The Poisonous Employee-Ranking System That Helps Explain Microsoft’s Decline

Slate ^ | Friday, August 23, 2013 | Will Oremus

[SunkenCiv]

There were many reasons for the decline of Microsoft under Steve Ballmer, including, as I wrote this morning, its lack of focus and its habit of chasing trends rather than creating them. But one that’s not obvious to outsiders was the company’s employee evaluation system, known as “stack ranking.” The system—and its poisonous effects on Microsoft’s corporate culture—was best explained in an outstanding Vanity Fair feature by Kurt Eichenwald last year...

So while Google was encouraging its employees to spend 20 percent of their time to work on ideas that excited them personally, Ballmer was inadvertently encouraging his to spend a good chunk of their time playing office politics. Why try to outrun the bear when you can just tie your co-workers' shoelaces?

Microsoft wasn’t the first company to adopt this sort of ranking system. It was actually popularized by Jack Welch at GE, where it was known as “rank and yank.” Welch defended the practice to the Wall Street Journal in a January 2012 article, saying, “This is not some mean system—this is the kindest form of management. [Low performers] are given a chance to improve, and if they don't in a year or so, you move them out. "

As the Journal and others have noted, what seemed to work for Welch—for a time, anyway—has produced some ugly results elsewhere. Even GE phased the system out following Welch’s departure.

[Fightin Whitey]

Neither is worth the powder to blow it to hell

Bull's-eye.

I use Microsoft products and the company indeed seems bent on self-impairment.

But I also keep an eye on Slate and Vanity Fair (just as I tune into MSNBC on occasion, to see what the enemy is up to) and they are both singularly devoted to destroying others, specifically conservatives, Christians and anyone who individually achieves.

[meyer]

When you start ranking people who do tasks that are difficult to measure, such as design or innovation work, you start falling into decisions made on the basis of liking someone. Someone might not be an extrovert, but could be an excellent, innovative engineer. Then there are people who work on pharmaceutical development and who may take many years to identify a successful drug. How are you going to clearly assess their performance over the early years?

I recognize the difficulty when the performance measurement is ambiguous at best, but how do you rate their performance and how do you remove the real slackers from the workforce? How do you justify giving one employee 4% and another one 2% or 0% raise (assuming you can even give out raises)?

I guess it's the eternal question in the business world.

[spankalib]

Not much of a contribution maybe, but that man’s face (at the link)
looks evil, and scares the crap outta me.

[Fightin Whitey]

So boring, stupid and useless, I quit, got married, became a full time musician.

What I wanna know is if this is a story with a happy ending?

[BwanaNdege]

For every collaborative pack there is leader. Akela is to be followed.

Thank you, Baloo!

Do you think the Little Frog will learn?

[meyer]

Termination based on who doesn’t fit probably isn’t viable, but reassignment of all the ejectees to a new team made up entirely of ejectees might have some merit.

I've seen that in action - except that they then "team" up a misfit with someone that presumably has a clue in an effort to cover for the misfit's poor performance. The result - the productive team member (and I use the word "team" loosely) more often than not is pulled down to the misfit's level when they find out that their performance rating (and raise) is gauged on the performance of the team rather than the individual. It falls generally under the heading of "why should I bust my butt to do right when this idiot next to me gets the same thing I get for doing nothing (or worse than nothing)".

[liberty or death]

I meant to add, the bank also want to know how many products are top sellers.

[Traveler59]

I've taken college classes in both management and business administration recently. To answer your question, yes they do teach collaboration. But it's mostly book knowledge without hands-on application. In other classes, where a team project is required, no collaborative training or instruction was provided. It was the ‘sink or swim’ method. Since I'm paying my way through college, and I had more than 2 decades in the military, I would take over as the team leader and make assignments and timetables accordingly. I want the best possible grade, not just a passing grade. And I have, in all instances, notified the professors that I'm throwing people off the project due to lack of meeting the timetables. Got one guy so pissed he wanted to meet me in the parking lot (he failed the class).

The classmates who did complete projects with me thanked me for showing them how to do team projects correctly, how to make the assignments and schedules, and how to turn out the best product. In the end, it wasn't reading the management books that got them ahead, it was having someone who could show them how to actually make collaborating work.

[Gritty]

The key is to put the hiring decision into the hands of the people that will be working with the new employee. If you let HR make the decision, then they start filling "quotas", and you get people that can't make the grade.

HR is a poison unto itself which has risen primarily because of government regulations and oversight, i.e. "quotas", and lawyers and unions, i.e. "discrimination" lawsuits.

Very often, the very people who are hired into and staff these economically useless HR positions are chosen because they are the very target groups meant to benefit from those skewed policies and not because they add any particular value to the company. They therefore perpetuate the poisonous system of embedded discrimination and mediocrity with a vengeance.

The HR Department is a millstone around the neck of any company who has one.

[Paisan]

Whenever they came up with a good idea, I credited them.
Why? Because I was confident in my skills.

Same here - “There is no limit to the amount of good you can do if you don’t care who gets the credit.”

