Are forced rankings the way to go?

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Just as Yahoo is adopting forced rankings, another major tech company, Microsoft, is abandoning its practice of “stacked rankings” (photo credit: Curtis Perry, flickr).Just as Yahoo is adopting forced rankings, another major tech company, Microsoft, is abandoning its practice of “stacked rankings” (photo credit: Curtis Perry, flickr).Just as Yahoo is adopting forced rankings, another major tech company, Microsoft, is abandoning its practice of “stacked rankings” (photo credit: Curtis Perry, flickr).

22By Oon Yeoh

Yahoo CEO Marissa Mayer made some big waves earlier this year with her controversial policy banning telecommuting. Now, she’s in the news again. This time it’s over an equally controversial policy that requires managers to rank employees on a ‘bell curve’ (with those at the low end getting the sack!)

Forcing managers to rank their employees along a bell curve was made popular by General Electric CEO Jack Welch in the 1980s. It obviously worked well for GE but it is hardly universally accepted as a good practice.

For sure, it has its advocates. Shortly after news broke about Yahoo’s new policy, an article in Inc.com by Suzanne Lucas (a writer with 10 years of human resources experience) wrote that what forced rankings do is make managers think about their employees and sincerely evaluate them. It makes them face the reality that not everyone contributes at the same level, she argues.

“This is actually good for business because you want to reward your top performers and eliminate your lowest performers. I’m not a huge fan of the ‘fire the bottom 5 percent’ plan, but sometimes people actually should be fired. Not because they are bad people, but because they aren’t right for the job,” Lucas wrote.

There are dissenting views.

A 2006 study by a couple of MIT professors and a researcher from Bedarra Research entitled “Punishing by Rewards: When the Performance Bell-curve Stops Working For You” found that for companies that are going through layoffs (like Yahoo, for example), forced rankings makes things worse over time.

“We observe that pressure, if maintained below a certain level, can lead to higher performance. However, with lay-offs, constant pressure demoralizes employees, leading to drop in performance. As the company shrinks, the rigid distribution of the bell-curve forces managers to label a high performer as a mediocre. A high performer, unmotivated by such artificial demotion, behaves like a mediocre. Further, managers begin to reward visible performance over the actual. Finally, the erosion of social capital could cripple the company,” the authors wrote.

Interestingly, just as Yahoo is adopting forced rankings, another major tech company, Microsoft, is abandoning its practice of “stacked rankings”. Similar in nature to forced rankings, this practice resulted in unnecessary tension among employees. David Auerbach, a former Microsoft employee, recently told Bloomberg Businessweek that the practice “encouraged people to backstab their co-workers”.

This form of force rankings in Microsoft first came to broad public attention last year when Vanity Fair published an extended profile feature on the company entitled “Microsoft’s Lost Decade”.

“Every current and former Microsoft employee I interviewed — every one — cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. The system — also referred to as “the performance model,” “the bell curve,” or just “the employee review” — has, with certain variations over the years, worked like this: every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor,” wrote the articles author, Kurt Eichenwald.

“The behaviour this engenders, people do everything they can to stay out of the bottom bucket,” Eichenwald quoted one Microsoft engineer as saying. “People responsible for features will openly sabotage other people’s efforts. One of the most valuable things I learned was to give the appearance of being courteous while withholding just enough information from colleagues to ensure they didn’t get ahead of me on the rankings.”

Well, Microsoft has finally decided to drop this practice. Perhaps it has learned something about its impact on employees that Yahoo has yet to discover?

 

Oon Yeoh is a new media consultant.

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