{"id":2225,"date":"2010-02-10T18:59:09","date_gmt":"2010-02-11T02:59:09","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=2225"},"modified":"2010-02-10T19:04:17","modified_gmt":"2010-02-11T03:04:17","slug":"aig-installs-a-forced-ranking-incentive-plan","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/aig-installs-a-forced-ranking-incentive-plan\/","title":{"rendered":"AIG installs forced-ranking incentives"},"content":{"rendered":"

AIG’s CEO Robert Benmosche has implemented a forced-ranking system<\/a> whereby people get a grade from 1 (you’re a star) to 4 (you suck).\u00a0 Only 10 percent of the people can be stars.\u00a0 20 percent can get a 2 (you’re good).\u00a0 50 percent get a 3 (you’ll do), and 20 percent must get a 4 (fail).\u00a0 The amount of variable pay one receives would, of course, depend on their ranking.<\/p>\n

Some years back, Benmosche heard that GE did this, liked the sound of it, and implemented it at MetLife when he was the boss there.\u00a0 (GE used to tell their bottom 10 percent that they had to leave the firm.\u00a0 AIG can’t afford that attrition, having just gotten rid of its top 10 percent<\/a> via a government-approved bonus scheme.)<\/p>\n

At MetLife, some staffers there “hated” the system, says Mr. Benmosche.<\/em><\/p><\/blockquote>\n

Well, there are three reasons staffers might hate a forced-ranking system:<\/p>\n

– Obvious one:<\/strong> People hate hearing that they aren’t stars, even slackers who are obviously not stars, but have been able to hide behind squishy, Lake Wobegon<\/a> ratings (everybody is above average).\u00a0 Benmosche doesn’t want slackers to hide anymore.\u00a0 Fair enough.<\/p>\n

– Less obvious, unless you’re been there:<\/strong> People hate to give honest feedback to anyone who is not a star.\u00a0 Figuring out which seven of your ten people are going to get less than a 2 is a difficult intellectual exercise.\u00a0 Actually giving those seven people the news can be excruciating, especially for the inevitable borderline cases.\u00a0 Tears are not uncommon.<\/p>\n

– Frighteningly subtle:<\/strong> Forced rankings can kill teamwork.\u00a0 You’re basically letting people know that if your cube-mate gets a 1 or a 2, you’re highly unlikely to get rated well.\u00a0 You might as well give people swords and shields and throw them into a cage.<\/p>\n

A forced-ranking system can change a corporate culture and “help drive consistency across large organizations,” says Ravin Jesuthasan, leader of the talent-management consulting practice for Towers Watson.\u00a0 [Towers Watson did not implement this system at AIG.]
\n<\/em><\/p><\/blockquote>\n

A powerful incentive to make other people look worse than you can certainly change a corporate culture.\u00a0 People will step on each other to get to the top.\u00a0 Managers within divisions will furiously fight to keep their quiet, but competent people from getting trashed in a political “rank and yank” debate.\u00a0 It can get ugly.<\/p>\n

The “consistency” benefit is not just the hobgoblin of little minds<\/a>.\u00a0 It’s hard in a large organization to track your stars across divisions when everyone busts the curve on evaluating their own people.\u00a0 But the key to doing this better is not to further politicize your organization; you should look for ways to de-politicize it by, among other things, enhancing rewards for teamwork.<\/p>\n

None of this easy.\u00a0 If it were, Hodak Value<\/a> would have few buyers for its uncanny insight, and Towers Watson would have few buyers for its voodoo<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

AIG’s CEO Robert Benmosche has implemented a forced-ranking system whereby people get a grade from 1 (you’re a star) to 4 (you suck).\u00a0 Only 10 percent of the people can be stars.\u00a0 20 percent can get a 2 (you’re good).\u00a0 50 percent get a 3 (you’ll do), and 20 percent must get a 4 (fail).\u00a0 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-2225","post","type-post","status-publish","format-standard","hentry","category-executive-compensation"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2225","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=2225"}],"version-history":[{"count":5,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2225\/revisions"}],"predecessor-version":[{"id":2230,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2225\/revisions\/2230"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=2225"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=2225"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=2225"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}