Ronald Reagan

[adorno]

Oh, btw, no, iPhone sales *haven’t* declined, they’ve increased.

The combo of iPads and iPhones, which is iOS, has declined, and iPhones, while still selling well, are no longer the biggest seller in the market, and even WP8 smartphones are setting up to surpass iPHone sales within the next year or two. Once the hype and coolness factors wears off (and there are many indications that that has already happened), Apple sales and stock will be in deep doo-doo. Apple could easily become the next Palm, but perhaps they'll survive to become the next HTC.

[1rudeboy]

Forgive me in advance for the martial movie reference, but boy, did I love the attitude of the sales force at that place.

SALES: Heck, we'll pick your boat up and lay it down like a baby, right where you want it. This is the Cav boy -- airmobile. I can take that point and hold it as long as I like -- and you can get anywhere you want up that river that suits you, Captain.

ACCOUNTING: I don't know, sir . . . it's . . . it's . . . .

SALES: [aggressive] What is it?

MARKETING: It's hairy in there . . . it's Charlie's point.

SALES: Charlie don't surf!

[1rudeboy]

darn, “martial,” I always screw the two words up, they’re the same, anyway

[ziravan]

“On the other hand, while MS might not be as profitable, they do have the best and largest portfolio or products in the IT market, for corporate and consumers...

While MS might not have the “coolness” factor working for them as do Google and Apple, it is operating with a much more mature approach to being a major player in all sectors of the tech market.”

I’ve stuck with MS since 3.1 but Win8 is my breaking point. After 2 months of having a worthless computer, I finally broke down and bought my first IPad.

MS turned me into an Apple customer. They have nobody to blame but themselves.

[Henry Hnyellar]

The predictions of Apple’s demise have been almost nonstop since the 1980s. They were especially loud in the 90s. Of course, they were all wrong then. Who knows what will happen in the future. But based on the accuracy of the predictions in the past, there’s a good chance that Apple will be around for a long time.

http://www.macobserver.com/tmo/death_knell

[SunkenCiv]

iPhone sales were up 20% in the most recent quarter. That’s what this conversation which you started was about. Apple’s iOS is about 13% of all smartphones sold.

Windows phones are 3.7% of the world market, although it is second behind Android in the Latin American market — not much economic growth there for some reason. Brazil has tariffs on the iPhone, because that’s where the money is.

Android OS is sold on a lot of platforms, some of which actually have survived long enough for the manufacturers to intro an updated model. To get a look at really inexpensive Android tablets, it’s easy enough to go to a Big Lots, and there are even more available on the Big Lots website. The big growth area for Android may be in Chromebooks, which are a notch up from trying to use a tablet, at least for us older-timers. The main problem going forward will be to maintain interest by hardware manufacturers.

The funk in the tablet market (declined in the most recent quarter, but that was up half again over the same q of last year) is attributed to the lack of a new iPad model — there appears to be an autumn rollout in the offing, sufficiently ahead of the 2013 Christmas season, and to include an entry-level iPhone intro, and an iPad refresh, and perhaps one more thing.

As I said above, the smartphone market has grown — in large part thanks to Apple — and Apple’s market share has shrunk, and its profit margins have naturally declined, but the number of iPhones sold has not declined. Also, Apple is the number one seller, and the current iPhone model is always the largest selling smartphone, period.

[driftdiver]

Microsofts new online software has almost done me in. They charged me 10 what they should have and didn’t care. Did it four months in a row. Next to impossible to get out of the contract as well.

[Moonman62]

This is a misappropriation of the first order! The true inventor of this evil ranking system was JD Rockefeller of Standard Oil. His grim “Rating and Ranking System” is still practiced ruthlessly at ExxonMobil.

I didn't know that. Rank and rank seems to be the opposite of W. Edward Deming's philosophy. I wonder if anyone notices that liberals tend to make very successful entrepreneurs, which is fine with me as long as they stay out of government.

[Seruzawa]

The good ol’ Bell Curve. Something that describes genetic distribution has been foolishly compared to human behavior. This is a result of the idiotic idea that intelligence and behavior are genetically transmitted. As a result companies that are stupid enough to employ psychologists come up with stupid bell curve based rating systems.

You can have a crew smart guys and you can have a crew of dolts. The idea that the chief dolt deserves a bonus and the guy who is not quite as smart as the others, though he is still a brain, deserves to be fired is itself stupid beyond belief. Anyone who uses such a system is a bad manager. This is obvious because the companies that use this system struggle and fail.

If anyone thinks that there is any validity to the bell curve ratings system remember that it is used by the Federal Govt. It is laziness personified.

[bjc]

This is a useful reminder that Welch did do a number of things that strengthened GE. His Mantra of #1 or #2 or get out was smart for the legacy businesses. Stack and yank was not so smart because it was way too mechanistic and assumed managers were themselves competent to make the judgments. As I said earlier it also presumes the organization is able to identify talent and allocate that is at least as productive as that which is already in the organization. The point of diminishing returns is reached pretty quickly in many organizations.