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The Poisonous Employee-Ranking System That Helps Explain Microsoft’s Decline
Slate ^ | Friday, August 23, 2013 | Will Oremus

Posted on 08/25/2013 6:24:11 AM PDT by SunkenCiv

There were many reasons for the decline of Microsoft under Steve Ballmer, including, as I wrote this morning, its lack of focus and its habit of chasing trends rather than creating them. But one that’s not obvious to outsiders was the company’s employee evaluation system, known as “stack ranking.” The system—and its poisonous effects on Microsoft’s corporate culture—was best explained in an outstanding Vanity Fair feature by Kurt Eichenwald last year...

So while Google was encouraging its employees to spend 20 percent of their time to work on ideas that excited them personally, Ballmer was inadvertently encouraging his to spend a good chunk of their time playing office politics. Why try to outrun the bear when you can just tie your co-workers' shoelaces?

Microsoft wasn’t the first company to adopt this sort of ranking system. It was actually popularized by Jack Welch at GE, where it was known as “rank and yank.” Welch defended the practice to the Wall Street Journal in a January 2012 article, saying, “This is not some mean system—this is the kindest form of management. [Low performers] are given a chance to improve, and if they don't in a year or so, you move them out. "

As the Journal and others have noted, what seemed to work for Welch—for a time, anyway—has produced some ugly results elsewhere. Even GE phased the system out following Welch’s departure.

(Excerpt) Read more at slate.com ...


TOPICS: Business/Economy
KEYWORDS: aboreyouknow; adoorknob; generalelectric; jackwelch; kurteichenwald; microsoft; msbuttboys; rankandyank; slate; stackranking; steveballmer; vanityfair; willoremus
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To: staytrue
Yep. I recall a particular episode where Norm from Cheers (I forget his real name) was kicking serious butt. (His charity, btw, was a local Catholic charity from his hometown of Boston.)

The profane bimbo Kathy Griffin more or less told all the other contestants, on the air, to vote Norm off and he was gone. (Body language, whispers, evil eye expressions...)

I think in the third round after he'd demonstrated that he was the smartest one there.

(No kidding, the guy was that good.)

41 posted on 08/25/2013 7:15:37 AM PDT by OKSooner
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To: SunkenCiv

Intel did “Ranking and Rating” in the 1980s when I was there, from top to bottom. I was in HR and thought it was ridiculous.


42 posted on 08/25/2013 7:15:50 AM PDT by goodnesswins (R.I.P. Doherty, Smith, Stevens, Woods.)
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To: Norm Lenhart

-— That said, he encouraged us all to challenge him every step of the way with our own ideas. He was smart enough to understand that surrounding yourself with the expertise you lack, works when you listen to it. ——

I went out of my way to allow my employees to contribute, even allowing them to compete with me, in presenting ideas to my boss.

Whenever they came up with a good idea, I credited them.

Why? Because I was confident in my skills.

Later on, one of my employees was promoted over me. He presented initiatives to my boss, initiatives that I had given him to do, as his own ideas. I found out well after the fact.

In an act of cosmic justice, we were all laid off a month later.

I have my own fast-growing company now. I would have hired the guy if he hadn’t stabbed me in the back. Oh well.


43 posted on 08/25/2013 7:18:40 AM PDT by St_Thomas_Aquinas (Isaiah 22:22, Matthew 16:19, Revelation 3:7)
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To: staytrue
Jack Welch kept GE from becoming Eastman Kodak and made it into a great US company again.

Welch transformed GE from a business that invented real products; transformers, electric steak knives, Lexan; to a government-connected savings & loan operation. The lending devision swamped and destroyed avery other aspect of the company because they had virtually zero overhead; no research costs, no development costs. Things looked wonderful on paper right up until the financial crisis meltdown. GE now is nothing more than a component in the government big business nexus.

44 posted on 08/25/2013 7:20:48 AM PDT by Flick Lives (We're going to be just like the old Soviet Union, but with free cell phones!)
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To: staytrue; WMarshal

Kodak and GE are/were completely different — GE had its fingers in everything, Kodak was highly specialized. Some dolt near the top insisted that they stop relying on Macs for their photo station innards and then got the rug pulled out in a MS beta.


45 posted on 08/25/2013 7:22:39 AM PDT by SunkenCiv (It's no coincidence that some "conservatives" echo the hard left.)
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To: Seruzawa

:’)


46 posted on 08/25/2013 7:22:52 AM PDT by SunkenCiv (It's no coincidence that some "conservatives" echo the hard left.)
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To: Sherman Logan

Having something like “Survivor” might work better than this, really. :’) Termination based on who doesn’t fit probably isn’t viable, but reassignment of all the ejectees to a new team made up entirely of ejectees might have some merit.


47 posted on 08/25/2013 7:25:12 AM PDT by SunkenCiv (It's no coincidence that some "conservatives" echo the hard left.)
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To: SunkenCiv
This is common in the tech business, but it's really destructive.

If you have a bunch of people working well together, ranking them poisons the entire working relationship. With an absence of outside influences, top performers will seek each other out and group together. So, any "bell curve" would be skewed to the point that it is meaningless. The person at the bottom of the ranking in one of these groups would be the top person in most other groups.

If the hiring is done right, you don't have poor performers. And the few that sneak in are quickly identified. The key is to put the hiring decision into the hands of the people that will be working with the new employee. If you let HR make the decision, then they start filling "quotas", and you get people that can't make the grade.

