![]() The result of using a curve is that, regardless of performance, some percentage of employees are always ranked in the lowest tier ( and the highest tier, but that's not discussed much). PerformYard makes it easy to implement your custom performance management process. This is the distinguishing factor in this debate - not just rating or ranking performers to create your list, but forcing a distribution. Simple, right?īut it’s not just ranking them first to last that makes the Yahoo and Microsoft cases newsworthy, but rather distributing them into groups based on some sort of bell curve (or other pre-set distribution) where a certain percentage must fall into categories from best performers to worst performers. Perhaps part ways with your poorest performers. This certainly seems reasonable. Determine your top performers and reward them. Under these, like most performance systems, those at the top get the accolades, bonuses, promotions those at the bottom, well, they see the opposite. So let’s talk about what stack ranking is… at its simplest, it’s what the name implies. So what's this all about? What is stack ranking? the news came the same week it was revealed that Microsoft stopped that same practice. While the true impact on their workforce and, ultimately, corporate performance certainly cannot be seen immediately, that hasn’t stopped people from discussing it and, generally, panning their decision to implement stack rankings.Īnd in an interesting twist. Was this Marissa Mayer’s second fumble when it comes to employee management? You remember the first (well debated) fumble being the work-from-home kerfuffle. Thus far they have eliminated 600 employees–so she is seeing results. Is it the right way to achieve rapid change? That remains to be seen.Lots of ink was (figuratively) spilled in the digital media world talking about the implementation of stack rankings at Yahoo. She is using the process to quickly change the performance culture. Is stack ranking all bad? Marissa Mayer has instituted a fast-track quarterly performance review process Yahoo and is using stack ranking to weed out employees identified as low performers. Conversely, I’ve heard of managers who actively recruit a low performer from another team to help push their incumbents up in the stack rank. Employees that know they are a high performer in one org don’t take positions in a new org–where their knowledge & skills might be crucial–because they are too well positioned within the stack rank of their current team. Living in MS’s backyard, I know that MS employees and managers have gamed the stack ranking system. Stack ranking created a culture of individuals focused on championing their achievements over the the outcomes of their team–and with Microsoft attempting to pivot to a more integrated services model, that cannot continue. V anity Fair’s piece on Microsoft stated that every current/former employee interviewed for the article named the stack ranking process as a key driver as to why MS had lost its way. ![]() Unfortunately, this practice has been singled out by many employees as being damaging to Microsoft’s ability to consistently innovate and deliver game-changing products and services. Unlike a smaller, pre-IPO startup company–or a post-IPO company still in rapid growth mode–a mature company, with a stock price that isn’t moving upward, cannot incent employees using stock options. ![]() Stack ranking at MS was a key way of being able to differentiate the level of reward for performers of different levels once MS’s stock price leveled off about a decade ago. The left 10% are those at risk–whose work performance is poor enough that they should be on a performance improvement plan (or, in the days of Jack Welch’s GE, fired). The truly exceptional performers are the 20% to the right–and are incented accordingly. The idea is that most performers–the 70% in the middle–fall around the mean solid, if not exceptional. Most companies use what is known as the 20/70/10 model: Stack ranking is simple in theory: Employees are assigned ratings, and those ratings have to fall within a predefined bell curve. I was on the first of many planes home last week when it was announced that Microsoft was killing its employee performance stack ranking system. The announcement sent shockwaves through the tech, HR, and business news channels. Yes, I’m late to the game on this (in a number of ways). ![]()
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