Rank and Yank / Forced Distribution–Dick Grote: Giving Advice on Bad Reviews—Agree with Poor Rating

[Note:  This blog has covered Dick Grote’s wicked “rank and yank” program previously.]

Dick Grote has authored another article on “rank and yank,” “What to do when you think your performance review is wrong” (published in the Harvard Business Review (March 7, 2017)). This time the defense of the system is indirect—informing the recipient of a “C-Bucket” rating to accept it. Indeed, as Grote states in the article, nothing the employee argues against the rating is likely to change it.

Indeed that is true in the rank and yank process. The decision made in the calibration meeting for managers is final. Those in the C-Bucket receive negative ratings in order to convince them to quit.

Bucket (rank)

Percentage [“vitality curve”] (amounts can be adjusted)

Effect

A

20

Lavish rewards, encouragement

B

70

Little to paltry increase

C

10

Pressure to quit, firing

Because of the calibration meeting, where managers rank employees, changing a rating means changing it for others, given that rank and yank is a rigid, inhuman, and employee-abusive system.

rank_yank
Artist: Michael Sloan

A key Grote quote:

“But what if a company’s forced ranking procedure, honestly and objectively done, reveals that the blacks or women or disabled employees just aren’t as talented as the white ones? Should they do what some Harvard professors are said to do and award A’s to all the blacks, just to keep them from squawking?” (Grote, page 4 (a quote from a previous post). (Note: Consider this statement from Grote with the ever-present and persistent legacy of slavery and Jim Crow subjugation in the United States of America.)


Grote offers three options for an employee facing an unacceptable performance rating:

  • Accept the rating (Grote preferred).
  • Disagree with the rating (Grote disfavored this option because the manager is invested in the rating, errors look bad on the manager (rather interesting an aggrieved employee must defend unacceptable management behavior, while the employee is expected to satisfy any whim of the manager).
  • Quit (Grote advises for people who get c-bucket ratings to go on a “decision-making” leave to decide either to attempt to fulfill the impossible to meet expectations or quit. The resignation of the employee is the ultimate goal.)

While Grote thinks managers should be given absolute authority in performance appraisal, the personnel record is the property of the employee. The employee has the right to state what is allowed in that property; hence, the reason why employees must sign reviews. The company merely has possession of the employee’s property—the contents of the file.

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Department of Defense: General Schedule May Have a Long Tenure, But Still Effective; Dick Grote-Style Pay-for Performance is a True Failure

Artist: michael sloan
Artist: michael sloan

It seems that the idea of pay for performance-no matter the numerous failures (documented, in part, in this blog)-has yet again reared its failed head at the U.S. Department of Defense (DoD). Pay for performance is to replace an “aged” General Schedule system, the DoD proponents posited. A system’s age is irrelevant; whether it functions in a way that those it applies to can accept is more important.

The DoD proponents propose undemocratic, unfair, and dictatorial pay-for-performance policies that betray the democratic republic foundations of the country. In addition, the DoD proponents should never forget that the employees are also United States citizens and permanent residents and taxpayers and that agencies have authority through the consent of U.S. citizens and residents.

Bucket (rank) Percentage (amounts can be adjusted) Effect
A 20 Lavish rewards, encouragement
B 70 Little to paltry increase
C 10 Pressure to quit, firing

The DoD, and their bosses in the Congress and in the Executive Branch, should tread carefully in any move to alter the General Schedule unless the replacement can be well accepted as the General Schedule. Pay-for-performance systems are at their foundation unfair, subject to management abuse and manipulation without equivalent accountability for those managers, and render the employee powerless and subject to management ambush and destruction of employee livelihoods.

