so under the same ethical terms as the previous option. You must carry out the spirit and letter of your management duties. But at the same time, you can make your best effort to influence change. If this is the approach you take, I’d suggest a time limit to your efforts so you don’t become the angry rebel and waste your professional efforts in a lost cause.
If you choose to stay and influence change, here are a couple of options you could consider:
1. Invite study. If you have influence with HR or senior leadership, attempt to invite them to study the effectiveness of the 70/20/10 system rather than simply criticizing it with anecdotes. Honestly share your concerns with some of its effects, but also express openness that further study may convince you it’s the best approach. Encourage HR to declare what “dependent measures” they believe will be positively affected by the employment of the system, then study over time whether or not better results are following. It’s likely you’ll find that the system did produce some worthwhile effects—which will help you make recommendations more useful than just “throw out the bad system.”
2. Teach influence. As I mentioned earlier, the intent of the system is to influence managerial behavior. Our research into the six sources of influence is often a very effective way to help leaders see the limited success of their “single source” influence strategy. Share copies of Influencer: The Power to Change Anything with key leaders and attempt to engage them in reflecting on its application to managerial behavior in your organization.
I applaud your desire to do right by your people and your company and wish you the best as you make this crucial decision.
Warmly,
Joseph
Joseph,
I have a less lofty view of the purpose behind forced rating systems. Within our company, ratings tie directly to salary – this means that if the ratings distribution changes from the mandated norm, insufficient funds will be available to properly compensate the high-performing individuals – thus encouraging them to seek greener pastures.
While forced ratings may indeed force crucial conversations, and thus provide a benefit in some situations, they are also fundamentally problematic for the organization; “Grading on a curve” serves to discourage teamwork, fosters unhealthy competition (and backbiting) between employees, and leaves low-rated individuals feeling vulnerable in an age or forced downsizing, unmotivated and powerless to affect their situation, since they are not rated against objective success criteria, but instead against their fellow employees. To a lesser degree, these same factors affect the middle 70%, since they are also rated against their peers.
Since I’m neither a manager, nor involved in HR (or accounting), I have little leverage to influence the policy of a large organization (>10,000 employees in our city), and both reasons (encouraging crucial conversations and keeping the budget under control) are legitimate and important reasons for the existing system. So I have a different question – given that the status quo is unlikely to change, how can we leverage this undesirable situation to the benefit of all – including the lower 10%? BTW – I’m not in the bottom 10%, and don’t have a personal axe to grind here.
How about approaching senior management with an alternative propoosal. Acknowledge the spirit of the policy, but also emphasize the teambuilding you would like to do, and ask permission for an experiment: Encourage each employee to self-assess, identify the 70/20/10 within their own profile. Then group, categorize, and prioritize and work on them as a team. – e.g., “Here are our (70%) core competencies, here are the (20%) things we do well, and here are the (10% – or “the top 5) skills that my team has agreed they need to improve on, and we will focus on this as a team.” Pick a skill (time or priority management) – at team meetings share best practices and encourage feedback. This should encourage opportunities for practicing crucial conversations as the stronger in a particular skill coach the weaker within a safe environment. If the team members are secure enough, it could take the shape of a 360 degree feedback exercise. Work on a skill for a month or two, and then move on to another. Report results and progress to senior management, and model for the rest of the company.
I hope you choose the third option, to stay and try to influence change. These types of systems create an inward, competitive focus that can ruin a good company. Looking at other options and gathering information (on your own time) might educate you to the point of being well prepared when the right opportunity arises to suggest or help open discussion to a change. Asking questions to understand the reason for the change could also be helpful and would also identify the key concerns that an alternative system would need to address. Good luck!
Having worked for a company with a similar performance ranking system both as an employee and a manager, I witnessed and experienced the demoralization that occurred when a high-performing employee was ranked at the low end in order to accommodate the demands of the ranking system. As a manager, who did not support this system, I felt powerless at the time (10 years ago) to influence change. I do agree with the influencing options that you outlined, but how does a manager address the concerns of the employees who fell on the low end of the ranking scale for no reason other than “someone has to be there!”?
First of all, I would assume that when you are reviewing the employees, you have told them your true opinions (that the rating was not deserved but necessary). Otherwise it will spiral from feelings of “why keep trying if my rating is so low. I would also talk with other workers about this or these employees to see if your rating is close to what they think. Follow Dons suggestions. As to Marla’s question: Simply explain that you need to follow policy even if you don’t agree with it. Then state that “this rating was made following company policy” in the comments. I would also give them a separate letter with the positive feedback if they did an excellent job.
