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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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1 posted on 08/25/2013 6:24:11 AM PDT by SunkenCiv
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To: AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; cardinal4; ColdOne; ...

Microsoft’s Lost Decade
http://www.vanityfair.com/business/2012/08/microsoft-lost-mojo-steve-ballmer


2 posted on 08/25/2013 6:25:17 AM PDT by SunkenCiv (It's no coincidence that some "conservatives" echo the hard left.)
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To: Toddsterpatriot; Mase; expat_panama

Unintended consequences ping.


3 posted on 08/25/2013 6:31:34 AM PDT by 1rudeboy
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To: SunkenCiv
When I was young, school projects were pretty much "you do it" but in recent decades, more and more "group work" has been assigned, because collaboration and working within small groups is so central to how business is done.

Oddly enough, I have seen a real steady decline in how well people can collaborate. Some folks insist on being the star and want every decision made by the group to be the decision that seems personally best to them. "Compromise? Support others? Why would I do that?? We need to do it my way." Others, of course, want to kick back and let others do everything. "You guys are great. Keep doing what you're doing. I'll be over here surfing facebook."

It's hard to be a good leader. It is also hard to be a good follower. Collaboration is about knowing how to do both.

Collaboration is hard. You might think that schools teach people how to collaborate, but I think somehow the opposite lesson is being learned.

4 posted on 08/25/2013 6:35:54 AM PDT by ClearCase_guy (21st century. I'm not a fan.)
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To: SunkenCiv

Slate, Vanity Fair..... outstanding sources for how to run a business.

Neither is worth the powder to blow it to hell


5 posted on 08/25/2013 6:37:19 AM PDT by bert ((K.E. N.P. N.C. +12 ..... Travon... Felony assault and battery hate crime)
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To: ClearCase_guy

For every collaborative pack there is leader. Akela is to be followed.


6 posted on 08/25/2013 6:40:30 AM PDT by bert ((K.E. N.P. N.C. +12 ..... Travon... Felony assault and battery hate crime)
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To: ClearCase_guy

A system in which excellence is rewarded and incompetence is marginalized is not necessarily a bad thing, is it?

During my first year of college, back in the 70’s, I got all “A’s”.

Then the whole system switched to a Pass/Fail model. Show up- you pass. Don’t show up- you fail.

So boring, stupid and useless, I quit, got married, became a full time musician.


7 posted on 08/25/2013 6:40:58 AM PDT by left that other site (You Shall Know the Truth, and the Truth Shall Set You Free...John 8:32)
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To: SunkenCiv

Like every idea, each is applicable in certain circumstances and not applicable in others.

Stack and Yank is good if you are turning around an old ossified company like GE was when Welch got it. It was filled with “deadwood” that needed to be cleared out and Stack and Yank applied.

But when you have a relatively young workforce in a young company like MS, there is not that much dead wood that needs to be cleared out.


8 posted on 08/25/2013 6:43:44 AM PDT by staytrue
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To: SunkenCiv

The company I work for did this for about 10 years. The idea was cut from the bottom and add to the top. Everyone had to be ranked like in a totem pole, one higher or lower than someone else in your org. If you worked in an org of superstars you were in big trouble. I know alot of very good people who were let go because of it. They stopped about 10 years ago because everyone but HR hated it.


9 posted on 08/25/2013 6:44:27 AM PDT by Brooklyn Attitude (Obama being re-elected is the political equivalent of OJ being found not guilty.)
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To: SunkenCiv

Jack Welcch is a 24x7x365 d*ck. Not only did he poison the culture at GE he was the pioneer of outsourcing and the wedding of GE TO THE watermelon Marxist movement. Children die when he talks.


10 posted on 08/25/2013 6:45:19 AM PDT by WMarshal (Free citizen, never a subject or a civilian)
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To: SunkenCiv
From the article you linked us to:

"One Apple product, something that didn’t exist five years ago, has higher sales than everything Microsoft has to offer. More than Windows, Office, Xbox, Bing, Windows Phone, and every other product that Microsoft has created since 1975. In the quarter ended March 31, 2012, iPhone had sales of $22.7 billion; Microsoft Corporation, $17.4 billion."

Think about it: "one Apple product". That's not good. Especially for Apple, because, if that one product's sales start to dwindle and the iPHone falls from grace, it's back to HTC-type profits and market-cap for Apple. Heavy dependence on one product can be very damaging to a company, even if the product does well for years.