Dick Grote’s Forced Ranking Amazon.com [New York Times article] Department of Defense [Washington Post column by Joe Davidson]
Anytime Feedback Tool-allows co-workers to send feedback to one’s manager without the targeted employee’s knowledge. Jeff Bezos, chief executive officer of Amazon, is an investor in Workday, which seeks to bring this “gem” to other organizations which purchase it. “Force of the Future launches a strong attack on the General Schedule, saying it “is wholly inflexible and ill-suited to attract critical skills or motivate high performers.” In the name of fairness, “the promotion system primarily rewards time in grade,” the document adds, “instead of identifying, rewarding, and motivating high performers, the GS system rewards mediocrity.” ” [Note: Dick Grote uses similar language. http://www.groteconsulting.com/the-rationale-for-forced-ranking/]
Manager sets tough objectives and expects the employee to figure out how to satisfy the manager’s expectations “Molly Jay, an early member of the Kindle team, said she received high ratings for years. But when she began traveling to care for her father, who was suffering from cancer, and cut back working on nights and weekends, her status changed. She was blocked from transferring to a less pressure-filled job, she said, and her boss told her she was “a problem.” As her father was dying, she took unpaid leave to care for him and never returned to Amazon.

“When you’re not able to give your absolute all, 80 hours a week, they see it as a major weakness,” she said.”

“Officials want managers to have more authority so they can “divest low performers” —  in other words, fire them. “The current performance management system does not effectively hold low performers accountable, offering few negative consequences when an employee falls short of expectations, and gives supervisors unwieldy options for intervening,” the DOD proposal says.”
Callibration meeting Each year, the internal competition culminates at an extended semi-open tournament called an Organization Level Review, where managers debate subordinates’ rankings, assigning and reassigning names to boxes in a matrix projected on the wall. In recent years, other large companies, including Microsoft, General Electric and Accenture Consulting, have dropped the practice — often called stack ranking, or “rank and yank” — in part because it can force managers to get rid of valuable talent just to meet quotas.

Preparing is like getting ready for a court case, many supervisors say: To avoid losing good members of their teams — which could spell doom — they must come armed with paper trails to defend the wrongfully accused and incriminate members of competing groups. Or they adopt a strategy of choosing sacrificial lambs to protect more essential players. “You learn how to diplomatically throw people under the bus,” said a marketer who spent six years in the retail division. “It’s a horrible feeling.”

Unique to Discipline Without Punishment is the final step before an employee’s termination – the Decision Making Leave. The employee is suspended for a day with full pay. On this day he must make a final decision: either solve the problem and commit to fully acceptable performance, or quit and find more satisfying employment somewhere else. Performance Improvement Plan--“confidential” and among other expectations of the PIP is that the responsibility for bringing performance to the acceptable level rests with the targeted employee. “It would allow top officials to suspend an employee without pay. They would have 30 days to prepare a written statement of specific charges, but the employee would have just seven days to respond. That time discrepancy is one example of the plan’s power shift.”

Civil Service Reform: Current System Not Working; Move to New System Unwise

There are calls to reform the civil service (Partnership for Public Service), but the existing civil service is not functioning properly. A number of events urges better implementation of the current civil service and caution about further strengthening authority to an unaccountable management class.

3893340-handless-facepalm

Below is a table of several topics that demonstrate that much needs to be improved under the current rules before thinking of moving to new, untested civil service system.

Civil Service Event Coverage Comment
Artis v. Bernanke, employment discrimination case at the Federal Reserve Board https://alexwdc.wordpress.com/?s=artis 18 year duration for this case represents systemic failure.
Use of forced distribution at the Federal Reserve Board https://alexwdc.wordpress.com/?s=federal+reserve
Partnership of Public Service argument for civil service reform https://alexwdc.wordpress.com/?s=partnership Group envisions economic punishment of no raises (or self-firing) in its format for forced distribution.
Merit Systems Protection Board and methods to address so-called poor performance Washington Post: http://www.washingtonpost.com/blogs/federal-eye/wp/2015/08/06/the-top-five-ways-federal-managers-fail-to-fire-their-low-performers/ Poor performance lives in ambiguity; MSPB does not even attempt to define the term used to damage or end careers.
Commerce GS-15 manager alleged of several incidents of misconduct Washington Post: http://www.washingtonpost.com/blogs/federal-eye/wp/2015/09/02/commerce-official-let-her-kids-watch-porn-on-federal-computers-then-told-investigators-she-saw-nothing-wrong-with-it/ Commerce Office of Inspector General report: https://www.oig.doc.gov/OIGPublications/OIG-14-0153.pdf
Fired civil servant who filed complaints with newspaper, his congressional representative and staff, and nonprofit group, shoots and kills security guard and himself Washington Post: http://www.washingtonpost.com/blogs/federal-eye/wp/2015/08/27/federal-employees-and-contractors-face-danger-even-death-just-doing-their-jobs/
Diversity and inclusion issues at the federal financial regulatory agencies https://alexwdc.wordpress.com/?s=diversity

