Bad employees drain your IT organisation and the company. Forced ranking can help you get tough - but at what cost?

Reader ROI

• The costs created by underperforming employees
• How forced ranking works, and why it can backfire
• Five steps to improving workforce performance

Real employees who received poor performance reviews from Cheryl Smith, senior vice president and CIO of $US57 billion McKesson Corporation:

The IT manager who spent more time walking around the executive floor trying to be seen than working with his team to solve actual problems.

The senior programmer who worked very hard on an extra project she thought important, causing her group to miss key deadlines because her assigned work didn't get done.

The employee who called in sick every other Monday and Friday, believing that no one would notice.

The programmer who signed up to work at home two days a week but then never seemed to be available those days for conference calls.

The senior staffer who felt that, because he had worked hard throughout his career, it was time to take it easy because the company owed him.

The programmer who refused to take her turn in the rotation for emergency night-call duty.

The analyst who spent a lot of time shopping online for personal items.

If you've been in IT management for long, you've probably had to deal with employees who aren't up to the task, consistently perform below their capabilities or exhibit a bad attitude. These staffers fail to live up to "the agreement", as Smith puts it, that in exchange for a pay cheque, they provide the company with their talents, experience and time.

It's a wrenching task, but you have to face up to the need to confront poor performers and either fix their shortcomings or fire them. If your organisation is still in layoff mode, then identifying and weeding out the undesirables is by far the best way to trim headcount. And when the economy does rebound, CIOs who have culled their staffs will be better prepared to take on new projects aggressively.

In recent years, many companies have instituted the concept of forced ranking, a tough-minded approach that obligates managers to rank their staffers against one another. The bottom-dwellers typically are pushed out or encouraged to leave. Forced ranking is not without its detractors, however. Some say it drains employee morale, eliminates cooperation and, if used every year, can result in even good performers being cut. But forced ranking can be applied in a less draconian and more effective way.

Smith identifies and rewards her best employees with bonuses, while the poor performers get nothing. Anything else would be unfair to her star staffers. "Life is a bell curve. Get used to it," says Smith, who prefers to refer to "relative contribution" rather than forced ranking, since she believes the first term more clearly explains to employees how they're being evaluated.

You Can Run, but You Can't Hide

No question, it's often very hard to confront poor performers. "Managers would rather have a tooth pulled than have a performance conversation with a subordinate," says Dick Grote, president of a management consultancy specialising in performance appraisal, Grote Consulting, and author of several books on performance appraisal. "Dealing with poor performers is probably the most difficult job that anybody with supervisory responsibility has. The hardest thing to do is to look a person in the eye and tell them they're not good enough. God, that's tough."

Going soft on problem employees, however, can just end up creating more problems for an organisation, says Tsvi Gal, senior vice president and CIO of Warner Music Group. If a manager is not abundantly clear with an employee about his performance during a review, the employee won't change his behaviour to the degree needed. "When you say to someone: 'You can improve a little bit in this area', they take it literally - that they only have to improve a little bit," Gal says.

If unskilled or careless workers fail to take care of software and systems properly, it can affect the business from a revenue and cost perspective, says Martin Davis, CIO of $US24 billion financial services company Wachovia. When the business unit is funding the IT project, and the project ends up costing more than was established in the business case because of a botched implementation, the business unit will have to shell out more money.

Turning a blind eye to shoddy work can also eat away at your own IT organisation. That's especially true in companies that have downsized, where there's more work for remaining employees to do. "Nothing drives your good performers away faster than knowing that a supervisor isn't dealing with performance issues," says Kris Paper, senior vice president and CIO of Primedia Business Magazines & Media. "I know I have to pull the trigger and eliminate [underperformers] when my good kids are suffering, like when they're having to take that person's call or they're having to redo that individual's work," she says.

Nonetheless, managerial lenience with poor performers is so pervasive that many companies have turned to forced ranking. It's a controversial practice, because it effectively forces managers to make tough decisions that they otherwise wouldn't or couldn't make about their employees.