What defines a forced ranking system in performance appraisal?

A forced ranking system in performance appraisal is characterized by the requirement for managers to rank employees based on their performance relative to one another within a defined distribution. This approach typically categorizes employees along a bell curve, with a set percentage of employees assigned to different performance ratings, such as top performers, average performers, and underperformers. By enforcing this ranking, the organization aims to identify and differentiate levels of employee performance more clearly, fostering competition and striving for improvement.

This method contrasts with the other choices provided. Randomly assigning performance scores lacks the structured evaluation that forced ranking entails. Focusing solely on team performance would not capture individual contributions or allow for the necessary differentiation among employees. Finally, a peer evaluation process primarily relies on employee assessments of one another, diverging from the managerial oversight that is central to forced ranking systems. This solidifies the understanding that forced ranking is fundamentally about managerial rankings based on individual performance rather than assessments from peers or broader team outcomes.