https://alexwdc.wordpress.com/?s=cfpb

In general, the situation is grim.
Non-civil-service event but informative–abusive work environment at Amazon.com. https://alexwdc.wordpress.com/?s=amazon

The New York Times: http://nyti.ms/1ISY0xv

The New York Times: http://nyti.ms/1zoKGPy (Supreme Court rules that Amazon does not have to pay employees for time spent in warehouse security lines after end of shift.)

Salon: http://www.salon.com/2014/02/23/worse_than_wal_mart_amazons_sick_brutality_and_secret_history_of_ruthlessly_intimidating_workers/

Eye-opening articles

Dick Grote, Forced Distribution, and the EEOC Compliance Manual: Forced Distribution Must Show Compliance with All Civil Rights Laws and Regulations

Forced Ranking, its main apologist is Dick Grote, is a blunt management tool, one that does not work in an imperfect world. When imperfect human beings, named as managers, deign themselves to be perfect judges of “performance” by virtue of their position and power over other human beings, the result must be tragedy. See, for example, the Vanity Fair article on Microsoft or read the many articles on the failures of Enron.

This tragedy is compounded with one of the United States of America’s great shames and weaknesses–chattel slavery of African Americans and all of the negative results visited on those human beings considered as mere property and their descendants. The United States has barely started the recovery process on this indelible stain on the society and its governmental institutions, yet careful and conscientious observers witness consistent backsliding on true equal opportunity. Such weakness is magnified greatly with reckless use of forced distribution, with all of the negatives of the terrible procedure, such as

  • being emotionally abused through unchecked abuse of power,
  • finding new paying work,
  • having to explain the firing in neutral terms repeatedly in interviews with potential employers, and
  • losing access to money to pay for life’s necessities (food, shelter, and clothing) for oneself and his or her family.

All of the bulleted items (above) are thrown onto the target (the so-called poor performer, c-bucket employee) who does not know of the extent of the management’s wicked actions in “calibration” meetings.

Grote, in his writings (analyzed on this blog) on forced distribution, never directly considers the Equal Employment Opportunity Commission’s Compliance Manual and its effect on the use of forced distribution in the workplace. Obliquely, there is one example, that I contrast with an example from the EEOC’s Compliance Manual (below). Employers must be aware, however, that all aspects of processes affecting employees must be without bias.

Dick Grote Quote Equal Employment Opportunity Compliance Manual
“But what if a company’s forced ranking procedure, honestly and objectively done, reveals that the blacks or women or disabled employees just aren’t as talented as the white ones? Should they do what some Harvard professors are said to do and award A’s to all the blacks, just to keep them from squawking?” (Grote, page 4 (a quote from a previous post)).

(Note: Consider this statement from Grote with the ever-present and persistent legacy of slavery and Jim Crow subjugation in the United States of America.)

2. Performance Evaluations

Performance evaluations frequently serve as the basis for numerous other employment decisions, such as pay, promotions, and terminations. They should be unaffected by race bias.

EXAMPLE 23 PERFORMANCE EVALUATIONS

Daniel is a customer service representative, and the only African American in his unit. Until recently he has received uniformly stellar performance ratings, received performance awards, and earned a good reputation among his customers and colleagues.

