Ahead of Christmas, a widely opinion-dividing topic took center stage in the leadership debate: the performance-based differentiation of employees. The discussion followed reporting by Helsingin Sanomat, which suggested that Nokia had introduced forced ranking among its managers.

Forced ranking refers to a performance management system in which employees are classified into five categories based on a predefined distribution, with each category required to contain a fixed percentage of team members. The system, also known as stack ranking, was a popular leadership tool in the 1990s, pushing staff into a normal distribution and reducing bonuses for the lowest performers.

Following the reports, Nokia’s CEO Justin Hotard clarified to Helsingin Sanomat that the company does not intend to classify employees through forced ranking, and that the issue was the result of an internal communication error.

The topic is important and far broader than the leadership practices of a single company. According to Tommi Lehtinen, CEO and lead consultant at SCCG, the discussion reveals a broader Nordic discomfort with open performance differentiation. 

Tommi Lehtinen is an executive assessment consultant & CEO at SCCG.

“This discussion is very Finnish,” Lehtinen says. “Forced ranking is common in North America and parts of Asia. The shock comes from how strongly it clashes with our expectations of fairness.”

A global company, a local reaction

Nokia employs close to 80,000 people globally, so the Finnish workforce of nearly 7,000 represents less than 10 percent of total headcount. Practices that barely raise an eyebrow in the United States or parts of Europe can still cut deep into Finland’s cultural core.

“Finnish media often analyzes global companies through a purely national lens,” Lehtinen notes. “That is understandable, but it can distort the picture.”

Within Nokia, the forced ranking model faced internal criticism not just in the Nordics, but from the company's European Works Council, a body that represents Nokia employees across EU and EEA countries. Beyond Nokia, a broader question for global companies is how local leadership and corporate culture models can be embedded within globally competing organizations.

The real issue is not ranking

Forced ranking carries a poor reputation for good reason. Lehtinen cites research that shows it often increases internal competition, visibility seeking, and office politics, while weakening cooperation. Even in the United States, its popularity has faded.

But focusing solely on whether ranking is good or bad misses the deeper leadership challenge. “In many Nordic organizations, we avoid clear performance discussions altogether,” Lehtinen says. “That creates its own kind of unfairness.”

In specialist-heavy organizations, differences in contribution can be significant, yet feedback, pay, and development often remain broadly similar.

“At the leadership level, performance is constantly evaluated,” he says. “At the specialist level, discussion often revolves around workload, stress, and well-being. That imbalance is a red flag,” Lehtinen says, pointing to differing expectations and tolerance levels in performance evaluations.

As for Nokia, performance evaluation is intended to address the issue of paying all employees the same bonus regardless of individual performance. In an interview with Helsingin Sanomat, CEO Hotard stated that performance management is about safeguarding the company’s competitiveness. As the market and operating environment change rapidly, not all employees have the same capabilities. One goal is to retain and engage the top-performing employees.

Why leaders still reach for hard tools

Lehtinen does not believe companies adopt controversial systems lightly. “When organizations consider forced ranking, they usually understand the risks,” he says. “They are trying to create clarity where clarity is missing.”

The timing of the Nokia debate has also fuelled speculation. The tech company reported a 9 percent increase in net sales in constant currency in the third quarter, following the appointment of CEO Hotard in April. The American businessman is known for data center and AI-related executive roles at Intel and Hewlett-Packard. 

“New CEOs tend to shake things up,” Lehtinen says. “That is not unusual.” The problem is that ranking systems are often applied where targets are unclear, and work is highly interdependent. “In sales, where numbers are clear, it works better,” he says. “In matrix organisations and knowledge work, evaluating individuals fairly becomes extremely difficult.”

The result is a system that rewards visibility rather than value.

Clear targets beat hard rankings

Lehtinen argues that Nordic companies do not need harsher systems. They need better ones.

“Tough management is not bad,” he says. “But it must be structured, fair, and well communicated. Clear targets, clear monitoring, and freedom inside the structure. That creates safety, not fear.”

Without this foundation, any performance system will fail, whether it relies on forced ranking or softer alternatives.

The argument echoes the broader shift toward harder leadership. Listeds reported in November that management thinking may be moving away from three decades of soft, empathetic leadership toward “hard leadership,” a model built on clarity, accountability, and performance, citing Sami Itani, professor of practice at Aalto University School of Business.

Culture, Lehtinen adds, cannot be changed through structures alone. “You need communication, involvement, and time. Imported models without cultural adaptation do not work.”

Rather than encouraging individuals to compete against colleagues, he suggests structured and safe competition between teams, focused outward toward market rivals rather than inward toward peers.

Warning signs leaders should not ignore

When performance systems begin to do harm, the signals are clear.

“Sick leave, rising conflicts, people leaving, low engagement, and weak 360 feedback,” Lehtinen says, referring to feedback received from multiple directions, not just direct managers. “Those are not HR problems. They are leadership problems.”  

Read as advice rather than a diagnosis, the message to leaders is simple. Either performance is discussed openly, and expectations are made explicit, or frustration will surface elsewhere. In the long run, clarity, not comfort, is what sustains performance.