Forced distribution rating systems: When does “rank and yank” lead to adverse impact?

Abstract

Despite widespread use of forced distribution rating systems (FDRSs), the potential for this performance appraisal method to lead to adverse impact (AI) in a layoff context has yet to be examined empirically. Thus, the current study uses a Monte Carlo simulation to examine the likelihood of encountering AI violations when an FDRS is used in the context of layoffs. The primary research questions included an examination of how AI violations change depending on the definition of the employment action (i.e., retention vs. layoff), the length of the repeated layoffs, and whether or not laid off employees are replaced each year. The current study also examined the impact of the size of the organization, the percentage of the workforce laid off, and the type of AI calculation method used on the likelihood of AI violations. Results suggest that defining the employment action as layoffs (rather than as retentions) may result in a greater likelihood of AI violations, and AI violations are likely to peak in the 1st year of use. Further, replacing laid off employees may result in higher levels of AI over time as compared with not replacing layoffs. Additionally, the greatest risk for AI occurs when the organization size is large (i.e., N = 10,000) and when certain AI calculation methods are used. Results are discussed in terms of their practical and legal implications for organizations.

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Stereotype Threat in Organizations: Implications for Equity and Performance

“…For example, forced-distribution performance evaluation systems clearly convey that not all can succeed (i.e., some people are rated in the bottom 10%) and often set up an environment of needing to continually prove one's worth (Blume et al 2009, Schleicher et al 2009 Changes may still occur before final publication online and in print management systems that are not well connected to employee development processes may convey a fixed mindset (Frear & Paustian-Underdahl 2011). Indeed, simulation research has shown that "rank and yank" systems such as forced distribution can be associated with disproportionate numbers of minority-group members receiving lower evaluations under certain conditions (Giumetti et al 2014). Although organizational mindsets do not explicitly reference social group differences, the exclusionary message of the fixed mindset can trigger identity threat for people who belong to groups whose ability is impugned by negative stereotypes.…”

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