Things began to change, however, when a new supervisor was assigned a year ago to manage his unit. While Daniel had long been rated one of the best employees, the new supervisor began rating Daniel as below average, which has affected Daniel’s quarterly bonuses.

He files a charge alleging race discrimination. A review of the performance evaluations of Daniel and others in his unit reveals that while Daniel’s overall performance rating has dropped markedly, the ratings of his counterparts have gone up. Significantly, on the most objective part of his performance evaluation – “quantity of results,” which measures the number of accounts serviced – Daniel was rated below average when in actuality he serviced more accounts than persons with higher ratings in this performance category. In addition, there is evidence that the supervisor undermined Daniel’s professional standing with customers – for example, by taking over meetings Daniel was supposed to lead, and refusing to correct a customer’s clearly mistaken belief that Daniel was responsible for an error. This treatment is markedly different than that of Daniel’s colleagues.

The investigation reveals no evidence of a nondiscriminatory reason – such as a pure personality clash (i.e., one not rooted in the alleged bias)(147) – that explains Daniel’s treatment. There is reasonable cause to believe Daniel’s performance evaluations, and thus his pay, were racially discriminatory.(148)

Federal Reserve Board (OIG Audit 2015-MO-B-006): Performance Ratings Differences Wrongly Diminished; Board’s New Performance Management Approach May Be Based on Grote Approach and Fierce Conversations; Glassdoor.com Review Discussed

I have reviewed a report by the Office of the Inspector General (OIG) for the Federal Reserve Board (Board) [The Board Can Enhance Its Diversity and Inclusion Efforts, Audit Report 2015-MO-B-006], and I am disappointed with the weakness of investigatory probing in the part of the report discussing the Board’s performance management policy. Specifically, I question the independence of the OIG when the OIG is following the Board’s performance management policy, yet the OIG does not describe the program in its audit report.

Moreover, the position of the Board’s Chief Operating Officer, Don Hammond, does not inspire confidence. Rather than addressing any signs of unfair and inequitable workplace practices, he makes arguments to defend the status quo. A status quo that includes Artis v. Bernanke (or Yellen) and Robert Auerbach’s observations.

In addition, Mr. Hammond focuses on job level measures, yet ignores that the Board’s policy is implemented on an agency level (in 2011-2013 and after that period). As such, the agency level measures (between Whites and African Americans as well as between Whites and Asians) are relevant measures and need to be further studied and addressed.

Statement of Don Hammond, Federal Reserve Board Chief Operating Officer

Glassdoor.com Review

With respect to the more relevant job level analysis [performed by an independent consultant, see Appendix E of the OIG audit report], the independent consultant concluded that there is no trend of statistically significant differences between White and African American performance ratings when the data are analyzed at the job level. (OIG report, page 100 (carryover paragraph)) (Emphasis (in bold) by blog author.)

[Author’s note: However, the independent consultant did find statistically significant differences at the agency level between Whites and African Americans and between Whites and Asians. (OIG report, Appendix E, page 90 (third full paragraph))

Review submitted 24-August-2013:

I have been working at Federal Reserve Board full-time (more than 3 years)

Doesn’t Recommend Neutral Outlook Disapproves of CEO

Pros

Prestige (for what it’s worth), adjacent to National Mall, OK cafeteria, annual leave, insurance (health, dental, vision), raises available (but if you are not one of the 20% “high performers”, you will tread water economically with low raises with 70% of the staff at the “commendable” (nice way of saying average) level.)

Cons

Performance evaluations (that is, the dreadful so-called PMP) use the forced distribution, or “rank and yank” method. Google it; forewarned is forearmed. A set percentage are given bad reviews, with encouragement to quit. The internal webpage shows no one gets below commendable; do not believe it. The entire performance evaluation system is a true insult to workers who bravely try to meet impossible-to-satisfy expectations. Again, my fellow human beings–beware.

[To employees (current and future): As low-level managers will be taking notes for the PMP on computer, you must make sure to ask for a copy of any managerial documentation with your name on it. If denied, make note of the denial. Also, take assignments, do well on them, write a success list (for your own eyes only) so that you can update your resume and leave at will. Your heart, soul, and mind will thank you when you leave the building for the last time.]

