The Poisonous Employee-Ranking System That Helps Explain Microsoft’s Decline

Slate ^ | Friday, August 23, 2013 | Will Oremus

[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.

[SunkenCiv]

Good policy. :’)

Blackberry has recently announced that it may be selling itself (the company), what is that, RIMM? Nokia’s current uptick has been selling Windows phones, but that is why MS has taken second place in Latin America, and is outselling Blackberry worldwide. :’)

[SunkenCiv]

The iPad saw a slump in sales, because buyers are waiting for the new model; instead of 19 million, ‘only’ 14 million were sold. :’)

[SunkenCiv]

from July:

http://www.theverge.com/2013/7/23/4549094/apple-microsoft-google-profit-revenue-margins-q2-2013-chart

...Google’s wealth grew significantly this quarter, but even with revenue and profit growth pegged at around 15.5 percent year-over-year, Wall Street were left cold; revenues and profits fell short of expectations.

Microsoft, on the other hand, was always unlikely to see profits drop year-over-year: last year’s calendar Q2 saw a huge $6.19 billion “goodwill impairment charge” related to its disastrous acquisition of aQuantive. That said, relatively static Windows revenue, despite the launch and continued push of its Windows 8 and Windows RT operating systems, and a $900 million write-off on its Surface RT tablet, gave investors cause for concern.

Apple also had a troubling quarter, with flat revenues and significantly lower profits than this time last year. The company is making far less revenue per device than it has done in the past, and that’s impacting it’s bottom line significantly.

Q2 may have been a difficult quarter, but It’s fair to say that none of the three are really struggling.

[SunkenCiv]

It’s actually a selling point for the new units that the old units retain value and functionality. That’s another hard-learned lesson that finally sank in with Jobs.

[Revolting cat!]

Steve Ballmer said one wise thing in an interview with him I read a couple of days ago: “We don’t talk about quarters!”

[SunkenCiv]

I remember accurately, so, yeah.

[SunkenCiv]

http://www.youtube.com/watch?v=JJm8fZ6WS5Y
http://www.youtube.com/watch?v=6CRt-h4IrEQ
http://www.youtube.com/watch?v=odY8nff3h0w

[SamAdams76]

Apple continues to preserve their margins so even though they are losing market share to competitors who are willing to give their "copy cat" products away, they continue to be way ahead in terms of profit dollars.

It is the profit dollars and the cash on hand that will allow Apple to survive the shakeout that typically occurs when an industry is too busy chasing short-term market share over long-term viability.

[left that other site]

well, I was married 40 years to the same guy.

I am a widow now, but STILL a musician.

So, I guess that is about as happy an ending one could expect in THIS world, anyway. :-)

[SunkenCiv]

One of the most difficult things to do in the entertainment industry — that is what most of the high-rolling businesses are in, after all (professional sports, movies, music, broadcasting including ‘news’, and most consumer electronics) — is predict what the market will want. Success can be a monkeys and typewriters proposition.

A few years back a Sony exec said that BluRay would be the last optical format. This stemmed no doubt from the continuing storage density gains in hard drives and flash drives (including SSDs).

Now what happened?

“will target the development of an optical disc with recording capacity of at least 300GB by the end of 2015.”

http://www.sony.net/SonyInfo/News/Press/201307/13-0729E/

http://www.digitaltrends.com/computing/the-disc-is-dead-long-live-the-disc-panasonic-and-sony-to-create-the-next-gen-300gb-optical-disc/

from 2012:

http://www.theregister.co.uk/2012/04/18/sony_optical_disk_archive/

[Revolting cat!]

[PapaBear3625]

At a place I worked, for a time we had "management by consensus". Nothing on the team would be approved unless there was consensus. The women on the group liked this, because they disliked openly making a decision and standing accountable for it. By having all decisions be "group consensus", nobody was really accountable.

This turned into "dictatorship of the most stubborn", where one woman in the group refused to go along with any decision she didn't like. She was eventually fired, but it took a while.

[left that other site]

While the concept of “Teamwork” is a good one in business, there also should also be a system where excellence is rewarded and incompetence “corrected”.

[Daffynition]

I blame cubicles. Who can do anything productive in a cubicle?

[The Cajun]

Seems like a fair payback to me, why back in the day when we had big monitors............................ :)

[left that other site]

It’s Really Cooking Along Great, isn’t It? :-)

[Mad Dawgg]

Enron did the same thing.

[adorno]

Apple continues to preserve their margins so even though they are losing market share

Not true at all.

Apple's margins are lower each passing year, and will continue to go down. That has been apparent in the last few quarterly reports from them.

And, they have also been losing market share, like you said, and that continues to get worse with each month of sales.

Then, there is their stock, where the investors have become increasingly worried about Apple's staying power, and the investors worries are reflected in the much lower market cap which Apple has suffered in the last year. The only uptick they've gotten in the last few months, was from Carl Icahn's statement where he said that Apple's stock was undervalued, but, he didn't bother to explain why he felt that way. Fact is that, other than Icahn, there was nothing new to warrant Apple's uptick in the stock.

Apple is still very profitable, and might be so for another year or two. The only thing I've been saying is that, Apple doesn't have the products and research to make it beyond iPhones and iPads. Once those two products have run their course, Apple is in danger of going back to where they were in the 1990s.

[left that other site]

There is always someone like that in every group!

[Daffynition]

If I worked in a cubicle.....that would be *me* throwing paper airplanes...I just know it.