Vanity Fair recently lambasted Microsoft for losing its innovation prowess. The magazine blames the Redmond giant’s management style, and takes specific aim at its stack ranking review system.
Every current and former Microsoft employee [Eichenwald] interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees
Stack ranking is a pretty simple system. Every manager ranks their employees into buckets of a certain size. X percent are top performers, Y percent are the next tier down, and so on. On a team of 15 people, there might be three top tier slots, eight middle tier slots, and four bottom tier slots. No matter how good the team is overall, everyone’s going into one of those tiers. Stack ranking can be applied to individuals or to teams — any definable subsets of a larger group.
The argument for stack ranking is pretty simple: Not everyone is above average. In any group of people, some will perform better than others. Stack ranking makes a manager separate the rock stars and the weaker links. It’s a transparent system that identifies the best of any group, whether it’s a team, division, department, etc.
There are some major downsides, however. Stack ranking foments competition among peers on a team — there are only so many top slots — and diminishes cooperation among its members. It’s also not comparable across teams: A top tier person on team A might have gotten a bottom tier ranking on team B, even if team B was just that good. Lastly, as with any review system, the rewards go to those who best “game the system,” not necessarily to the best overall performers.
But like it or not, stack ranking is pervasive. GE used a form of it for years and is frequently credited with popularizing it. Microsoft will certainly continue to use it, at least for a while. Other companies ranging from IBM to Pepsi to a decent percentage of Fortune 500 companies also use stack ranking.
So, my question: Would you go work for a company that used a stack ranking review system? Tell me in the comments below.
- Microsoft’s Downfall [Vanity Fair]
- Why Stack Ranking Worked Better at GE Than Microsoft [Forbes]