Managers in organizations seem to be preoccupied with ranking people based on performance. It is beautifully displayed in a bell curve and this bell curve is then dissected into high – medium – low performers. Subsequently, diverse actions are taken from this exercise. Sounds about right?

Unfortunately, ranking people within an organization based on ‘performance’ is problematic on so many levels that it is mind-boggling to think how it ever came into being.

But what is actually wrong with it?

Okay, let’s take it from the top.

Performance in people is seen as the achievement of targets or KPIs – let’s ignore how these are set because it really doesn’t matter.
The big issue here is that performance has nothing to do with the achievement of indicators, i.e. targets, KPIs, no matter what you choose to call them. Performance is the behavior of a variable over time, performance is causal. Correlative measures are irrelevant for the measurement or management of performance. Measuring performance in people through indicators is even more problematic. People, as individuals, often have only very limited influence on the achievement of these indicators even if their achievement would indicate any measure of performance.
The actual achievement of most indicators is subject to a team effort, external influences, internal circumstances outside the scope of authority, or even plain manipulation of circumstance.
So the measurement of performance through indicators, even if we would take it as relevant, which it clearly is not, would be inherently unjust.
Let us further look at this bell curve business: dissecting the curve into high, middle, and low performers. Let’s assume for a moment that the measurement of indicator achievement really results in a bell curve, then mathematically all points under this bell curve are equal in performance. The arbitrary cutting of this bell curve into quantiles or similar, to represent differences in performance, is a) mathematically wrong, b) baseless, c) process management wise, you would be messing with a stable process, and d) equal to deliberately destroying your employee base as once you’ve done it once and took action, you consequently could do this at infinitum until you have one employee left.

Let’s take stock, we have an evaluation method that is objectively unjust and mathematically wrong.
And we rank our people according to that method. That ranking often is not just for statistical or other noble purposes but used as the basis for decisions on the allocation of money, promotion, and dismissal.
It becomes obvious that something here is not in the best interest of an organization in search of keeping good people or achieving sustainable high performance.

Fundamental
Okay, let’s assume for a moment, that we have found a just and accurate method to rank people based on their performance.
Then, this would be all right and desirable, wouldn’t it?
Because I would want to divide my people into low, medium, and high performers.

Sorry, but what on Earth for?

Internal competition?
The benefits of internal competition have been debunked long ago.
Internal competition serves no legitimate purpose and will destroy cooperation, teamwork, and operational excellence.

Remuneration?
The benefits of linking performance to pay or vice versa are an urban myth.
In order to achieve any kind of performance, it becomes necessary to remove remuneration and remuneration decisions once and for all from performance measurement and management – these two don’t mix.

Promotion?
Basing decisions about promotion on current performance is the basis of much evil.
Decisions on promotions are much better based on capabilities, competencies, and desire, not employee ranking.

Motivation?
Even if this ranking is objectively just, a ranking will achieve excellence destroying internal competition, and subsequently the opposite of motivation. The assessing manager/department will be viewed as unfair and colleagues will be perceived as a threat to one’s own wellbeing. Ranking employees against each other subsequently destroys not only motivation, but it also destroys cooperation, teamwork, engagement, and all chances to operational and organizational excellence this organization ever had.

Learning and Development?
Ranking people against each other gives no legitimate or even useful information about L&D needs of anyone for anybody. L&D requirements are better and legitimately developed out of competency, capability, and process management, plus similar individual response loops as well as organizational learning requirements, not competitive rankings.

Dismissal Decisions?
Basing dismissal decisions on quasi performance ranking, i.e. the lowest quantile will be slated for eventual dismissal, will make the organization extremely vulnerable to industrial tribunals and lawsuits. Not a very clever thing to do.

Performance Management?
Ranking people against each other gives no legitimate or even useful information for the management of performance. Performance management is better and legitimately based on competency, process management, and capability response loops, not competitive rankings.

So, there we are.

Ranking your people on performance serves no legitimate or useful purpose other than to destroy motivation, cooperation and teamwork, and any chance of achieving sustainable high performance.