How to Kill Teams Through "Stack Ranking"
Analyzing one of American corporate history’s greatest mysteries — the lost decade of Microsoft — two-time George Polk Award winner (and V.F.’s newest contributing editor) Kurt Eichenwald traces the “astonishingly foolish management decisions” at the company that “could serve as a business-school case study on the pitfalls of success.”
Relying on dozens of interviews and internal corporate records — including e-mails between executives at the company’s highest ranks — Eichenwald offers an unprecedented view of life inside Microsoft during the reign of its current chief executive, Steve Ballmer, in the August issue...
Eichenwald’s conversations reveal that a management system known as “stack ranking” — a program that forces every unit to declare a certain percentage of employees as top performers, good performers, average, and poor — effectively crippled Microsoft’s ability to innovate.
“Every current and former Microsoft employee I interviewed — every one — cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees,” Eichenwald writes.
“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”
When I read that section, I immediately recognized similarities with programs at former employers.
This is not a comfortable post to write, but I believe it is important to learn from management and business failures as well as successes. Clearly programs like "stack ranking" are destructive for organizations and individuals. The sooner managers and human resource departments learn that lesson, the better for the business and its team members.
Is "stack ranking" something you've encountered?
Comments
Eventually, employees that are put in the average group when they belong in the top will leave until only 25% of the employees remaining are above average. This applies to all the groups -- if employees are put in a group where they don't really belong then it will eventually even itself out. It's self-fulfilling and perfect if you want to make sure your company is average instead of superior to others.
This is particularly difficult with knowledge workers and SMEs but somehow you have to choose.
As ugly as it sounds one person will be "less" valuable to your team than the others.
And result is 20 people create almost as much as 120.
People are scored when hiring. More than 9/10 will not get hired.
If you slack a lot you are fired. Nobody likes doing that, you have some freedom, but can't abuse it.
I do not know how they will put scores on who stays and who must go. Probably like always, by personal preference.
Welch laid off the bottom 10% of the performance pool every year. Of course he started from a lumbering 400k people corporation that had not been known for its human capital.
It's destructive, causes friction and seriously impacts on productivity. People should be encouraged to work together for the good of the organisation and all efforts and work should be recognised. A good manager will manage poor performance, develop their people and recognise the people who excel.
To expand upon a previous comment, teams end up in-fighting whether directly or indirectly. The practice provides incentive to let other team members fail. Because someone has to fill the bottom slots, people become afraid to help their teammates improve or solve problems.
This may seem like I was around people that were petty or cruel. But the truth is that every employee has their own person responsibilities to take of. In an economy where finding work is difficult, employees have to do what they can to make sure they keep their jobs (to pay for their mortgage, support their families, etc).
It's truly sad that the people in positions that are supposed to understand employee needs and behavior (HR, management, executives) actually decide to implement this process. Maybe if the C-level executives were ranked in the same way and at least one CXX was fired every year the process would be eliminated.
But then our company decided to introduce that mandatory "stacking" mechanism. Now we have to find 10% "underperformers" every year =>
a) In some department there just are no underperformers left, but still you have to de-motivate 10% of people telling them they are not-so-good because every manager has to identify 10% (no matter how much you discuss with HR and senior managers)
b) The managers are told to agree on measures how to develop the "underperformers" so that they are better next year and will be "good". So ... assuming the person really improves - whom to select next year??
This whole system is really stupid. Unfortunately our senior management is not able to realize that. But then - hey, maybe that explains why they did take other stupid decisions as well.
Apparently 1 year there were only three people who deserved it so it was a popularity contest to find the fourth.
The same organisation had a policy where "only" doing what was expected was ample grounds for one guy getting "managed out".
Analogous to only wearing five pieces of flair.
Soul killing environment made liveable for me by a line manager (team lead) who acted as a buffer between that crap and his team members.
GPS in Bangalore has about 80 ppl and they need to identify 8 employees every year to fill the bottom stack.
Amazon takes peer feedback for ranking and what really happens is that employees flock together to give each other good feedback to save jobs. Newcomers specially, who aren't aware of this, get worst hit as they receive negative feedback and buck passing, back stabbing kills their chances even before they are ready to adapt to new environment. And lot of newcomers are forced to leave within a year.
What is worse, you do get to read your peer's review and mostly you can make out who wrote the review. It seeds deep mistrust between in team and affects the project and productivity.
In the US, all the major sports teams focus on contribution and 'cut' those that are not (yet) performing at the highest level. Yet the rewards mean there's always players trying to make the team.
Where performance is objectively measured, stack-rank works.
I suspect where it fails most is among organizations that lack the ability / willingness to objectively recognize superior performance. And I doubt they get that performance either.
But given the talent in our field, I would hope at least 50% of us would want the opportunity to compete in a stack-rank environment, based on the tangible impact we make through our roles.
You put in stack-ranking, the first thing that happens is that you kill all collaboration - not only you kill collaboration people actually sabotage (within limits) other people work so they can come on top.
Secondly, who is the least valuable person to the team? - right a person who is about to relocate to a different team within the same company (or maybe leave the company) - what do you do? you screw them. creating antagonism and not planning ahead. How do avoid law suite? - you lie, you keep everything in the dark, and you do not give detailed reviews in writings.
And this is before you put office politics in.
Do you still think it is a good system?