Recently there was a lot of media on Microsoft's decision to end it's performance ranking methodology, and Yahoo's plans to rev it up. An approach well-known to most in our profession, it goes by affectionate nicknames like "rank and yank," "up or out," "forced ranking," and my personal favorite,"vitality curve," which seems to have something to do with your ability to a. not act your age, b. stay alert at meetings after four hours of sleep and c. deliver the punchline of a joke well.
There's also "stack ranking" which seems to be an attempt at obfuscation. Ranking always means from bottom to top. What else would it be but stacked?
Since my mind's been on performance management recently -- my pre-Thanksgiving post was called, "Can We Give Thanks for Performance Reviews?" -- I thought I'd chat with you about ranking, even though I know that many have very strong, clear feelings about the subject. I worked for 15 years in an "up or out" firm, so I have some experience to fall back on, too.
Yes, it is either a cause of, or symptom of, a competitive organizational model where cutthroat behavior can thrive. For some business strategies, this competitive culture can encourage achievement whether we in HR like it or not. For example, in my case, clients needed to trust that they were getting the best ideas and highest service for the immense bills they were paying. As a result, I had a chance to work with some really fine minds who, when they elbowed each other intellectually and career-wise, ended up with really cutting-edge insights. I also worked with some very distinguished leaders who wouldn't have been distinguished if they had a simple-minded approach to "up or out."
Nonetheless, the "vitality curve" of the "rank and yank" approach is predictably unreliable because, like other human pursuits, we are ever willing to manipulate it into the strong vs. the weak. As the approach starts to fray, people cut deals with leaders to get themselves a high ranking. They may also try to influence leaders to rank their frenemies low. (All done in the name of the organization's best future!) And, of course, once these practices really take hold, the distinguished leaders and their solid guidance become less and less apparent.
Why do stack rankings survive in spite of their failings? And how did they become a pretty popular practice in Fortune 500s? In my ancient past, the approach was usually used only by companies under duress, whose resources had diminished so far that employees had to be cut fast. Or when merit or incentive budgets were anorexic. At that point, leaders believed, any real subtleties in judgment just took too much time and got in the way of resolving an impending disaster. A short-term fix was needed, after which they would return to their more strategic ways.
I think there are a few reasons stack ranking's still holding on, almost all based on frustration -- which is not really an emotion that leads to thoughtful behavior, as I think you would agree. Companies like GE, Yahoo and Microsoft have taken ranking on when they have serious strategic problems to solve. Reading the tea leaves, these companies apparently believed their employees could give more of themselves and that ranking them in relation to their peers would get them focused. (Of course, there's a big issue here, since the approach labels employees as a singular source of the business problem.)
And how do high performers feel when they're stuck in this scenario? Reports are that many say, "I'm going to be the next one to go," and leave for better pastures before their disaster fantasy comes true.
Most tellingly, do you think stack ranking offers much in the way of business strategy? Where are the subtle insights into what each product line's or division's unique needs are, based on their products and customers? The bluntness of stack ranking doesn't seem to indicate there is real strategic insight behind it.
I know many of us have strong reactions to the employee engagement aspect of stack rankings, but what about the business issues? Has anyone seen improved company performance once stack ranking was introduced? If so, did it last? What's helping it thrive?
Many inquiring minds want to know!
Margaret O'Hanlon is founder and Principal of re:Think Consulting. She'll join Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- Everything You Do (in Compensation) Is Communication -- in an upcoming book. Margaret brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, she was a Principal with Towers Watson. Margaret earned her M.S. and Ed.S. in Instructional Technology at Indiana University, Bloomington. Creative writing is one of her outside passions, along with Masters Swimming.