Welch feels so strongly about this practice that he highlighted it in his 1999 letter to GE shareholders and advocated it again in his book Jack: Straight from the Gut (Warner Books, 2001). At GE, it’s the bottom 10 percent of employees who are supposed to be eliminated. Wright’s advice to managers at Microsoft: Give employees clear goals that drive team and company results and make customers, profits and products the focus of discussion with employees - “not jostling and jockeying for your own benefit.General Electric Company’s former CEO Jack Welch is among the most vocal and articulate advocates of performance management systems that force turnover of the lowest-performing employees each year. They need constant positive reinforcement and feedback, and now that they are losing their gold medal they may look elsewhere for recognition and personal affirmation of their success.” “Exceptional performers are high-maintenance. “The top performers may leave,” she predicted. Microsoft is not completely home-free with this move, though, according to Wright rather, the company needs to execute its exit from the system carefully if it wants something new to succeed. Yahoo is now suffering a public relations nightmare for putting in place a similar system, he added. “It created a storyline that Microsoft does not need as it faces many questions and concerns regarding its future.” “Stack ranking had received bad reviews from former employees and in the media,” he said. Microsoft will also get a positive PR boost from the move, David Johnson, CEO of Strategic Vision, told the E-Commerce Times. “You can’t have a rewards program that incentivizes individual performance in an organization that requires gargantuan cross-group collaboration.”Īs an added bonus, Wright added, “managers get 20 percent of their time back in May, June and July, as there are no more wasted calibration meetings.” “Executives’ and employees’ pay will now be linked to team and company goals rather than personal goals,” Wright noted. The system was so despised, however, that doing away with it actually gives Microsoft a good shot at executing its “One Strategy, One Microsoft” vision, Val Wright, principal at Val Wright Consulting, told the E-Commerce Times. Microsoft did not respond to our request to comment for this story. With CEO Steve Ballmer on his way out, a popular theory is that he wants to hand over a more cohesive and collegial company. Why Microsoft is doing away with the system only now is open for debate. “These types of systems ignore evidence-based management suggestions and run the risk of alienating not just top talent, but the respect of customer bases as well.” “Without having empirical backing and sufficient support for a performance measurement system, you are likely to have highly dissatisfied employees and create a dysfunctional culture,” Fullick told the E-Commerce Times. Rumor has it that the system was highly political, according to Julia Fullick, assistant professor of management at Quinnipiac University, and didn’t rely on reliable and valid measures of employee performance. Stack ranking is disliked by employees for obvious reasons: It establishes a competitive dynamic with co-workers that can be cutthroat as workers maneuver to be ranked in the top percentile or - conversely - to avoid the bottom of the heap. Nevertheless, the practice was singled out not long ago in a Vanity Fair article as a contributing factor to what the magazine called Microsoft’s “lost decade.” A Hated System It was used most famously during Jack Welch’s tenure at General Electric most recently, Yahoo is said to have adopted it. Microsoft is hardly the only company that uses some variation of this technique. According to the lore surrounding Microsoft, the bottom percentile of performers were either encouraged to improve their game, immediately, or shown the door in one fashion or another. In a nutshell, the stack ranking technique requires managers to rate their employees on a curve - that is, from best to worst. Instead, the company is changing its performance review program “to better align with the goals of our One Microsoft strategy,” wrote Lisa Brummel, the company’s executive vice president of human resources, in an internal memo reportedly sent to Microsoft employees on Tuesday and now reproduced on The Verge. Microsoft is ending its controversial practice of using stack ranking to evaluate its employees.
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