Thursday, August 16, 2012

"Stack ranking": a good way to encourage backstabbing

While the bell curve is indeed found in nature, it's probably not
found in corporate America. Credit: Wikipedia
Last month, Vanity Fair published a pretty remarkable story on Microsoft and how poorly its management has been adapting to the new challenges of the internet, including Google and Apple. But I noted this rather remarkable section about their employee review system:
At the center of the cultural problems was a management system called “stack ranking.” 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. 
“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review,” said a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.” 
Supposing Microsoft had managed to hire technology’s top players into a single unit before they made their names elsewhere—Steve Jobs of Apple, Mark Zuckerberg of Facebook, Larry Page of Google, Larry Ellison of Oracle, and Jeff Bezos of Amazon—regardless of performance, under one of the iterations of stack ranking, two of them would have to be rated as below average, with one deemed disastrous. 
For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings. And the reviews had real-world consequences: those at the top received bonuses and promotions; those at the bottom usually received no cash or were shown the door. 
Outcomes from the process were never predictable. Employees in certain divisions were given what were known as M.B.O.’s—management business objectives—which were essentially the expectations for what they would accomplish in a particular year. But even achieving every M.B.O. was no guarantee of receiving a high ranking, since some other employee could exceed the assigned performance. As a result, Microsoft employees not only tried to do a good job but also worked hard to make sure their colleagues did not.
“The behavior this engenders, people do everything they can to stay out of the bottom bucket,” one Microsoft engineer said. “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.”
I am no expert when it comes to employee reviews. It makes sense to me that employees need to be evaluated, both as a team and as individuals. (I've always suggested to my friends that perhaps the Pro Football Hall of Fame should not allow entry by individuals, but by unit, e.g. quarterback + offensive line + wide receivers, etc.) How to do it well and fairly, of course, is the real problem.

But stack ranking or its other monikers cannot possibly be a good way to get intelligent people to work together well. It is probably an excellent way of distributing gains unevenly, though. Thanks, business world.

Readers, I understand that stack ranking has been used in the pharmaceutical research world -- how's it worked out for you all?


  1. It was used at the well-known CRO where I used to work (I had no idea that was what it was called though). It worked exactly as described in this article. And, just as described, it encouraged colleagues to sabotage each other. It was counter-productive, soul-destroying and a complete waste of time (I spent countless hours of my personal time writing appraisals which everyone knew were almost completely pointless).
    In short, about what you'd expect from a typical HR department. It was good at limiting the amount of money spent on rewarding employees, and providing documentation to legitimize firings, and that's it. You can tell I was a big fan of the system, can't you?

  2. My only experience with this type of review system is from my father, who worked at an appliance manufacturing facility. In this system, if you finished in the "bottom bucket" for two consecutive years, you got canned.

    Also, he once asked one of his superiors why this review system wasn't applied at the upper/executive management level. He was told that the review process is just different at that level. I'm sure it's not apples-to-apples comparing performance reviews of line workers to VPs, but I think that self-preservation is a likely reason for this difference.

  3. The Wikipedia article you linked to states that Jack Welch at GE developed this, so it was no surprise that when McNerny took over at 3M, he brought it with him. We used to call it "The 3 G's: Great, Good and Gone!"

  4. Oh, and I forgot to add: we weren't supposed to tell our reports that the stack ranking system was being used. We were supposed to let them believe that all the members of the department could get an excellent rating if they just worked hard enough. It was utterly digusting. I spilled the beans, and was reprimanded for doing so. Happy days!

  5. CJ: It brings back some lousy memory. That's how it worked at Merck during the past where I worked. I am not sure if they still have it, but it pleased no one during the rating time. Imagine the morass you felt, when rating the people in your group and the "bucket" where they belonged that was beyond your control. It was and is most regressive system ever devised.

  6. This stack ranking system was used in Enron and their workers sabotaged the California electrical grid in their quest for better reviews, not just each other. Microsoft seems to be doing better than those guys though. They managed to launch the XBOX at least, but I just can't imagine the sabotage and bad relations this system brings as being responsible for good results in software development where you have to rely so much on others. I'll have to re-evaluate my use of Windows. I would not want to work anywhere with this review system. Unless you know... desperate; no money.