48 posted on 08/25/2013 7:26:44 AM PDT by justlurking (tagline removed, as demanded by Admin Moderator)
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To: adorno

Oh, btw, no, iPhone sales *haven’t* declined, they’ve increased. The overall smartphone market has grown, so percent of the market has declined per se, and thanks to competition profit margins have declined a bit, but the iPhone is still enormous, users still stand in line for upgrades, and the used market for iPhones is strong. Wow, what a terrible problem to have.


49 posted on 08/25/2013 7:27:55 AM PDT by SunkenCiv (It's no coincidence that some "conservatives" echo the hard left.)
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To: ClearCase_guy
you migh think that schools teach people how to collaberate, but I think somehow the opposite lesson is being learned.

What's being learned is that if one person does the work, they can all get credit. My preferred model (seldom used) is that everybody spends some individual time studying a problem and coming up with solutions before the group meets. Everybody would be graded on both their individual contribution sheet and the group result. Too often, without this step, the independent thinker with unique ideas isn't even given a chance to explore them.

50 posted on 08/25/2013 7:29:11 AM PDT by grania
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To: ican'tbelieveit

true,

I’ve personally seen this happen to several very good employees,

they just wanted to keep their head down, work hard, be diligent, get the job done, now that’s not enough, they have to play office politics or fall behind,

its poison,


51 posted on 08/25/2013 7:33:20 AM PDT by captmar-vell
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To: ClearCase_guy

Collaboration is also the means by which mediocre and lower performing employees (”teammates”) can ride on the coattails of real high achievers and performers. If “everyone gets a trophy for trying their hardest, gosh darn they ought to share in the winnings too” is the new group-think pervading our corporations. Sorry, this approach is in direct conflict with my capitalistic heartbeat so I will speak out against it. “Rank and yank” does work if it is not corrupted by the PC police and group-thinkers. The primary focus of the approach is to tell the employee where they stand in relationship to others - sadly, managers are not taught honesty skills and those that struggle with telling the truth will never be able to use the system as it was designed.

Our schools used to teach about independent excellence and achievement and instead, the schools are turning out dumbed-down, group-think idiots that can’t process on their feet or use critical-thinking skills. Businesses use it (collaboration and small groups) because that is the caliber of people they are getting from the system and it almost like a new sub-culture with its own language and thought processes.


52 posted on 08/25/2013 7:33:36 AM PDT by jettester (I got paid to break 'em - not fly 'em)
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To: adorno

Think about it: “one Apple product”. That’s not good.

When I get commercial loans for expansion the 1st question is, how diverse is my companies income stream? Extremely important to the banker that we have sales to more than just one distributor.


53 posted on 08/25/2013 7:33:47 AM PDT by liberty or death
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To: iacovatx
These types of systems are for managers who want simple systems for making tough decisions, thus absolving the managers of personal responsibility for making the decision. HR managers like these systems ‘cause they are simple, quantitative systems and require no real thought. HR managers don’t even work alongside the employees being evaluated.

Excellent comment. Just struck me that these sorts of "by the numbers" approaches to management have a lot in common with "zero tolerance" policies in schools and elsewhere. They relieve weak managers of the responsibility for making decisions.

54 posted on 08/25/2013 7:35:48 AM PDT by Sherman Logan
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To: 1rudeboy
The sales staff (of which I was one) was instructed to set-aside its loyalty to the company, and instead act as advocates for the company's customers... The company was #1 in the industry.

There is a Biblical principle at work here. If you want to be the most successful, you place others (your customers) first, and they will value you more than the others (your competitors) who place themselves first...

"If any man desire to be first, the same shall be last of all and servant of all" - words of Jesus, Mark 9:35

It really works just about every time when you are dealing with normal, generally honest people.

55 posted on 08/25/2013 7:38:44 AM PDT by Gritty (Political correctness is no longer just annoying. It's deadly. - Lori Ziganto)
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To: llevrok
Yeah, and so did Kodak.

I'd say that Apple is closer to being like Kodak was, than MS or even Google.

But, Kodak wasn't even close to being as diversified as Microsoft.
56 posted on 08/25/2013 7:39:17 AM PDT by adorno (Y)
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To: staytrue
Welch also made a lot of hourly employees millionaires during his tenure at GE through their 401(K) plans. (I worked there for fourteen years during his reign).

The stock price would be about $40 or so, then split. This happened four times while I was employed there. Then came Obama butt kisser Immelt who wiped about half of that wealth away for good.


57 posted on 08/25/2013 7:39:29 AM PDT by ex91B10 (We've tried the Soap Box,the Ballot Box and the Jury Box; ONE BOX LEFT!)
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To: 1rudeboy; adorno; Brooklyn Attitude; bert; bjc; captmar-vell; Chode; ClearCase_guy; CodeToad; ...

And thanks to all, what a fast-growing discussion!


58 posted on 08/25/2013 7:40:50 AM PDT by SunkenCiv (It's no coincidence that some "conservatives" echo the hard left.)
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To: 1rudeboy
"...act as advocates for the company's customers. "

That's how you get to be number 1.


59 posted on 08/25/2013 7:41:33 AM PDT by ex91B10 (We've tried the Soap Box,the Ballot Box and the Jury Box; ONE BOX LEFT!)
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To: Soul of the South

“one of the most powerful things about a well managed small business is the team spirit and flexibility to get things done on a moment’s notice. Priorities can shift due to the demands of the marketplace”.

So true. I only have three employees, but they flex and pivot to keep the products moving to the customers at a moments notice. We do online, store direct and wholesalers and each week is a new challenge because they are never the same. All three are women and work together amazingly. I’d be lost without them.


60 posted on 08/25/2013 7:42:29 AM PDT by liberty or death
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