Resistance to necessary change. Just because it worked in 1970 does not mean the exact practice must continue in the Internet era.

Excessive division between PHD and non-PHD staff. PHD staff advances; the rest languish.

Advice to Management

Complete transparency (that is, sunshine) should be standard operating procedure. Employees have a right to know if managers are making adverse decisions about their careers behind closed doors with a outside facilitator.

Forced distribution ultimately will cause systemic failure, requiring congressional attention to fix the mess.

With regard to the Board’s new performance management process, there is no specific description of the plan provided by either the OIG or the Board. However, there is a Glassdoor.com employee review (August 24, 2013) that provides some idea about what the Board may have implemented–A Dick Grote-style system (see Glassdoor.com review in table). If true, this Grote system will provide no improvement; the annual statistical review (OIG recommendation 3 and management response, page 101 of the OIG report) that the Board questions on a cost basis becomes an absolute necessity.

The new performance management process was piloted in five divisions and the OIG for performance year 2013–2014, with full implementation in all Board divisions in the 2014–2015 performance year. The purpose of the new process is to align staff to the work of the Board, provide greater accountability, support the growth of staff, improve the value of time spent, and increase the fairness of the process. In addition, the new process involves frequent conversations between employees and their managers that are designed to develop and grow employees’ capabilities. The Board contracted for the necessary expertise to assist with the program’s implementation, which includes information sessions, tools and guides, training, and other support. [Page 30 of the OIG report] (Emphasis (in bold) by blog author.)

Bucket

 (rank)

Percentage (amounts can be adjusted) Effect
A 20 Lavish rewards, encouragement
B 70 Little to paltry increase
C 10 Pressure to quit or firing

Given the Glassdoor.com review, there is reason to believe that the new performance management process, implemented across the Board (including the OIG), is the Grote Approach. In addition, the conversation method is governed by the Fierce Conversations program. Dick Grote favors forced distribution, a system that does not benefit protected class members. (The forced distribution issue is covered in numerous posts in this blog.)

But what if a company’s forced ranking procedure, honestly and objectively done, reveals that the blacks or women or disabled employees just aren’t as talented as the white ones? Should they do what some Harvard professors are said to do and award A’s to all the blacks, just to keep them from squawking?” (Grote, page 4 (a quote from a previous post)).

(Note: Consider this statement from Grote with the ever-present and persistent legacy of slavery and Jim Crow subjugation in the United States of America.)

The general approach of the Grote process is to make the employee responsible for satisfying the whims of the manager. If the employee cannot read his or her manager’s mind, the employee must quit or be fired.

Unique to Discipline Without Punishment is the final step before an employee’s termination – the Decision Making Leave. The employee is suspended for a day with full pay. On this day he must make a final decision: either solve the problem and commit to fully acceptable performance, or quit and find more satisfying employment somewhere else.

The Grote Approach is summarized below (information from Grote Consulting’s website).

Performance Appraisal

Corrective Action

Calibration

Does everyone know exactly what you expect and exactly how well they’re doing? We can help you create a new performance appraisal system that is simple and effective. Or tune up a worn-out one. And we can train your managers to be masters of performance management. Does your existing corrective action system solve problems, enhance relationships, and build personal responsibility? Does it reflect your organization’s values? Are your managers comfortable holding tough performance improvement conversations? We can help. Calibration systems assure appraisal accuracy, guarantee differentiation, and drive the truth into performance management. We can help you create a successful approach and train your managers and facilitators to use this this deceptively simple procedure skillfully.

Dick Grote: Forced Ranking Procedures Empowers Managers to Take Advantage of Subordinates; Exemplifed in Grote’s Document titled “Performance Appraisal: Solving Toughest Challenges”

Dick Grote advocates for rampant abuse of employees in the forced-ranking process. Specifically, employees are responsible for doing the manager’s job of supervision and of satisfying the whims of their supervisor, and managers are merely expected to pass judgment on their subordinates and then presumably to sit in judgment at the calibration meeting.

