General Electric CEO Jack Welch made the practice of "forced ranking" famous when his company championed it in the 1980s -- or maybe that would be infamous … but more on that later. What is forced ranking? It's the system where companies group employees into certain categories according to their performance. Welch's approach divided employees into three groups -- the top 20 percent, the middle 70 percent, and bottom 10 percent.
The purpose of such a system is to reward and retain top performers, help middle performers become top performers, and replace the company's bottom performers to improve the overall results of the organization and drive new growth.