Do a good job - or even a very good job - but get fired anyway. That's a risk when you work for a company that uses a "stack ranking" performance review system. It's known as "rank and yank" because managers are supposed to get rid of their
lowest-ranked performers every year, even if those performers have done well, just not quite as well as some of their colleagues. The New York Times reported this weekend that Amazon uses just such a system, one of many management practices the Times described to paint a portrait of a "bruising" workplace at the company. Specifically, the Times said that Amazon
(AMZN) "manages out a pre-determined percentage of its workforce every year." In an email to CNNMoney, an Amazon spokesman said, "That is not accurate. We would never want good performers to leave." The spokesman would not say more about its employee evaluations. Some well-known users of
rank-and-yank systems in the past, including GE and Microsoft, have abandoned the practice. But it's still used by an estimated 21% of
Fortune 500 and mid-sized global firms, according to CEB, a firm that advises corporations on best practices. Related: Amazon fights back against accusation of 'brutal' worker treatment Unsurprisingly, rank-and-yank systems are pretty unpopular with employees. And there is serious doubt among human resource experts that they're the best way to drive a company's
performance. Essentially they impose a "forced distribution" system on employee performance, according to Nathan Sloan, a principal in Deloitte Consulting's Human Capital Practice. "If a company is hiring the best of the best out of the best schools, would we say 60% of its employees are average? That's what forced distribution says," Sloan explained. In other words, stack ranking grades on a curve. You may have done a good job and even accomplished more than you did the
year before, but this year someone else may have done just that little bit more. Related: Microsoft kills employee-ranking system That can be demoralizing to otherwise great employees and it
can pit colleagues against each other, even when they're supposed to work collaboratively. "It may get people's attention focused on where they fit in the ranking rather than on creating long-term value for the customer and the shareholder," said organizational psychologist Liane Davey of Knightsbridge Leadership Solutions. She described the practice as more of a "Hunger Games" approach to work. Increasingly, companies are moving away from numeric ratings in evaluations.
And some are de-emphasizing annual reviews or ditching them altogether in favor of more frequent and informal evaluations that emphasize more of a mentoring approach. The idea: By encouraging and coaching good performance and playing to workers' strengths, the feedbackwill do a better job driving bottom-line results. "High-potential young employees want regular feedback and career progression advice, not just 'once and done' reviews," according to a 2015 Deloitte
study. CNNMoney (New York) First published August 17, 2015: 5:27 PM ET Moral Awarness
The first step needed to explain why an authority acts ethically is moral awareness, which occurs when an authority recognizes that a moral issue exists in a situation or that an ethical code or principle is relevant to the circumstance.86 Ethical issues rarely come equipped with "red flags" that mark them as morally sensitive.87 Sometimes authorities act unethically simply because they don't perceive that moral issues are relevant in a given situation, so the
ethical merits of certain actions are never debated. For example, let's say you own a clothing retailer that specializes in fashion-forward styles at low prices. You know that Diane von Furstenberg's styles are hot this year, and your buying team just discovered a vendor that makes cheap knockoffs of those styles. Do you buy clothes from that vendor and hang them on your racks? Is there an ethical issue at play here? On the one hand, you might be tempted to say that imitation is the way that
fashion trends spread—that the "gurus of style" expect their products to becopied. Besides, a skirt is a skirt, and knockoffs are part of the game in a lot of businesses. On the other hand, Diane von Furstenberg's styles are her intellectual property, and the people who work for her label put a great deal of time, effort, and talent into their clothes. It turns out this scenario has played out with Forever 21, the Los Angeles-based specialty retailer.88 More than 50 labels have sued Forever 21
for copying their clothes, including Diane von Furstenberg, Anna Sui, and Anthropologie. "Their design is swathed in mystery," notes one expert on copyright law. "But it probably looks a bit like a crime scene, with the chalk outline of the garments they're copying."89 Such charges are difficult to prove because U.S. copyright law protects original prints and graphics, not actual designs. Forever 21 wound up settling those lawsuits, noting that the company ultimately has to trust the integrity
