"Forced ranking" and other management fads

I was struck by the following comments on management fads.  It's from Forget Going With Your Gut Jena McGregor Business Week 03/20/06 edition.  It's a review of Hard Facts, Dangerous Half-Truths & Total Nonse: Profiting from Evidence-Based Management by Jeffrey Pfeffer and Robert I. Sutton.  McGregor writes:

The authors are at their best when dispelling the copycat tactics managers use for evaluating and rewarding talent. Take forced ranking, for instance. Popularized by General Electric Co. (GE ) under Jack Welch, the process requires managers to divide employees into the top 20%, middle 70%, and bottom 10% of performers, often culling the lowest group. Practiced by as many as one-third of companies today, the authors say the approach has many flaws. A 2004 survey of more than 200 human-resource managers found that even though more than half of them used forced ranking, they felt it resulted in lower productivity, skepticism, reduced collaboration, and impaired morale. Breaking up teams by automatically firing the bottom 10% of workers can even be dangerous: Citing a National Transportation Safety Board study, the authors note that 73% of commercial airline pilots' serious mistakes happen on crews' first day together.

Pfeffer and Sutton also make a surprisingly persuasive case against paying widely divergent rewards to high and low performers, a popular practice in talent management today. Many studies show that tying pay to performance can drive good results when individuals are working solo. But the same can't be said for the collaborative, interconnected teams that now make up most companies. The authors cite a 2005 study that surveyed senior management groups at 67 publicly traded firms. Those with greater gaps between the best- and worst-paid executives also had weaker financial performance. Managers who implement wide pay differences in heavily team-based groups, argue Pfeffer and Sutton, forget that people get a lot of fulfillment from their social bonds at work, and creating such distinctions often diminishes trust.

Companies do a lot of damage to themselves by picking up on these management fads, pushed by expensive consultants, without thinking through the likely consequences realistically.