On the other hand, while MS might not be as profitable, they do have the best and largest portfolio or products in the IT market, for corporate and consumers. The huge diversification of products that MS has, is a firewall to failure that could come with dependence on one or two products, which is how Google and Apple have operated. Microsoft is in a much better position to survive a downturn in any part of the tech market, than Google or Apple.

While MS might not have the "coolness" factor working for them as do Google and Apple, it is operating with a much more mature approach to being a major player in all sectors of the tech market. Neither Google nor Apple can touch MS when it comes to diversification and number of products. And, heck, even WP8 is getting closer to becoming second in the smartphones battle, ahead of iPhones. Apple may be flying high right now, but they're also closer to becoming another Palm than any other company out there.
11 posted on 08/25/2013 6:45:51 AM PDT by adorno (Y)
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To: SunkenCiv
Now, whether our existing performance-management system needs to change to meet the goal of fostering collaboration is something that Lisa Brummel [head of human resources] would take up.

Very silly system.

Tech companies quite literally ARE their people and the innovations they produce. They have nothing else to sell. Sticking them into a somewhat toned-down version of Survivor is not a wise decision.

12 posted on 08/25/2013 6:46:22 AM PDT by Sherman Logan
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To: left that other site
Wired magazine had a recent article about a college professor who graded on a curve. His policy was to give an "A" on the final exam to whichever student got the highest score and then grade the other students in direct relation to what the best student had achieved.

A recent class communicated through facebook (quite openly) and they all (100%) showed up for the final exam and sat in the hallway. No one took the test. Everyone got an "A".

The teacher was honest and consistent (but has probably since altered his policy).
The class was clever and showed good collaboration.
But the overall lesson is that "gaming the system" is the way ahead -- and the problem at Microsoft -- and achieving excellence is just not necessary.

13 posted on 08/25/2013 6:47:29 AM PDT by ClearCase_guy (21st century. I'm not a fan.)
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To: left that other site

The problem with these systems is that it isn’t always excellence that is rewarded, more political skill, as is noted in the article. Managers can successfully use these systems to harm employees they don’t like, whether the employee is a performer or not. And in the case where I work, there is great pressure to classify at least 10% of staff who as underperforming, whether they are or not. It ends up resulting in someone being screwed every so often because it is “their” turn.

Other staff notice that on years when they really go all out, they get a nominal review. The next year, doing the normal day to day work, they get promoted.


14 posted on 08/25/2013 6:47:35 AM PDT by ican'tbelieveit
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To: bert

Best boss I ever worked under (in many ways, worst in others) had a simple philosophy. “I am the Law”.

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.

But when he made his decision, there was no further debate wanted. And he achieved much success. Did I mention we didn’t create a problem by hiring idiots to begin with?


15 posted on 08/25/2013 6:49:32 AM PDT by Norm Lenhart
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To: ClearCase_guy

“Collaboration is hard. You might think that schools teach people how to collaborate, but I think somehow the opposite lesson is being learned.”

I agree with you. Having worked in both small entrepreneurial businesses and large corporations, 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 and a small business, at the direction of the leader, can shift focus to capitalize immediately on opportunity or respond to a customer problem. Large businesses, with many layers of management and job description defined limits on freedom of action have a much more difficult time making decisions and responding, even when a shift is mandated from the top.

As you described, collaboration is hard, even without the politics and rules of a large organization. Leaders of big companies talk about the need for collaboration, flexibility, and entrepreneurship but they rarely invest in training employees how to collaborate. Collaboration requires a high level of trust and if the corporate culture does not inspire trust, employees will not collaborate. Certainly the Steve Ballmer and Jack Welch forced ranking performance systems does not work well with teams whose total output can be measured but the individual contribution to the team effort is difficult to discern objectively.


16 posted on 08/25/2013 6:50:19 AM PDT by Soul of the South (Yesterday is gone. Today will be what we make of it.)
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To: ican'tbelieveit

Oh Indeed!

Office Politics is POISONOUS.

I was relating my own experience.


17 posted on 08/25/2013 6:50:23 AM PDT by left that other site (You Shall Know the Truth, and the Truth Shall Set You Free...John 8:32)
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To: Brooklyn Attitude

I wish the company I work for would stop it. The horror stories of what happens in the management meetings where the ranking is determined is unbelievable. Every misstep an employee makes is discussed, aired.


18 posted on 08/25/2013 6:51:03 AM PDT by ican'tbelieveit
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To: SunkenCiv

I use Openoffice and Codewrite and.... well, Microsoft’s products have been second rate about forever.