of its clothing vendors. Indeed, one executive notes that she chooses from among 400 items a day, spending only about 90 seconds to review a piece. Moral awareness depends in part on characteristics of the issue itself, as some issues have more built-in ethical salience than others. A concept called moral intensity captures the degree to which an issue has ethical urgency.90 As described in Table 7-3, moral intensity is driven by two general concerns, both of which have more specific facets.91
First and foremost, a particular issue is high in moral intensity if the potential for harm is perceived to be high. An act that could injure 1,000 people is more morally intense than an act that could injure 10 people, and an act that could result in death is more morally intense than an act that could result in illness.92 Second, a particular issue is high in moral intensity if there is social pressure surrounding it. An act that violates a clear social norm is more morally intense than an act
that seems similar to what everyone else is doing. In the case of Forever 21, moral intensity might seem low because selling cheap knockoffs benefits its customers, and interactions with customers are much more common and salient than interactions with designers. Moral awareness also depends on the way authorities observe and perceive the events that happen around them. A concept called moral attentiveness captures the degree to which people chronically perceive and consider issues of morality
during their experiences.93 Research in cognitive psychology shows that people pay more attention to stimuli that are significant, vivid, and recognizable. Authorities who are morally attentive tend to view the world through a lens of morality, giving ethical issues a particular significance, vividness, and recognizability. That lens colors the way they identify and interpret information and also shapes the way they analyze and reflect on it. Morally attentive people are likely to report that
they face several ethical dilemmas in a typical day, that many of the decisions they face have ethical consequences, that they regularly think about issues of morality, and that they enjoy pondering moral issues. In the case of Forever 21, it may be that top management was not morally attentive enough to recognize that buying copies of more expensive designs represented an ethical issue. That premise may make some sense, given that Forever 21 has had other ethical struggles. It has settled
multiple lawsuits with garment workers' groups alleging unfair business practices and wage violations. The company claims it didn't know about the conditions in its suppliers' factories, but lawyers maintain that the company squeezes suppliers so much on price that they are partially responsible for the violations. Some business schools are taking an unusual approach to increasing moral awareness on the part of their students. New York University, the University of California at Berkeley,
Purdue, and Penn State have invited convicted white-collar criminals to speak to students about their unethical actions, as well as the consequences of those actions.94 For example, Walter Pavlo Jr. earns up to $2,500 a visit to detail the $6 million money-laundering scheme he perpetrated at MCI. The 40-year-old served two years in federal prison and is now divorced, unemployed, and living with his parents. Such testimonials can highlight the potential harm involved in unethical actions while
also making students a bit more attentive to ethical issues. Although some professors consider the payment of convicted felons to be an ethical issue in its own right, part of what Pavlo earns goes to make restitution for his crimes. One professor at Penn State summarizes, "Here's a real person telling students what happened to his life. I don't think there's any substitute for that." Moral Judgement
Some authorities may recognize that a moral issue exists in a given situation but then be
unable to determine whether a given course of action is right or wrong. The second step needed to explain why an authority acts ethically is therefore moral judgment, which reflects the process people use to determine whether a particular course of action is ethical or unethical.96 One of the most important factors influencing moral judgment is described in Kohlberg's theory of cognitive moral development. 97 This theory argues that as people age and mature, they move through various stages of
moral development—each more mature and sophisticated than the prior one. All else equal, authorities who operate at more mature stages of moral development should demonstrate better moral judgment. You might wonder how the moral development of a person can be measured. One approach is to give people a series of ethical dilemmas like the one in Table 7-4, then ask questions to gain insights into their decision-making process.98 According to Kohlberg, people begin their moral development at the
preconventional stage.99 At this stage, right versus wrong is viewed in terms of the consequences of various actions for the individual. For example, children seek to avoid punishment for its own sake, regardless of any concern about moral order. Similarly, children obey adults for its own sake, regardless of the respect or wisdom shown by those adults. Over time, the desire to obtain pleasure and avoid pain expands to the formation of "you scratch my back, I'll scratch yours" sort of exchanges.
