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 ...
Yup. And also, the second a good manager lets his guard down and hires an idiot, the whole thing collapses rapidly. That one idiot destroys the cohesion, the morale and the desire to excel in the rest.
Oh did I get an inside view on that one once.
“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.”
Even before this policy it was a very demanding environment where poor performers are not tolerated for very long. There wasnt alot of dead wood to start but the new policy demanded that 15 percent of people in ALL organizations were deemed poor performers. For example if you had a group of 10 nobel prize winners, one of them would have been rated unsatisfactory. Lots of good people got flushed.
“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.”
I saw that happen in my organization while I was a manager. While ranking employees in other organizations if no one knew who you were you got a poor rating. Luckily I was able to get out of management and back to the bench after a few years.
I think that's true. How many businesses of a certain size do NOT have an HR Dept? Any? Why?
I think it's partly the mindset of many businesses that "expertise," however defined, is valued. The thought is that hiring and managing people is such an important function that we need "experts" which is in this case HR professionals. The results speak for themselves.
However, HR depts. serve a much more important function for a company...they PROTECT THE COMPANY FROM ITS EMPLOYEES.
I believe the #1 priority of any HR Dept is...don't let us get sued. So there are all kinds of methods and processes for hiring and firing that are legally sound but functionally null (at best).
While true for some companies, I think that really depends on the company and the HR department.
Compliance is a huge issue for companies now days; federal and state DOL regulations, EEOC, FMLA, unemployment claims, workers compensation, disability claims, health and welfare benefits, wrongful terminations, fair hiring practices, background checks and drug screenings, what you can and cant ask in an interview, policies that you can and cant include in the employee handbook and in the case of the company I work for payroll with all the tax and other regulations that fall on my dept which is under HR - its a mine field out there and having a competent HR department does help keep the company out of court and prevent them from being fined big bucks.
Ive also seen our HR manager go to bat for our employees and she really does listen to their concerns and complaints and when valid, she tries to resolve their issues and acts as their advocate. She advises/mentors employees who want to move up, or transfer to other positions within the company, telling them if they are not qualified but also tells them why and with suggestions for further training or areas where they need improvement or if they are qualified, makes sure they have a fair shot at the promotion or transfer. Shes been with this company for over 24 years and knows our business, the area and the culture and really has her finger on the pulse of all our workers and is highly respected by all for her honesty and fairness.
Ive also seen her question performance reviews conducted by a manager where that manager gives one employee a higher review score than another but the comments on the review are either exactly identical or the employee with the higher score has been recently reprimanded, has a poor attendance record or has been put on an improvement plan yes, there is potential legal exposure for the company that she is concerned about, but she also wants to ensure that an employee is truly not being treated unfairly by a manager with a grudge or personal issue not related to their employees performance. She will also look at outstanding performance reviews and talk to their manager about the employees potential for promotion and then the employee to ascertain if that is something that they are interested in pursuing. She also makes sure that our performance reviews are written in such a way as to be both meaningful and fair to the employees and management and not onerous or overly time consuming for supervisors to complete.
And Ive seen managers write job descriptions for new positions but when it comes to writing the job listing, they ask for things like degrees or certifications that are not at all supported by the actual job description or they have unrealistic expectations of what that position should pay, either way too low or way too high. A good HR manager can bring both the managers expectations of what is needed vs. what is wanted and what the job market is paying for those positions and for our region and our industry, what a qualified applicants expect in an offer and brings theses all in line to get the best candidate for the job. One recent example was when we had an opening for a pricing analyst. The hiring manager wanted 10+ years of experience in pricing and both a BA and an MBA in but only wanted to pay something like $15 per hour as a non-exempt (hourly) employee but the actual job description as written did not support this. She told the hiring manager it was a waste of both her and his and any applicants time to advertize the position that way and bring in qualified candidates and then only offer them $15 per hour and for a non-exempt position when the job description alone would make it salaried position and that the job advert as proposed would bring in only people looking for a lot more than $15 per hour. As a result, with her help, the manager re-wrote both the job description and the job advert (upgraded the job description a bit and lowered the job advert to match and more in line with what was really needed) and we hired someone who so far is working out very well and within the new job description, a job and person who filled it that are serving the business needs and well within budget and a new hire who is not likely to quit in a few weeks or months because the job and pay wasnt what they wanted or within the market price for their skills set.
Last year we got a new president and he has tried to make a lot of changes in a very short time some are good and make sense and some are just because that was what he was used to at his last company and or, and in my opinion, he just wants to flex his muscle and authority and make changes for the sake of making changes.