Joseph,
I also was a manager for years with a company which had a similar ranking system, and I had some of the same concerns about the system’s fairness. At the same time, I believe you are spot-on, at least as it relates to that company (and probably many others). Lots of managers convince themselves that “my team is superior to this arbitrary curve”.
There is an additional factor to mention. Very few companies, if any, can afford to pay their people as if 40-50% are top performers. The salary plan has to take the available $$, based on forecast business results, and divide them over the workforce. The pay scale for a 20-70-10 distribution is significantly different than a pay scale for 30-65-5 or whatever people are advocating. The result is that top performers would get less as the money is spread more widely, and then they feel under-appreciated and leave for better opportunities. A company has to determine what their average $$ distribution will be over the workforce. Then it CAN decide to have flexibility within individual units and make sure it evens out at the higher levels, but that gets back to the management discipline you referred to – it is often no better at the middle management level than at the lower level, which is why companies have to impose rigid policies to stay within their budgets.
Thanks for a great response. I read a book by Harvey-in which he attacks this rule. This normal distribution of performance is only possible if there is no interdependence of staff such that each persons performance is solely dependent on thier own effort. If you have a true interdependent team, almost everyone should be functioning at the same level with a few who dont respond to the team. I find the art of holding effective crucial conversations and creating safety in the team helps all to perfom at their best. I have been consistently rating everyone high and use examples to show that everyone can improve including so called high performers and low performers.
Joseph – I agree with Don that you may have left out a strategic element of “stay and influence”. In my extensive experience working with large and small companies, upper management will likely accept a deviation from the 70/20/10 rule, IF it errs on the side of results. So my suggestion – like Don’s – would be to ask each employee to self-assess their own 70/20/10. Certainly, it would be a great idea to compile a list of team-based improvements and work on them together. But I would also encourage the regular review and assessment of action plans for each employee to work on their individual improvements. For example, if an employee mentioned that they were weak in returning email on a timely basis, I as a manager would help that employee make an action plan, AND would check in weekly to review results and help readjust as needed. As you mention, the reason senior management imposes forced assessment plans is to get managers to do their job: to provide resources, perspective, direction, and motivation for the people who work for them. You are there to assist employees in achieving breakthrough performance, not to assess them out of existence. A plan like this could be the best thing that ever happened to your team! (Got lemons? Make lemonade.)
When you mentioned: “1. Invite study”, I thought you were going to show them how you develop people and why 70/20/10 doesn’t match your actual evaluations. I agree with looking at why it’s wrong, but use your own process and evalus as a model. Have them look closely at your team!
The issue of overall bonus compensation across the org is an issue, but should be tied to org improvement, and if the org improves a lot, that should go to those who contribute, and their should be a correlation between org performance and compensation.
Joseph poses a good question when he asks if you are being honest with yourself about the quality of your team and whether you are stepping up to crucial conversations.
Here’s an idea to stimulate your thinking on this subject. Suppose you had to pick your work team today. From your current roster, who would you pick? Your answer will generally fall into one of 3 categories. I would pick this person without reservation. I would pick this person with reservation. I would probably pass on this person and pick someone new.
Anyone who falls into the last 2 categories should probably not receive anything higher than a “Meets Expectations” rating. They are also owed a crucial conversation.
Joseph,
In a team of 5-20 people, it’s entirely possible that no one fits the needs improvement category. Delivering this rating to someone who does not deserve it qualifies as a crucial conversation in my mind. Pretending that they do deserve it, acting like you have no choice, and saying they are just being victimized by the company all seem somewhat unethical to me. I would (and have) refused to do it.
Joseph, how would you suggest we handle it with the employee?
Vernel
Vernel
Let me start out saying that I am not a manager nor I have much experience in HR, but I’d like to pose a question to the group. I look at this issue as a prioritization effort. Choosing between buying food or medicine when you are out of money is an extreme example. None of us like the idea of picking one over the other, but sometimes we have to. Even within the A team, where everyone is an over achiever, there are differences. In the Olympics you could be a great swimmer but never get a medal. To get the team to always aspire to be better and never settle or rest, don’t we need to continue to look up and push everyone up? Even if you are at the top of your game today, keeping that post is very hard and requires a lot of work. I am not sure if the 20/70/10 ratios are the best, but it is a lot easier than asking to rank employees according to performance, 1,2,3…etc. I do agree that this ranking makes a lot more sense for an individual sport and the risk involved for a team sport. So may be in team sports we need to rank within the team as well as the team as a whole. If we reward people for their individual performance as well as their overall team performance, maybe we can find the balance between team cohesiveness and continuous improvement. Thoughts?