Why Employee Ranking Can Backfire

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Big Data has made it possible to measure employee performance more thoroughly than ever. But two recent studies offer a warning: Be careful about how you deploy that data.

Many managers assume that distributing a ranking of their employees’ performance is an effective motivational tool, said Iwan Barankay, an associate professor at the Wharton School at the University of Pennsylvania. The idea is that lower-ranking employees will strive to improve, while higher-ranking ones will work to maintain their edge.

Professor Barankay sought to test this assumption in a study of 1,500 furniture sales workers that he conducted over three years in North America. One group of sales workers was shown how their sales ranked compared with their colleagues. Another group was not shown a comparison, but only their individual results.

Professor Barankay found that the sales representatives who did not know how they ranked achieved higher subsequent sales than those who were aware of their comparative ranking. The results of the workers who had received high rankings neither improved nor worsened.

Human nature combined with simple math caused the lower-ranking workers to falter, according to Professor Barankay. Most people optimistically assume that they are above average in their performance, he said. But real life is not Lake Wobegon, and most people, when measured against one another, will inevitably rank as average or below average. For these people, seeing their rank is demoralizing, causing their performance to wilt.

In another study of employee rankings, a group of researchers analyzed the fuel use and driving behavior of truck drivers. Some of the truck drivers had undergone a program known as lean management that was intended to build a more team-oriented environment. Another set of drivers had not participated in the program. As in the study of the sales workers, some drivers were shown only their individual performance while others were shown how they ranked alongside their colleagues.

Even though management explicitly stated that the data was intended to make the company safer and more efficient and would not be used to evaluate individual performance, the drivers in the team-based environment still viewed the ranked data with suspicion and resentment, said Steven Blader, an associate professor of management and organizations at New York University. (He wrote the study with Claudine Gartenberg of New York University and Andrea Prat of Columbia University.) The drivers feared that the company was trying to pit employees against one another. But the truck drivers who had not undergone the program were spurred to higher performance by the rankings.

Studies on employee rankings might have implications for corporate wellness programs, Professor Barankay said. Some employers have explored the idea of introducing friendly competition among their workers in the interest of promoting healthy behavior and keeping medical costs down. One example is equipping employees with pedometers and then showing a table of how many steps they have taken relative to others. If the demoralization factor that Professor Barankay found takes hold, a program like this could backfire.

“Competition in a collaborative environment doesn’t work well,” Professor Blader said. In team-based environments, it may be better to inform each employee of his or her performance individually rather than as part of a group ranking. But if a company’s culture is self focused rather than team focused, publicizing rankings may be effective, he said.

Via New York times

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