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Economics for HR Geeks: The Quitter's Index

Stack Ranking vs. Coaching for Greatness in Performance Management

Don't kid yourself - stack ranking and forcing a distribution in performance management is the easy way out.  It's much harder to create a culture where managers are expected to have coaching conversations with depth, to take the time to really dig into what good vs. great performance looks like in any area or overall.

Vanity Fair's pointing to stacked ranking as a "company" performance problem at Microsoft.  Here's a clip from the article on problems in Redmond:

"Eichenwald’s conversations reveal that a management system known as “stack ranking”—a program Celebrity-apprentice-boardroom- 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.”

The problem with that isn't so much managing non-performers out, it's the concept that the 7 in the middle see a couple of rockstars in their group and inherently know that there's no way they can get to the top ranking.

Managers assume that too.  So why should they coach hard about what it takes to get to that top level if they can't give them the rating and the rewards to go with it?

It's much harder to start at zero with each employee and coach hard for innovation, discretinary effort and growth in performance.  That's why so few companies try.

Comments

Amanda N

Kris,

Thank you for framing so well what I find frustrating with performance management. If you're a strong manager who regularly provides feedback and coaching, and yu agressively manage poor performance (either to improvement or out of the org), then why should it be impossible for you to have a team of strong to high performers? Furthermore, why wouldn't a company want that for all their teams?

Scott

I've been part of that "stack ranking", and I've led people who had to be put into that framework. Of all of the ridiculous ideas to come out of corporate America's briefcase, this one has to rank as one of the worst. The bottom line is that in any group of people who are performing a task (or job), there will usually be some sort of bell curve where there are the high performers, middle of the road performers, and low performers. It's group dynamics - it's what is generally expected when you look at a group. Someone, somewhere along the way, thought it would be brilliant to force the bell curve so that performance would match the expectations that group dynamics suggests. WRONG! You squash creativity, and crush innovation. You are left with disengaged employees who now believe that no matter what they do . . .it won't matter!

Toss the stacked ranking approach! Bring in quality talent management that includes "coaching to greatness" (great title of a book) and teach your managers how to lead people, rather than lead projects. Don't fit people to the job . . .let the job fit the person. Right person for the right job.

ShellyB

Stack ranking = lazy, lazy managers who want to do nothing but look at "red, yellow, green" boxes.

It is for executives who don't want to do the awfully hard work of observing what people they have, what the mix of talents are, and then carefully constructing the right environment to allow all of them to succeed. To put it in terms the big financial types who inflicted this on us just might understand: how do the really great football or baseball teams succeed? It certainly isn't through rank stacking like this. Creating a great team is a human endeavor, and it is next to impossible to brew up metrics that mean anything when you deal with all the tiny interactions that make humans effective--or not.

Stack ranking definitely leads to "eating your own" in an organization, at least in my experience. People start doing things that are definitely not in the customer's interest, and not in the long term company interest--because the system makes that behaviour profitable. Good managers hate stack ranking, and good workers walk out in droves NEVER to return--Microsoft is a classic case. I've read in Forbes the MBA types arguing this was just badly implemented. Wrong. Kevin Turner followed all their rules to a T, Ballmer did a picture perfect implementation. We need to start admitting this management fad has been a complete disaster, and not just at Microsoft.

Jack Welch used it to "clean house" at GE, and has been on a PR kick ever since to claim it is great for everyone. Ballmer also appears to be using it at Microsoft to get rid of older engineers with heavy benefits, so he won't be forced to pay unemployment benefits. The problem with this fundamentally dishonest approach towards "culling the herd" is it has frightened those standing nearby and a stampede out of the company formed. The best people are clearing out, and because trust has been broken, this time it is highly unlikely they will ever come back. Nobody wants that kind of stress again.

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