Bucket (rank) Percentage [“vitality curve”] (amounts can be adjusted) Effect
A 20 Lavish rewards, encouragement
B 70 Little to paltry increase
C 10 Pressure to quit, firing

At this calibration meeting, some of the beleaguered employees will then be selected for termination, abused during an “improvement period,” then likely fired. It seems that the best method for targeted persons to respond to this abuse is silence after a blanket denial of all accusations.

Selected quotes from Dick Grote (2000), “Performance Appraisal: Solving the Toughest Challenges,” HR Magazine, July.

There are two themes of management abuse of authority in Grote’s advice, which is detailed in the following chart. [My comments are in brackets.]

Abuse of Authority Situation Grote Quote or Proposal (and Page Number)
Responsibility shifting
Distant subordinate “The mistake appraisers make in this case is to assume that it’s their job to figure out an answer to the question [how to review someone the manager does not see very often]. It’s not. Make it the subordinate’s job.” (page 2)
Technically superior subordinate The same idea carries to this issue as the distant subordinate–the technically superior subordinate is expected to develop a plan for reviewing. (page 3).In addition, a group assignment is proposed–teaching the manager how to assess their work. (page 3) [Author’s note: Should not the manager be expected to do this on the manager’s own? Because the manager will be the only voice at the calibration meeting, all of this “education” may well be for naught.]
Older, more-experienced subordinate “The best way to deal with the highly experienced individual is to get right to the point at the start of the appraisal discussion: ‘Frank, you’ve been through this drill many times before. Let’s not waste any time on small talk. How do you think your department compares with where it was last year?’ Then shut up and listen, and proceed as you would with anybody else.” (page 4)[The manager should be on top of the business (and not expect the subordinate to do management work on top of his or her other duties (without extra pay)). That is why the extra pay for management is being paid.]
Power and Control; Ambush
Highly compensated individual (situation where the subordinate earns more than the manager (commissions)) [Why would a commission-sales-compensated person need a performance review, especially when earning good commissions?]Regardless, advice is provided: “The answer is also classic: just do what needs to be done. The fact that his compensation structure is different from yours is irrelevant. He’s paid to peddle potatoes (among other things). You’re paid to manage his performance (among other things). Do your job.” (page 4)
Dealing with unrealistic expectations (1) No self appraisal, unless required by company policy. (page 4)(2) For good solid performers [A and B buckets], give the appraisal in advance. (page 4)

(3) “For non contributors [C bucket]–give appraisal (negative) to person in manager-scheduled meeting: “Instead, wait until the person is actually sitting in your office before you give her the evaluation to read. You need to break the bad news face-to-face at the exact moment you’re going to discuss it. Forewarned is forearmed–and you don’t want to forearm a marginal performer.”

[This is an institutionally sanctioned ambush, which is totally unfair, especially since the calibration meeting is conducted in secret.]

Coping with defensiveness [When giving bad review and the response is bad.] “To start, do what every smart manager has learned to do. Put a box of tissues in your desk drawer. If tears start to flow, simply pull it out, put it down, look away for ten seconds or so, and then get back to the matter at hand.” (page 5)Moreover, Grote suggests when a rater faces ratee’s “defensiveness” (page 6)–

  • Allow the ratee to vent and listen to what is said.
  • Agree with the ratee’s right to have his or her own point of view.
  • Restate the ratee’s position, using pauses liberally.

Nowhere in this approach is the place where the rater expected to make any adjustments; therefore, this so-called listening is useless to the ratee. Indeed, the rating is fixed once established in the calibration meeting. [This is manipulation masquerading as managerial authority; companies that use forced ranking must be exposed.]