19 posted on 08/25/2013 6:51:41 AM PDT by Seruzawa (Hokey religions and ancient weapons are no match for good a blaster kid.)
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To: ClearCase_guy

“You might think that schools teach people how to collaborate, but I think somehow the opposite lesson is being learned.”

Schools are teaching equality and every opinion is as good as the next. This also means EVERYONE IS A CHIEF AND NO ONE SHOULD BE AN INDIAN.

The only problem is that when everyone is a chief, there is no collaboration.

What needs to be taught is that if someone is better than you, that guy gets to be the chief and you are the indian. When you improve enough to be the chief, you get to be chief. The problem is, most of the kids should never be chiefs and that would damage their self esteem. The parents of the persistent indians will also come down on the teacher too.

In most self evaluation surveys, about 90% of the students rate themselves as “above average”.

Most adults when rating themselves on a scale from 1-10 rate themselves a 7.


20 posted on 08/25/2013 6:52:58 AM PDT by staytrue
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To: ClearCase_guy

It didn’t work 40 years ago, and won’t work now.

College professors are supposed to be at LEAST “Moderately” intelligent! LOL.


21 posted on 08/25/2013 6:53:03 AM PDT by left that other site (You Shall Know the Truth, and the Truth Shall Set You Free...John 8:32)
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To: bert

You never know when or where you’ll find an interesting tidbit. It’s still a matter of finding a needle in a haystack sometimes even when the haystack is named Vanity Fair.

I don’t subscribe to as many magazines as I did long ago. I still look at them on the newsstand or library to figure out which issues might have something interesting. Most don’t. It doesn’t take long to look at the index and scan an article for merit.

I view it as part of continuing education Even Vanity Fair has had a few worthwhile articles over the years.


22 posted on 08/25/2013 6:55:21 AM PDT by meatloaf
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To: Brooklyn Attitude

“The company I work for did this for about 10 years”

Ok, but in the first 2 years, was this good ?

I suspect it was as the competent people stayed and the deadwood got cleared out.

After that, the dog eat dog atmosphere probably was detrimental.


23 posted on 08/25/2013 6:55:36 AM PDT by staytrue
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To: SunkenCiv

All “Rank & Yank” does is tell managers they do not have to manage or terminate bad employees they only have to rank someone low and HR will yank them out. Star performers that are threats to their managers are routinely ranked low so that they are terminated.


24 posted on 08/25/2013 6:56:44 AM PDT by CodeToad (Liberals are bloodsucking ticks. We need to light the matchstick to burn them off. -786 +969)
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To: WMarshal

“Jack Welcch is a 24x7x365 d*ck. Not only did he poison the culture at GE he was the pioneer of outsourcing “

Jack Welch kept GE from becoming Eastman Kodak and made it into a great US company again.


25 posted on 08/25/2013 6:57:04 AM PDT by staytrue
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To: SunkenCiv

http://www.amazon.com/The-Advantage-Organizational-Everything-Business/dp/1455877255


26 posted on 08/25/2013 6:58:33 AM PDT by varmintman
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To: SunkenCiv

Oh, btw, iPhone sales have started to decline, and Apple doesn’t really have anything new and improved where it can keep the competition at bay.

Meanwhile, Microsoft is the only company with 16 products and services that produce more than $1 billion in revenue per year. I’d say that’s a company with a much better foundation going forward than Apple or Google.


27 posted on 08/25/2013 6:59:43 AM PDT by adorno (Y)
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To: ican'tbelieveit

“The problem with these systems is that it isn’t always excellence that is rewarded, more political skill”

There was a show “the weakest link” where a group of contestants filled a pot with money by answering the right questions. After each round , they voted off the weakest link. At the end, one person took home the pot of money.

In the early rounds, they did vote off the weaker players to get more money in later rounds.

But in the last few rounds, they started voting off the strongest player to eliminate competition.


28 posted on 08/25/2013 7:02:13 AM PDT by staytrue
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To: adorno

I love Windows 8 for the laptop. I guess I must be the only one.


29 posted on 08/25/2013 7:02:45 AM PDT by St_Thomas_Aquinas (Isaiah 22:22, Matthew 16:19, Revelation 3:7)
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To: SunkenCiv
the old rule of thumb was to get rid of the bottom 5% every year
30 posted on 08/25/2013 7:03:30 AM PDT by Chode (Stand UP and Be Counted, or line up and be numbered - *DTOM* -ww- NO Pity for the LAZY)
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To: SunkenCiv

Very interesting


31 posted on 08/25/2013 7:04:30 AM PDT by RightGeek (FUBO and the donkey you rode in on)
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To: SunkenCiv

This happened to me several years ago. I was an employee at a major computer company for 25 years. I was usually evaluated as a 1 or a 2 performer. I transfered, within the same company, to another site into a group of 1 performers. Since I was new to the department and had the timing misfortune of joining the department during a ‘ranking’ session, I was ranked at the bottom and ‘yanked’.


