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Published 13 August 2012 14:14, Updated 14 August 2012 00:05
Stacked ranking schemes can end up pitting colleagues against each other and destroy business morale. Photo: Rob Homer
Pitting people against each other in a fight to the death is a pastime enjoyed by Roman emperors and some CEOs.
To the relief of the Christians, gladiatorial games ended in 404 AD in Rome. But the bloodfests of the annual performance review live on as employees are set up in competition with each other to fight for their jobs.
In a performance management system – variously known as stack ranking or forced ranking – people are rewarded for their individual attainments. If they achieve a high rating, they are rewarded with bonuses and promotions and job security.
The arbitrary nature of this system, however, means that managers are given a formula for grading staff: only a certain number can be slotted into each grade. This means that no matter how good their performance, someone will always be seen to be failing.
And in some organisations, anyone slotted into the lowest grade will be “eliminated” (fired). This process was made famous by GE under its former CEO, Jack Welch.
The impact of this kind of system is that it sets workers against each other. Rather than working for a common good, they are “incentivised” to undercut their rivals to make sure they get the best rating possible.
It also encourages highly political behaviour because it relies of managers’ (often subjective) assessments of their staff and their ability to “horse trade” with other managers to fit as many people in possible into the “safe” grades.
The danger about any performance management scheme is that you have to be very careful what behaviours you are rewarding. Programs that seem like good common sense at first can have unintended consequences.
A project manager in the car manufacturing industry joined a Harvard Business Review discussion last year, saying: “My company introduced forced ranking a year ago and as a result people are clawing at one another and scared to leave their seats. The morale has gone to an all time low and now the company can’t understand why people do not want to involve themselves in employee engagement initatives and surveys”.
The writer, Kurt Eichenwald, says that every current and former Microsoft employee he interviewed cited stack ranking as its most destructive process: “Something that drove out untold numbers of employees”.
“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review,” a former software developer told Eichenwald. “It leads to employees focusing on competing with each other rather than competing with other companies.”
Eichenwald writes: “Supposing Microsoft had managed to hire technology’s top players into a single unit before they made their names elsewhere – Steve Jobs of Apple, Mark Zuckerberg of Facebook, Larry Page of Google, Larry Ellison of Oracle and Jeff Bezos of Amazon – regardless of performance, under one of the iterations of stack ranking, two of them would have to be rated as below average, with one deemed disastrous.
“For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers out of fear that they would be hurt in the rankings. And the reviews had real-world consequences: Those at the top received bonuses and promotions; those at the bottom usually received no cash or were shown the door.”
One engineer told him: “The behaviour this engenders, people do everything they can to stay out of the bottom bucket. People responsible for features will openly sabotage other people’s efforts.
“One of the most valuable things I learnt was to give the appearance of being courteous while withholding just enough information from colleagues to ensure they didn’t get ahead of me on the rankings.”