Dealing with discussion difficulties Grote’s general idea is that the rater accuses and the ratee responds to the accusations. (See page 7.) Should the ratee not respond, this action breaks the expected pattern Grote has established. Thus, Grote recommends asking a question then waiting. Should the ratee maintain his or her silence, Grote suggests repeating the question, and, if that does not work, conclude the meeting and define “insubordination” [?] to the ratee.[This is another example of the rampant abuse of authority present within forced distribution. The manager plans an ambush on the so-called C-ranked person and not only is the manager supposed to control the conversation, the manager is supposed to control the ratee’s reactions as well, as if the ratee was property of the rater. This process is disgusting and unacceptable.]

Should the ratee (unwisely) offer an excuse for the poor rating (implicitly agreeing with it and the bad treatment that will follow for a C-ranked person), Grote advises to make the issue one of “personal responsibility” and turn to the ratee and ask the ratee how they will deal with the comment.

[This is manipulative, especially within the context provided in the document: deadlines changing in the middle of the project. Silent is the reason for the changing deadlines. The situation leaves me with a strong suspicion that it is the rater that created a “crisis” in order to down rate the ratee. Then, this same rater has the gall to make the ratee responsible for the rater’s whims. See the definition of “gaslighting.”]

Focus on choices In the case of a discussion that veers away from the offloading of blame on the targeted C-ranked person, Grote offers a way for the rater to dismiss and redirect the conversation. (See page 7)

  • Acknowledge the topic’s importance, then
  • Consign it to the nether world of irrelevancies, and
  • Return to the primary issue on your [the rater’s] agenda
Ultimate solution Grote suggests that the rater develop a clear core message to deliver to the ratee. The ratee is supposed to repeat this core message upon request of the rater [insulting and childish]. (See page 8.)

NCUA and Pay for Performance: IG Report Failed to Provide Necessary, Complete Evaluation and Analysis of NCUA’s PfP Program; PfP Can Be Barrier to Equal Opportunity

The report to Congress (OIG-14-09, issued November 26, 2014) prepared by the Inspector General (IG) of the National Credit Union Administration (NCUA) showed generally that the NCUA was open to investigating potential problems relating to diversity and inclusion issues of its employee rating program (a pay-for-performance-based program). However, the report did not present the structure and rating effect of its pay-for-performance program.

Given this blog’s various postings on pay-for-performance-based evaluation systems, this lack of information is potentially troubling. Pay-for-performance systems can themselves be barriers to equal opportunity. As a result, the pay-for-performance programs cannot be presumed to be without fault. The NCUA’s pay-for-performance program, in totality (structure, operation, and results), should also be audited. In addition, Congress should monitor these agency programs closely as they can interfere with or obstruct goals of diversity and inclusion.

The IG noted on page 16, third full paragraph, second sentence, of the report that management told them that “Employees leave for various personal reasons, including, travel, job fit, and performance.” It is the last word of the sentence that caused me to want more information of the NCUA program. Did the employee leave because of low ratings or did the pay-for-performance program encourage resignations because of the results of the low rating.

There seems to be significant churn in the lower-graded examiners (page 16, third full paragraph), with managers tending to give these entry level workers lower ratings for “lack of demonstrated advanced knowledge, skill, and independence.” But do low ratings encourage improvement or encourage disappointment and departures? If the latter, do people in the lower grades actually advance to higher-graded positions, or do those in higher grades protect their positions by unfairly down rating their subordinates?

Without an examination of the NCUA’s pay-for-performance program, it is hard to evaluate the effect on equal opportunity and achievement of diversity in senior management. The conclusion suggested from the information provided on page 16 is that NCUA has a form of forced distribution rating system (also known as rank and yank, up or out, and so on), with the possible exception that those assigned to the lower ratings are denied pay increases or other benefits rather than being fired. But NCUA must provide more details for a firm determination of what its pay-for-performance program does.

[Postscript: NCUA would be well advised to review the research and ill results of forced distribution systems (for example, at Microsoft and Yahoo Inc.). Also, potential employees should consider, overall, the employee reviews of their employers at websites such as http://www.glassdoor.com (for example, NCUA and the Federal Reserve Board).]