32 posted on 08/25/2013 7:04:44 AM PDT by duckman (I'm part of the group pulling the wagon!)
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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.
But when he made his decision, there was no further debate wanted. And he achieved much success. Did I mention we didn’t create a problem by hiring idiots to begin with?

The manufacturer I worked for had an interest twist to that idea. 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. Open hostility to the marketing manager and the bean-counters was encouraged (I need to add that arguments usually were not about pricing--we all knew that our bonus was tied to profit).

Like I said, interesting because I had never experienced something like it before, and might not again. The company was #1 in the industry.

33 posted on 08/25/2013 7:05:28 AM PDT by 1rudeboy
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To: CodeToad

“All “Rank & Yank” does is tell managers they do not have to manage or terminate bad employees they only have to rank someone low and HR will yank them out. Star performers that are threats to their managers are routinely ranked low so that they are terminated.”

Please see post 28 on the game show “the weakest link”


34 posted on 08/25/2013 7:06:15 AM PDT by staytrue
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To: WMarshal

Thank you.


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

“this sort of ranking system. It was actually popularized by Jack Welch at GE, where it was known as “rank and yank.”

This is a misappropriation of the first order! The true inventor of this evil ranking system was JD Rockefeller of Standard Oil. His grim “Rating and Ranking System” is still practiced ruthlessly at ExxonMobil.


36 posted on 08/25/2013 7:09:50 AM PDT by pelican001
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To: adorno
On the other hand, while MS might not be as profitable, they do have the best and largest portfolio or products in the IT market

Yeah, and so did Kodak.

37 posted on 08/25/2013 7:10:57 AM PDT by llevrok ("It's a beautiful thing, the destruction of words....." - Geo. Orwell)
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To: staytrue

I worked in this area for many years. You are exactly right. IBM needed this approach in the 80s. Most Government Bureaucracies could do with it for 5 years or so.

However, stack and yank seldom works for more than a few years before you start eliminating talent, eroding morale and diluting productivity since it is frequently predicated on the organizations ability to recruit equivalent or better talent. Most importantly it is designed to force weak managers to do a better job evaluating their own reports. If you don’t make sure that you first get rid of weak managers you will end up perpetuating performance weaknesses. A lot of schools suffer from this problem. Weak principals keep weak teachers and drive out the stronger teachers that threaten them: Fish rot from the head.


38 posted on 08/25/2013 7:13:04 AM PDT by bjc (Show me the data!)
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To: ican'tbelieveit

Very wise comments. These systems might work if performance was unambiguous, such as in a track and field 100 yard dash competition. You can definitely rank the participants in that race, provided they were all in good health that day. However, can you compare the sprinters to the distance runners? If you cut the slowest in each group, did you really cut the lowest two performers for the team as a whole? If you include enough small groups in the overall cutting process, you will make several wrong cuts and keep some performers who werent’ as good.

When you start ranking people who do tasks that are difficult to measure, such as design or innovation work, you start falling into decisions made on the basis of liking someone. Someone might not be an extrovert, but could be an excellent, innovative engineer. Then there are people who work on pharmaceutical development and who may take many years to identify a successful drug. How are you going to clearly assess their performance over the early years?

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.


39 posted on 08/25/2013 7:14:14 AM PDT by iacovatx (Conservatism is the political center--it is not "right" of center)
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To: ClearCase_guy

You are pretty much describing the electric paower systems lab group I was in when I was in college. Two members of the four person group I was in I call “Captain Head” and the “Stomed Ranger” since they liked to partake in a lot of weed. The course was on a Monday morning, so you can accurately guess what state they were in (and we’re working with 480 volt 3 phase, and it’s amazing no one got killed!). When it was time to do the group lab report, instead of meeting a t the agreed upon time and place, Head and Ranger were at the Student Center playing pinball. When the other lab group member and I reminded them of the shared responsibility, we get called before counseling services to get lectured about tolerance - as in we were suposed to accept people showing up stoned.


40 posted on 08/25/2013 7:15:29 AM PDT by Fred Hayek (The Democratic Party is now the operational arm of the CPUSA)
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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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