Now more than ever, organizations need to optimize their workforce in today’s economic climate of falling revenues and shrinking profits. Companies have long used stack-ranking to manage their people and identify employees to manage out or up, GE for example categorizes their workers as being top, middle and low performers with 20% high, 70% middle, and 10% low performer distribution. They regularly manage out the bottom 10%. Stack ranking is a powerful tool, but does it work?

Professor of management at Drake University in Iowa, Steve Scullen, found that forced ranking, including the firing of the bottom 5% or 10%, results in an impressive 16% productivity improvement.

Companies that are able to quickly compare the performance of their people to find high and low performers have an advantage over those who cannot. Low performers actually cost the company money, so when a business manages them out, they see an immediate benefit. The opportunity cost is even higher. If high performers contribute about 5 times as much as low performers, as our friend and thought leader Dr. Peter Cappelli has found in his research, the opportunity costs is huge. Imagine how much more value the company could generate if they could replace low performers with high performers.

These kinds of optimizations are on everyone’s mind in todays slowing economic environment. SuccessFactors decided to tailor a solution for optimizing the workforce by building a tool that allows managers to stack rank their employees.

Of course stack ranking isn’t just about managing out low performers, but it is also about ensuring that you are able to find and cultivate your best talent. Those top performers who contribute 5 times as much as the low performers should be rewarded, leaders should be identified and trained. Competencies should be compared and managed across teams to ensure that the right capabilities are in place. Stack ranking is a great tool not only for optimizing your workforce, but also for building it.

Already rich with performance management data, the SuccessFactors Stank Ranker helps managers to:

• Visually Rank Talent – Instantly identify your top-ranked players so that you can optimize your team by motivating and cultivating your best people. Give limited rewards to top employees that deserve extra recognition, or quickly identify low performers to let go when faced with tough layoff decisions.
• Go Beyond Performance Reviews –Stack Ranker expands the formal review process by letting you capture new characteristics for a more holistic assessment. For example, you can incorporate factors like criticality of the role into ranking or other criteria to serve as tie breakers.
• Assess Everyone at Once – Quickly assess your entire team across critical competencies and criteria in real time — all in one place. Side-by-side rating promotes more accurate relative assessments.

Stack Ranker was designed to help companies act now. Organizations simply cannot afford to carry the dead weight of low performers in these uncertain times. Furthermore, they need to move quickly or they will be outflanked by their competitors. Tools like Stack Ranker are critical to succeeding in today’s environment.