Skip to comments.The Poisonous Employee-Ranking System That Helps Explain Microsoft’s Decline
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 thats not obvious to outsiders was the companys employee evaluation system, known as stack ranking. The systemand its poisonous effects on Microsofts corporate culturewas 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 wasnt 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 systemthis 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 Welchfor a time, anywayhas produced some ugly results elsewhere. Even GE phased the system out following Welchs departure.
(Excerpt) Read more at slate.com ...
The interesting thing about the late Steve Jobs is, he had to be gone from Apple and take a lot of lumps for his stupid personal habits in order to reemerge as the effective and successful leader of Apple that he was in the final decade or so of his life.
The original iMac, which was the first big rollout after he returned (on an interim basis), was going to ship with a 33K internal modem, which was just idiotic; Jobs reacted by pulling the plug on that idea and going with the 56K. Up until he did that, the diehards defended the 33K, claiming that buyers wouldn’t even be using dialup — a foolish argument, because in that case, why include a modem at all? That’s when I started to realize that Jobs had changed during his exile.
He’s been gone a while, but he was always years ahead of the market, and years ahead of the technology, and his vision will be good for a good while yet. In addition, there’s engineering depth and creative depth at Apple that doesn’t get the big headlines, and that’s probably a good thing.
“Im old-fashioned. I think collaboration is best taught on playing fields and other non-academic venues. Its actually a dangerous crutch when thinking itself is the lesson.”
I’ve participated in some very powerful team building sessions and some very poor ones during my business career. The better ones stress dealing with hard interpersonal and business directly and honestly as well as team members holding each other accountable for performance and results. In those sessions personality and behavioral issues preventing the team from succeeding were dealt with by the team with a facilitator. These sessions were brutally honest and “real”, not theoretical. At the end of the multi-day session the team had wrestled with several real interpersonal issues that were getting in the way of successful collaboration.
The poor team building exercises were emotional “feel good” sessions. There was no direct application to business issues or problems getting the team members to collaborate. These sessions were about cheerleading and “trying harder”.
To your point, actually working through real issues in real time is a more productive exercise than listening to theory that may or may not apply to the leadership management tasks at hand.
Thanks! I remember the ‘good’ old days, when [FR nick deleted] used to *organize* Apple bashing posses, and when just pointing that out was — Moslem-style — condemned as an attack.
And I’d say those difficult personalities simply didn’t play on enough sports teams. ;-)
What college was that? I can see this happening in a public school but not in a private college. I guess I’m just not buying this.
Don't forget the tablet (iPad) - a product that has yet to reach maturity. It will soon be outselling PCs and phones combined. People will soon have tablets in every room in the house including the car.
Rumor has it that Apple has another product in the pipeline that will create a whole new industry. Most likely a large screen that will have embedded electronics that will redefine the television set and make obsolete set-top boxes like Tivo, Roku and cable boxes, etc.
That doesn't even make sense. If they didn't take the test, how could they get any kind of grade at all?
Professor Peter Frohlich, computer science professor at Johns Hopkins University taught the class.
The stratery is that if Sally doesn't take the test, she get's a zero. If any student gets a higher grade, then Sally is in trouble. But if no one gets a higher grade, then Sally's zero qualifies as the highest grade in the class. The highest grade gets an "A", Sally has an "A" now. And since every other student scored exactly the same, then every student has an "A".
“And Id say those difficult personalities simply didnt play on enough sports teams. ;-)”
Actually I doubt most of them played sports.
Employees of an organization model the behavior of their leaders. If executives model collaborative behavior, and hold employees accountable for working effectively together, the organization will display collaborative behavior. If the executive staff is made of individuals with big egos, clawing their way to the top of the pyramid, employees will not be collaborative.
Unfortunately most corporate executive compensation systems reward individual performance over group performance. Therefore if I can make myself look good and you look bad while the organization suffers, I’m better of financially than if the organization succeeds but you look better than me.
A company's biggest threat is to long-term survival. This comes from sustainability - sustainability of products and services, but also of its corporate culture and processes.
The cited problem with Microsoft "rank and yank" is the focus on office politics, surviving in a team of top performers, and retribution from unscrupulous managers. The cited problem with Google/Apple is reliance on a single product, and if I may add, the risk of diverting focus to non-strategic activities.
The truth is that both approaches rely on the abilities of their people, and reward performance of individuals. The risk to survival is that people eventually leave through attrition or retirement. Companies that rely in the talent of individual contributors have a hard time replacing 25+ years of talent. Imagine the Chicago Bulls after Jordan retired, or the San Francisco 49ers after Montana and Young retired.
What companies are finding out is the need to replace individual performance with systems of process management, that is, get the expert knowledge out of the individual and into the process. The way to do this is to encourage and reward mentoring. This means changing the "rank and yank" to deemphasize individual contribution and reward teaching the next generation of worker. Doing that will lead to a collaborative workplace that doesn't lose focus on the corporate strategic goals.
After I had recruited a team of "cream of the crop" performers who were literally acknowledged -- world wide throughout our industry -- as the leaders in establishing the much-needed next generation of products for the industry -- I was told that I must rate those "stars" on the same "curve" used for janitors.
There was no way I could live with the rule that, if I rated one "star" "exceptional", then I must fire another.
So, after a career there for nearly twenty years, I left -- and never looked back...