Effective January 1, we are becoming a 100% smoke free campus and while my HR manager is a smoker herself, she was more concerned and stood up for our other and especially our hourly employees when it was proposed by upper management that: we should drug test for nicotine as we would for illegal narcotics and telling hourly workers that they were not allowed to leave the building during their unpaid lunch break or if they were allowed to leave the building, that they couldnt smoke in their own vehicle even while off company property or parked on the public street across from our facility or in not hiring new employees who were smokers (which is illegal in NC where one of our plants is located). She made it very clear that while such a policy is supposed to be an incentive to quit smoking and in theory to reduce our healthcare costs and she supports the smoke free campus idea and this policy would be legal except for our NC plant. She also pointed out that smoking is still legal and that by treating workers who smoke and only the hourly employees with unpaid meal breaks (as opposed to salaried or some hourly workers on 2nd, 3rd and weekend shift workers who get a paid meal break), many of them long time and productive workers, like criminals or children, that this would have a real negative effect on moral. She also pointed out that workers who are not smokers could be engaging in activities or life style choices on their free time that could also impact their health and her push back resulted in a more reasonable and fair policy.
The new president also recently wanted us to change our Paid Time Off (PTO) policy, originally wanting to institute effective January 1, an annual use it or lose it policy and then when that was struck down, a reduced number of hours one could carry over from year to year (to only 40 hours), and reducing the maximum caps on accrued PTO hours to 120 hours across the board, regardless of how long theyve worked for the company and totally eliminating the ability to cash out unused PTO. While again, she understood the economic reasons for the proposed changes and supported it, she also brought to the president and the compensation committees attention the fact that some employees with more than 20 years with the company have banked up to their max, in some cases up to 300 hours of PTO and that there was no way they could use all that time between now and the end of the year without impacting production and that it was unfair for them to lose this time especially if they were not able to cash it out or use that time due to business needs. She also advocated for a cap and carry over limit higher than 40 hours as because if an hourly employee goes out on short term disability, they have a four week wait period and can use their banked PTO as a float until their STD kicks in. In this case she looked at what was good for the company but also what was fair to the employees.
While Ive worked for some companies where HR was only looking out only for the company, even ignoring or supporting illegal or unethical employment policies, thats not how it works at the company I work for presently - and thank goodness.
Since 1995, Willow Creek Association has held an annual Leadership Summit. Speakers at the Leadership Summit have included President Bill Clinton, Karen Hughes, who served as Special Advisor to former President George W. Bush, Lady Vols' women's college Basketball coach Pat Summitt, Dallas, Texas pastor Bishop T.D. Jakes, business consultant and author Jim Collins, University of Southern California president Steven Sample, Yahoo!'s Tim Sanders, business author and leadership consultant Marcus Buckingham, and Rick Warren, pastor and author of The Purpose Driven Life. The 2005 Leadership Summit had over 53,000 attendees in over 100 locations across North America. The 2006 Leadership Summit featured Bill Hybels interviewing U2 frontman Bono.
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...its a mine field out there and having a competent HR department does help keep the company out of court and prevent them from being fined big bucks.
You're right about that. In the end though, the value of HR is mostly related back to government, lawyers, and unions - all parasites or sand-in-the-gears people who add little or nothing much of value to either the company or the product.
Now, with thousands of $$$ worth of film Nikons (for which film and processing are hardly available) in the safe, I'm 100% digital, and my hold-out wife is just about to give up film...
Even back when Kodak pulled that dumb@$$ move, it didn't take a futurist with a computer to predict Kodak's demise...
Bravo sierra! Kodak rode one old horse (film) into the ground; Apple keeps inventing new horses.
Microsoft can barely stay in the saddle on horses others invented...
Nice try, Steve...
Microsoft is still sitting on a ton of cash. Things can change in an instant.
Thanks for the ping. Bean counters have a role to play, but they aren’t fit to lead.
Dr. Deming’s 14 Points for Management, Point #12:
12. Permit pride of workmanship:
Remove barriers that rob workers and people in management of their right to having pride in their work. This means, for example, abolishment of the annual or merit rating and of management by objective.
I work in a company that does this. I think that *on the whole* talent is recognized. But there are exceptions as well. And there are probably many more cases where someone is ranked middle of the pack (not bottom 5%) when they should be higher, or someone who is ranked higher when they should be middle of the pack.
But I strongly agree that it creates a fearful, political atmosphere. People in this environment will tend to do the safe thing, not the innovative, courageous thing. And there’ll be a bit less of a tendency to help one’s peers.
Having said all of that - no system is perfect - at least none that I can see or even imagine.
The biggest thing is that if you’re at a company that’s “flying high” - say like Google - everything is going to come out smelling like roses. You’ll get the smartest people - they will get stock options that actually are worth something and you’ll get to develop new and innovative products.
If you’re working at a company in decline - nothing is going to seem like it works. People will leave, the ones that stay won’t be happy and the rich will get richer and the poor will get poorer.
“...that company — in my rear-view mirror — for the final time...”
I felt the same way. On my last day I was ‘checked out’ of the company, I could not say good bye to my work associates and was escorted to the parking lot. As I approached my car, I looked back and felt like a newly released prisoner just given a gray suit and $5 dolars spending money.
As soon as a major manufacturer can get an alternative OS installed in bulk that supports viable consumer and business apps that doesn't cost $2000 a la apple MS is toast. Already any business using Windows servers on its back end is run by fools (having just seen a back end server on hosted network get infested with viruses).
I think everyone who works in IT owes MS a big debt because computer use would never have gone anywhere if everyone were stuck having to a $20k SG workstation. But that doesn't mean Windows isn't a POS.