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Time to Hire or Time to Fire? How to Rank Employees to Identify Low and High Performers Employee ranking identifies high and low performers to properly allocate work, compensation and development. However, ranking requires considering multiple factors over time to ensure fairness and avoid demoralization.

By Murali Nethi Edited by Micah Zimmerman

Key Takeaways

  • One of the key challenges of a leader is to distinguish between low and high performers.
  • This is important so that underperformers can be retrained or let go if needed while top talent is identified, rewarded and retained.

Opinions expressed by Entrepreneur contributors are their own.

While every person who joins an organization aims to contribute productively, the reality is that individual performance levels vary significantly. As a manager, one of the key challenges is to distinguish between low and high performers so that underperformers can be retrained or let go if needed while top talent is identified, rewarded and retained.

One common approach companies use is ranking or rating employees against each other to get a sense of relative performance levels. However, ranking is a delicate exercise that must be done carefully and judiciously to be effective and fair. Here are a few pointers from my experience on how ranking can help identify low and high performers while minimizing potential pitfalls.

Related: 9 Ways to Retain Your Top-Performing Employees

Why ranking is important

First and foremost, ranking employees allows you to understand who is truly excelling in their roles and who may need additional support or training. It helps you distinguish between average performance and outstanding performance. Additionally, ranking can highlight employees falling short of expectations and not meeting defined goals or key performance indicators (KPIs).

Knowing your high and low performers is key for a few important reasons:

  • Compensation and rewards: You'll want to reward your high performers appropriately through bonuses, promotions, career opportunities and salary increases. Conversely, low performers may warrant reduced or stagnant compensation.
  • Work allocation: High performers are ideal candidates for new, complex projects and leadership roles. You'll want to challenge them. Low performers are better suited to more routine tasks that don't require as much independence.
  • Career development: For high performers, you can help craft development plans that position them for even greater responsibilities. Low performers may need remedial training or be out of their role.
  • Performance management: Ranking gives you data to properly manage ongoing performance through check-ins, feedback and setting expectations for improvement.

So, while ranking can feel uncomfortable, it provides objective data to make critical people decisions fairly and thoughtfully. Done right, it benefits both high and low performers through tailored development.

Related: 4 Steps to Manage Your Employees and Help Them Win

How to rank thoughtfully

There is certainly no perfect science to ranking employees. However, here are a few best practices to employ a thoughtful, multidimensional approach:

  1. Look beyond numbers: Don't rely solely on quantitative metrics like sales figures, number of projects completed, etc. Consider qualitative factors as well, such as leadership, collaborative skills, work ethic, initiative, judgment and problem-solving abilities.
  2. Use multiple lenses: Gather feedback from various sources — your direct reports, peers, customers, etc. Also, consider self-evaluations. A diversity of perspectives provides a well-rounded picture of performance.
  3. Monitor over time, not one moment: Ranking should reflect sustained performance over weeks or months, not one spike or dip. Look for consistency and growth trajectories.
  4. Account for role differences: Not all jobs have identical responsibilities so compare "apples to apples" as much as possible. Weigh roles appropriately based on complexity, impact and expectations.
  5. Discuss rankings openly: Explain your methodology and rationale transparently so employees understand how decisions were made. Clarify it's not punitive but aims to maximize strengths.
  6. Make room for nuance: Realize not all top and bottom performers are cut and dry. Leave flexibility for unusual circumstances, recent improvements, high potentials and more discretion.
  7. Revisit regularly: Periodic reviews help ensure rankings stay dynamic and responsive to changing performance levels. Continuous assessment fosters ongoing development and accountability.

This way managers can have thoughtful, meaningful discussions that maximize employee growth and company success overall. Regular checking and adjustment also maintain fairness and accuracy over time.

Pitfalls to avoid

Of course, there are also some potential downsides to be mindful of:

  • Beware of bias: Our inherent biases around gender, age, race, or other attributes can subtly influence perspectives if not checked. Ensure rankings derive from professional criteria alone.
  • Avoid perfect/imperfect mindsets: Most employees ebb and flow. See rankings as ranges not fixed labels, leaving room for improvement or workload adjustments that change ratings.
  • Use with compassion: While discussions must be straightforward, maintain empathy, dignity and respect throughout the process. Frame it as development, not judgment.
  • Share judiciously: Protect confidential information appropriately. Rankings need not be fully transparent company-wide to drive effective conversations.
  • Standardize definitions: Clearly define what differentiates a "good" vs. "great" rating so that rankings are applied and understood consistently.

When rankings consider multiple lenses, change over time, account for role nuances, avoid biases and use empathetic language — they can offer constructive guidance. But they also warrant sensitivity to avoid demoralization so the focus stays on growth.

The goal of any employee evaluation system should be to develop, challenge and care for all individuals while fueling company success. When done thoughtfully using data from various critical perspectives, rankings can provide functional differentiation that motivates high performers and offers low performers clearer paths for improvement.

Murali Nethi

Entrepreneur Leadership Network® Contributor

CEO & Founder

Murali K. Nethi is the founder and CEO of SnapBlooms, a flower-delivery marketplace. His 24-plus-year background in enterprise architecture and IT allows him to explore business solutions in the retail industry.

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