As many folks in Texas were wont to say, I "saw the most beautiful sight in Texas" -- that company -- in my rear-view mirror -- for the final time...
What a shame -- for a once-great company to be viewed so scornfully -- not only by its employees -- but by the surrounding community in general.
If the activities for which someone shows ability is to get rid of competitors as quickly as possible, the company will suffer all the way to the end. That’s the point of the article. Rewarding employees for their ability to maintain their own employment regardless of how it impacts the company turns MS into a gov’t agency style place to work.
MS has been moving toward the Apple model — Apple’s strength is its control over both hardware and software. Previously, MS was the OS company and (other than in the late 1970s and very early 1980s, when it was making some peripheral cards; and its current business making or outsourcing mice and keyboards, and btw, I love the Microsoft 5000 mouse, I’m on my second one) didn’t worry about the hardware. IBM hired MS to write a knock off of CP/M, and Gates retained rights to “port” the OS under their own label after a couple of years.
The clones (Leading Edge, Compaq, many many others) eventually drove IBM right out of the hardware business, and their own OS/2 never caught on.
Google’s model has been mostly a copy of MS’ OS-only strategy, using the foundation of the open-source OS and office suites that had been hacking away at MS market share for a few years already. If the Linux flavors had a real installer, suitable for regular folks, that free OS would have taken over everything by now. Geeks.
Which is why monopolies and companies that are 'too big to fail' need to be broken up. Companies will treat employees real good, if they know said employees could easily jump to competing firms.
From yesterday's WSJ:
Microsoft remains a behemoth financially. It generated nearly $78 billion in revenue in the year ended June 30an average pace of $150,000 worth of sales every minute. The company's fat profit, amounting to $21.86 billion last year, remains the envy of most industries.
Long-term viability reduces the impact of single contributors by developing systems of management (project management, support management, talent management, etc.). To grow this change, the rank and yank (or any HR reward system) has to put emphasis on handing down the knowledge to the next generation of worker, and not emphasize hoarding the knowledge in order to be at the top of the performance hierarchy.
In essence, top performance is no longer measured by output, but by knowledge transfer.
It didn’t make me feel like a team player. It made me more conservative. I’d rather do a paper and turn it in than do twice as much work and see others get the credit.
More than once, I had to do the group project by myself because I couldn’t sync up schedules with others or was paired with a slower kid who did nothing but put a name on it.
That is an interesting problem for a corporation to have. Thier previous offerings are so strong that they actually compete with current ones. In our household it works in a kind of funny way. Wife really likes ithingies, with lesser enthusiasm by MIL and myself. So when WifeofZeugma is ready to upgrade, everyone else gets the hand-me-downs. Currently, she has a 5, MIL has a 4s and I have a 4.
I think it's amazing that the products are so strong that the previous products work just fine all the way down the line. When WoZ upgrades, I'll probably still be able to get a few bucks for the 4 I'm using now.
You remember differently my friend.
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. :’)
The iPad saw a slump in sales, because buyers are waiting for the new model; instead of 19 million, ‘only’ 14 million were sold. :’)
...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.
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.
Steve Ballmer said one wise thing in an interview with him I read a couple of days ago: “We don’t talk about quarters!”
I remember accurately, so, yeah.
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.
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. :-)
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.”
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.
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”.
It’s Really Cooking Along Great, isn’t It? :-)
Enron did the same thing.
There is always someone like that in every group!
If I worked in a cubicle.....that would be *me* throwing paper airplanes...I just know it.
Apple made their products too good, if anything.....People don’t feel the need to upgrade from the Apple products they bought 3 or 4 years ago.
Massachusetts College of Art Class of 1974.
A State College.
That probably explains a LOT! :-)
Look at Sprint as a current example. They were the leaders in 3g/4g cellular when they built a national WiMax network. Unfortunately, the industry eventually settled on LTE and Sprint went from first to last as they are trying to catch up. They are dismantling their WiMax network and scrambling to build LTE.
At least four separate subthreads. :’)
If you tear that image into four equal pieces, I’ll give you a quarter.
WiMax suffered from that ill-considered lawsuit from Clear, on the stupid litigation ideas list, it probably nudges that $60 million lawsuit their record label brought against the band Boston because the third album took so long.
Also, the WiMax buildout didn’t reach much beyond urban areas, but because it has a long range (perhaps 25 miles line of sight), it was offered in areas which didn’t really have coverage, so someone got sued for that idea. WiMax would work, but the dropouts and resends drastically increase with distance.
Sprint offers LTE where I live here in the Boonies (actually, I’m about three miles past the Boonies, but anyway), and no one else does (yet, and probably won’t until LTE is itself superseded); Costco’s price on it is $67 unlimited data, I’ve definitely been thinking about it.
What is needed is 100% optic line coverage, everywhere; all the TV, phone, and web services would be offered on that; and the network would be the sole delivery channel for all land line biz, and jointly owned. The installation costs would be offset by the copper recovery and recycling value as the old lines are removed from trenches and poles.
A good manager will hire smart and able people, who will naturally gravitate to him. He's not intimidated by people smarter than himself.
A poor manager not only will not, but cannot surround himself with good people. He wouldn't know a good employee if he saw one, would probably find be repulsed by somebody smarter than himself, and good people tend to stay away from fools.