A piece in the Slate last week blamed Microsoft’s ‘Stack Ranking’ appraisal system for much of the company’s recent decline. Stack Ranking is a variation on the ‘Rank and Yank’ process in which managers are forced to rate a certain proportion of their staff, usually 10 percent, as unsatisfactory. Depending on the culture of the organisation, these people are either put on some sort of disciplinary programme or are simply fired.
The Slate article quotes from this Vanity Fair piece which goes into Microsoft’s ‘Lost Decade’ in some depth. Here are some choice quotes:
By 2002 the by-product of bureaucracy—brutal corporate politics—had reared its head at Microsoft. And, current and former executives said, each year the intensity and destructiveness of the game playing grew worse as employees struggled to beat out their co-workers for promotions, bonuses, or just survival.
Microsoft’s managers, intentionally or not, pumped up the volume on the viciousness. What emerged—when combined with the bitterness about financial disparities among employees, the slow pace of development, and the power of the Windows and Office divisions to kill innovation—was a toxic stew of internal antagonism and warfare.
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.”
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.
“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.”
Worse, because the reviews came every six months, employees and their supervisors—who were also ranked—focused on their short-term performance, rather than on longer efforts to innovate..
“I was told in almost every review that the political game was always important for my career development,” said Brian Cody, a former Microsoft engineer. “It was always much more on ‘Let’s work on the political game’ than on improving my actual performance.”
Like other employees I interviewed, Cody said that the reality of the corporate culture slowed everything down. “It got to the point where I was second-guessing everything I was doing,” he said. “Whenever I had a question for some other team, instead of going to the developer who had the answer, I would first touch base with that developer’s manager, so that he knew what I was working on. That was the only way to be visible to other managers, which you needed for the review.”
I asked Cody whether his review was ever based on the quality of his work. He paused for a very long time. “It was always much less about how I could become a better engineer and much more about my need to improve my visibility among other managers.”
In the end, the stack-ranking system crippled the ability to innovate at Microsoft, executives said. “I wanted to build a team of people who would work together and whose only focus would be on making great software,” said Bill Hill, the former manager. “But you can’t do that at Microsoft.”
Gore Vidal is supposed to have said, “It is not enough to succeed. Others must fail.” Nowhere is that more true than under a forced ranking system. If the bottom 10 per cent are being thrown out, your performance relative to others in your team becomes paramount. There are two ways to stay out of the bottom group. Firstly, perform well (or at least appear to) and make sure everybody knows it. Secondly, stick the knife into a few other people just to make sure. Even the most scrupulous employees must be tempted to do a bit of both.
I discussed the pros and cons of ‘Rank and Yank’ in an earlier post. There is very little research evidence on it but management opinion seems to be moving against it, even in the US. These days, it’s more common to find articles in the business press arguing against it than for it.
Some people have always opposed forced ranking on ethical grounds but now even the bread-heads are coming out against it on the grounds that it just doesn’t work. An argument I’ve heard quite often recently is that it drives away an organisation’s best performers as well as its worst. In my limited experience of forced ranking, I have seen something similar. Some very talented people say “I want no part of this” and walk.
The only argument I can see for Rank and Yank is that, in a culture where people have simply stopped managing performance, forced ranking might, might, just break that habit and push people into having the difficult conversations they should have had years ago.
I have no idea whether HMRC is such an organisation but its bosses clearly think that forced ranking can improve the department’s performance because they have just introduced it, albeit with ‘development support’ rather than the sack for the bottom 10 percent. There has been talk of using it throughout the civil service. Given the Microsoft experience, though, perhaps it’s not the best way of getting people to be honest about failure.
The task facing the civil service and the wider public sector is huge; how to redesign the state provision when costs are outstripping inflation, government debt is rising, economic growth is slow and there is a £25 billion hole in the public finances. That’s going to require some really clever thinking and, as Francis Maude says, the admission that some things have been wrong in the past. Is introducing a winners-take-all appraisal system that is being rapidly dumped by the private sector really going to help?