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Citigroup has begun its end-of-year performance review process, once again using a ‘stack ranking’ approach that has drawn controversy in recent years.
Managers rank team members from best to worst, placing them within one of four levels. Not all employees can be put in the top rung and must be split across the ratings.
This means employees who hit all their targets for the year could still theoretically be placed outside of the top level.
According to a Business Insider report, Citi says the process is meritocratic and ensures their employees meet consistent standards, insisting that it does not follow a ‘forced bell curve’ methodology.
However, some managing directors responsible for rating employees report that they have been told to strictly follow a prescribed curve.
What is Citigroup’s performance review process?
Citigroup is not the only financial institution to use a stack ranking approach for performance reviews. Although some tech companies like Microsoft and Amazon have ditched the bell curve method, banks including Morgan Stanley and Goldman Sachs some variation of the approach.
Business Insider spoke to current and former managing directors at Citigroup responsible for rankings, who said employees get a combination score of two grades from 1 to 4: 1 is “exemplary”, 2 is “exceeds expectations,” 3 is “valued contributor,” and 4 is “needs improvement.”
Managers give staff a ‘what’ score, based on the employee’s results against key metrics, and a ‘how’ score, based on their approach and abilities, they said. For example, a top performer might get a 1-1, while a poor performer might get a 4-3.
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Managers then reportedly take part in a “calibration meeting,” alongside fellow managers, the head of their business unit, and a member of Citigroup’s HR team. Employee scores are reviewed and any 1s or 2s must be justified.
A top business unit manager makes a final decision after the meeting. According to the MDs who spoke to BI, only 5% to 10% of staff can be deemed ‘exemplary’ (1), 15% to 30% ‘exceeds expectations’ (2), 50% to 65% ‘valued contributors’ (3), and 3% to 7% ‘needs improvement’ (4).
An employee who scores a 4 may be put on a performance improvement plan (PIP) or miss out on their bonus, while staff who want a promotion are typically expected to get 1 or 2 ratings for two to three years in a row.
‘We fought’: Citigroup HR team and former MDs disagree on performance review approach
In a statement to BI, a spokesperson for Citi said: “We are a company filled with hardworking, achievement-oriented colleagues and we embrace meritocracy… Our process aims to ensure that colleagues across Citi are held to consistent standards and are assessed by those who have the most direct knowledge of their contributions.”
Moreover, in a recent virtual town hall with employees, Citi’s Head of HR Sara Wechter was quizzed on the distribution system. Employees asked whether the stack ranking approach was fair on smaller, high-performing teams, and Wechter replied there was no forced bell curve.
A senior executive also suggested to BI that claims the bank uses fixed percentages are false. “We have guidelines associated with ratings, which is different from a forced curve,” adding that smaller teams of three to four employees can secure exemptions.
However, the managing directors who spoke to BI disagreed. "They are playing with words," one said. "We were mandated to strictly follow the prescribed curve."
The managing directors also said the stack ranking approach puts employees hoping to become directors or managing directors under a huge strain over multiple years. They also said the outcomes frequently frustrate managers and employees, given how significantly unit heads who have likely never worked directly with the individual can influence the ranking decision.
The process also frequently caused stress and heated disagreements, the managing directors recalled. They said that with a limited number of high ratings to allocate, managers were unwilling to move members of their team down to accommodate high performers in other teams.
"No one was like, 'You can take mine,'" one managing director said. "We fought."
While the senior executive said that the many calibration meetings he has attended were productive and ensured “fairness” by breaking down silos, he acknowledged that the conversations can get heated.
However, he said this was not a fault of the stack ranking approach: "This is a very human thing when you have finite anything, and obviously we have finite compensation," he said. "Of course, people are aware of that, but I don't think it's a flaw in the design. I think that's just part of being human."
Other complaints raised by the managing directors included unclear criteria for non-revenue-generating roles and that the model leads to employees being compared against colleagues with vastly different roles or objectives.
So far in 2024, Citi’s employees have already had to cope with a workforce reduction of 7,000 employees; and over 20,000 further jobs are set to be cut by 2026. One managing director said the layoffs are causing even more anxiety than usual about the performance review cycle.