    Incidentally, I was watching the Enron documentary again since it's now on youtube.

  7. I've seen similar at a government lab. The PI told the entire lab of postdocs that he was only going to keep two of them: whomever was the first to publish or patent.

    The results: everyone having to take their lab notebooks everywhere with them and no unattended experiments. The lab was full of paranoia and fear instead of collaboration and creativity. Which is why the PI's publication record is mostly him citing himself in review after review.

  8. the revolting management methods popularized by Jack Welch probably did more for the big pharma decline than combichem and genomics combined.

  9. I work in big pharma and there is, without question, stack ranking. Very hush, hush, and nobody tells you how or why you're ranked the way you are. Rumors are 1) number of compounds submitted for testing and 2) number of reactions/chemist/year are at least two of the criteria.

    Wonderful invention the electronic notebook is. Makes it SO much easier for the bean counters to actually count those beans.

    I've heard that there's been comparisons made between data captured from internal ELNs to the ones our CROs enter their experiments in as well for benchmarking purposes.

    Isn't data mining great!

    My colleagues laughed when I told them that they weren't my colleagues, they were my competition. Sad thing is, I wasn't really kidding.

    1. My company recently interviewed for a chemist position. Several candidates were from a particular big pharma, and each of them knew exactly how many compounds they had made the year before and which ones made it to Ph I/II/III. It was fairly obvious to me that their annual bonuses or something similar were tied to these useless metrics.

    2. Hey 1.58 PM,
      Sounds very familiar to me... Do you happen to work @ Novartis? I remember them having a system like this. Counting reactions, counting test reactions like half a reaction. Counting submitted compounds. And a the end of the year, the team leaders would have a meeting to bargain out whose employee is in the lower end category...

    3. Not Novartis. Rhymes with "Habit"

  10. This type of system was developed in the 1930s as a result of the new management science. I have seen it used in one form or another in every company I have worked at in the past 40 years. It is an abomination and especially inappropriate for creative people like scientists. Once I got into management I did everything I could to do undermine this approach because it demotivates and pisses-off 85% of the workers every year. And yes two groups seemed to avoid it. Managers who could of course do no wrong or they would not be managers and managers' secretaries because the managers could not deal with the blow-back. The inventors of this system and the HR professionals who keep it forever going deserve a special place in hell for such a terrible concept and the resulting ill treatment it foists on the workers they claim to cherish.

    Unfortunately in the end, the pool of money for raises and bonuses is finite (unless there is a pay freeze in which case ratings are even more meaningless or for the executive class for whom infinitely large raises and bonuses are an entitlement) so there has to be some way to divvy up the bucks. The one major change is this stupidity in the past 20 years is its use in justifying canning employees to: 1) shrink the workforce without some kind of buy-out program (as was popular in the 1980s) and 2) help avoid employment suits which are ever more ubiquitous as employee protection laws have proliferated faster than lay-offs. Neutron Jack's big contribution was to make the system harsher by using it to justify kicking out employees deemed under performers rather than as a tool to help workers improve their performance as was the original intent.

    I have been thinking about this asinine approach to management ever since I first encountered it. Unfortunately every experiment I have tried to replace this system has broken down because of that most human trait, the need to do better and be rewarded for efforts above the basic job. We still live in a Darwinian world and this system is just a very crude tool in support of what is a very human need.

  11. People beat me to it but yes, the first time I've heard about this system was at GE campus recruiting event. What was it, bottom 10% every year?

  12. Wyeth called it "Forced Distribution". Every year 5% of the staff had to get a poor rating. Manager's meetings at ratings time were brutal as everybody was fighting to make sure one of their people was not at the bottom.

  13. Business needs to take a nod from education here—teachers have been evaluating people since the dawn of time, and we too have figured out that curves in any form are idiotic.

  14. A few of W. Edwards Deming’s 14 Points for Management apply here.

    8. Drive out fear, so that everyone may work effectively for the company.

    10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

    12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective


    1. The more I read about Deming, the more I like him. He died too young. If only he lived to 120... He's worth more than the entire Boston Consulting Group.

  15. Just discovered our orginisation is using stacked ranking with a twist. On the self appraisal & managers appraisal, HR have blocked the input cell so that you cannot achieve top score. So on a scale of 1 to 5, only 2 to 5 is available.