Such relationships remain self-interested however, with little concern for loyalty, gratitude, or fairness. In the case of the ethical dilemma in Table 7-4, viewing question 1 as one of the most important issues would signal preconventional thinking. As people mature, their moral judgment reaches the conventional stage.100 At this stage, right versus wrong is referenced to the expectations of one's family and one's society. At first, people seek the approval of friends and family members,
conforming to stereotypes about what's right. Question 2 in Table 7-4 reflects this sort of priority. Over time, people come to emphasize the laws, rules, and orders that govern society. Concepts such as doing one's duty and maintaining the social order come to be valued for their own sakes. Question 3 reflects this level of moral sophistication. Research suggests that most adults find themselves at the conventional stage.101 That positioning is relevant to organizations because it shows that
moral judgment can be influenced by organizational policies, practices, and norms. The most sophisticated moral thinkers reach the principled (or postconventional) stage.102 At this stage, right versus wrong is referenced to a set of defined, established moral principles. Research suggests that fewer than 20 percent of Americans reach this principled stage.103 Philosophers have identified a number of moral principles that serve as prescriptive guides for making moral judgments, with some of the
most influential shown in Table 7-5. Rather than viewing a given principle as the single, best lens for making decisions, it's better to view the principles as a prism for shedding light on a given situation from a number of different angles.104 The consequentialist principles in Table 7-5 judge the morality of an action according to its goals, aims, or outcomes (these principles are sometimes termed "teleological," after the Greek word for "goal").105 Question 4 in Table 7-4 reflects these
sorts of concerns. The nonconsequentialist principles judge the morality of an action solely on its intrinsic desirability (these principles are sometimes termed "deontological," after the Greek word for "duty," or "formalist," due to their emphasis on formalized codes and standards). Viewing question 5 as one of the most important issues in the dilemma would signal nonconsequentialist thinking. Returning to the Forever 21 example, a utilitarian analysis would focus on whether the "greatest
happiness" was created by giving their customers access to cutting-edge designs at cheap prices, even if doing so harmed the profitability of the labels. An egoistic analysis would focus on whether buying "copycat" clothes from vendors boosted the short-term and long-term interests of the company. Is selling those clothes vital to the company's mission, or are the risks to the reputation and brand of the company severe enough that a change in course is warranted? Although the takeaways from
those analyses may be debatable, the judgment of the three remaining principles seems clearer. From the perspective of the ethics of duties, society would clearly be harmed if all companies copied the intellectual property of their competitors, though some customers would likely endorse the company's practices. From an ethics of rights perspective, Forever 21's actions can be viewed as disrespecting the designers' rights to consent and expression (and justice, given that they were offered no
compensation for the use of their intellectual property). Finally, an analysis using virtue ethics would suggest that Forever 21's actions lacked the virtue of honesty Moral Intent
Assuming that an authority recognizes that a moral issue exists in a situation and possesses the cognitive moral development to choose the right course of action, one step remains: The authority has to want to act ethically. Moral intent reflects an authority's degree of commitment to the moral course of
action.106 The distinction between awareness or judgment on the one hand and intent on the other is important, because many unethical people know and understand that what they're doing is wrong—they just choose to do it anyway. Why? Sometimes situational factors encourage people to go against their moral convictions. For example, organizations may possess unethical cultures, where violations of moral codes become the rule rather than the exception (see Chapter 16 on organizational culture for
more discussion of such issues).107 As another example, economic pressures from assigned goals or specific incentives can encourage people to set aside their moral judgment, at least for a time.108 What explains the ability of some people to resist situational pressures and stay true to their moral judgment? One factor is moral identity—the degree to which a person self-identifies as a moral person.109 Our self-concepts have a number of components to them: We may define ourselves by what we do,
where we come from, what our family status is, or what cultural or ethnic groups we belong to. People with strong moral identities define themselves as compassionate, generous, honest, kind, fair, and hardworking. Their emotional well-being and sense of self is wrapped up in living up to those virtues. Moreover, the actions they take in their daily life—from the things they buy, to the hobbies they have, to the groups they join—are viewed as symbols of those virtues. Research suggests that
people with strong moral identities volunteer more for charitable work and donate more to charity drives.110 Research also suggests that moral identity "moderates" the effects of moral judgment on ethical behavior. Recall that in the language of theory diagrams, moderators affect the strength of the relationship between two variables. For example, one study shows that managers who emphasize specific ethics principles are less likely to engage in unethical behaviors (e.g., calling in sick to take
a day off, ignoring others' unethical actions), but only when they define themselves as a moral person.111 When morality is not an important piece of their identity, their moral principles have no relationship with their actual behavior. For an example of low moral identity in the fast food industry, see our OB on Screen feature. This leads to Ethical Behavior
What is the rank and yank system?
What is rank and yank? According to The Performance Management and Appraisal Resource Center, “rank and yank” is a term used to describe when companies rank their employees against one another, then terminate the employees who are dead last in the rankings.
81 Estimates are that about 20 percent of Fortune 500 companies adopted some variant of Welch's forced ranking system, also known as "rank and yank" or the "dead man's curve."82 However, there are some important limitations to this system of performance management.
Who created the rank and yank system?
Rank-and-yank performance evaluations have long been controversial. Popularized in the 1980s by Jack Welch at General Electric Co., the practice entails grading employees against one another and eliminating those deemed poor performers.
Ranking method is a method of performance appraisal. Ranking method is the oldest and most conventional for of method. In this method all employees are compared on the basis of worth. They are ranked on the basis of best to worst.
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