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.

[thecodont]

When I was young, school projects were pretty much "you do it" but in recent decades, more and more "group work" has been assigned, because collaboration and working within small groups is so central to how business is done.

The real-life translation of this:
In school projects ("groups"), two members of a five-member group do all the work, and the other three show up at the last minute to claim the credit.
In work situations, see above.

[Lancey Howard]

When my kids were going through school and had “group projects” coming up, I told them to always try to team up with Poindexter and just tell their friends they’ll catch up with them after school. Get the ‘A’.

[Paisan]

The six stages of a project…
1. Enthusiasm.
2. Disillusionment.
3. Panic.
4. Search for the guilty.
5. Punishment of the innocent.
6. Rewards for the uninvolved ...

[adorno]

After 2 months of having a worthless computer, I finally broke down and bought my first IPad.

I highly doubt the veracity of your statement. If you were really a fan of Windows, then there is really nothing that was done with Windows 8 that could change your mind about it. Windows 8 is really Windows 7, but with many improvements and updates. If your complaint is about the new UI, then that's really nothing go complain about, since, all you need to do to get back into the "old" Windows 7 desktop, is to click on any of the older applications, which brings you into that older desktop interface. From there on, it's Windows 7, but with many improvements and greater speed. There is absolutely no reason for anyone to opt to get a simple iPad in lieu of a full-fledged OS in a full-fledged PC. In fact, even the Surface tablets and the tablets offered by the MS OEMs that use Windows 8, are many times better than any iPad, mini or regular.

Methinks that your just an Apple cultists that took the opportunity to bash MS, while touting your preference for Apple, and that switch from Windows is just a simple lie. But, even if you did switch to an iPad, there is nothing to be gained by that at all. Heck, even the Android tablets are better than the iPads.

[varmintman]

The Willow Creek Church (Barrington Illinois) puts on a Global Leadership Summit event running two days which was held a couple of weeks ago. This is intended primarily for the management echelons of churches, nonetheless its appeal extends to business organizations and government agencies, and the thing amounts to about as good a $100 - $200 ticket as you'd ever find in the world dealing with human motivation and management philosophies. Attendance, both live and via closed circuit, was massive. Several of the recent presentations were stunningly good, particularly those of Patrick Lencioni, Brene Brown, Vijay Govindarajan.

List of speakers

In general, Ballmer's ideas about management would find no takers in that group; the ideas they were promoting were all pretty much 180-degrees opposed to what the article you've posted here describes.

[thecodont]

Good one...

[SgtHooper]

Bingo! Apples and oranges.

[Kozy]

Had a world history professor in college and he was demanding. Liked the challenge so worked to get an “A”. Everything I did was graded as an “A”, quizzes, testes, final; never missed a class, and dominated discussion in class. He gave me a “B”. I asked why? He said he only gave out 2 “A’s” in his career and they both were to Fulbright scholars and I was not a Fulbright scholar. Felt like telling him to take his “B” and shove it up his “A”.

[ez]

I got my first Iphone (4) recently because Verizon is giving them free with a two-year. I imagine they are counted as “sales” and may be skewing the stats.

[9YearLurker]

I’m old-fashioned. I think collaboration is best taught on playing fields and other non-academic venues. It’s actually a dangerous crutch when thinking itself is the lesson.

[adorno]

The predictions of Apple’s demise have been almost nonstop since the 1980s.

And, there were and are good reasons for Apple still being in danger, their current success notwithstanding.

But, weren't there also a lot more predictions about how MS was going to fail? Those predictions have been around since MS launched, and they continue even today, when the company is in very good health and highly profitable.

They were especially loud in the 90s.

Apple is still skating on thin ice, with basically "one" product, that being iOS, with basically different size hardware into which iOS is manifested. iPhones and iPads and iPods are all basically the same thing, with enough differences to create the perception that, they're different products. But, iOS is stuck in the past, and Android and WP8 have surpassed iOS's capabilities. The iPhone is still selling because of the continued hype and coolness that the it developed a few years ago, but lately, that coolness and hype are getting old, and the consumer has bigger and better choices available. Basically, Apple's days as the top smartphone make are over, despite the continued sales and profits.

Of course, they were all wrong then. Who knows what will happen in the future.

In the tech market, things change a lot faster than in any other, and whoever is on top today, could be just another has-been in no time. Ask Palm and BB about how that works. Yeah, it could happen to Microsoft too, but, MS could be immune or resistant to such a fate because of it's huge diversification, whereas Apple could lose a lot of iPhone sales in a short year, and then, it'll be either gone or just a lowly player in the market.

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.

Sorry! Don't see it.

Apple's success recently is mostly due to one product, that being the iPhone. That's not a company with a solid future. It's a company with a solid "current" success story, but not going forward into the longer or distant future. The smartphone market has met with saturation, and the market for smartphones is already facing the same fate as PCs, with sales declining, and what is being sold lately is not as profitable as in the early stages of the "re-invention" of smartphones which occurred when the iPhone first came out. Apple is having to introduce low-cost phones too, and with that, their profit margins will take major hits, and so will their stock. With low-cost phones, Apple is becoming "just another devices maker", and the coolness factor suffers. Right now, Apple is way overvalued, and it's real market cap should be closer to Google or Microsoft, but in about 2 years, it could be worth something along the line of what HTC is worth, which is around 33-34 billion lately. The only saving grace for Apple is the huge stash of cash which they have in the bank, but then, that's money which the stockholders could demand on getting back before the company starts losing more value.

ONe also has to consider that, with the current stinking economy, Apple doesn't have the same base of consumers to go after. And, like I said before, smartphones are being made to be useful for at least 4-5 years, which is one of the problems plaguing the PC market, where people don't need to buy a new PC every 3 or 4 years.

[Revolting cat!]

Dude, everybody on the Internet knows how to run a multibillion dollah company like Apple, Microsoft, Kodak, GE.
It’s our loss that they are not running one.

[ziravan]

“Me thinks that your just an Apple cultists that took the opportunity to bash MS.”

Nope. The IPad I bought a few months ago is the first major Apple product I’ve owned. Even my cell phone is a Galaxy 3S w/ Android. I’ve never owned an IPhone and never cared to do so: the screens are way too small.

I’ve used MS for 20 yrs. Win8 is a break point. On my Win8 brick of a laptop, I have classic shell and it helps, a little.

But whenever I do something like start a pic or music file and forget to use a different product than Win8, it takes me right back to Win8 hell and I have to keep moving my cursor off the screen to the right until I can get a menu screen that will take me back to classic shell. It’s too much of a hassle.

No sir, there are more things in the world wrong with Win8 than can be fixed with classic shell. I hear that, if you have a professional version, you can opt back to Win7. I just have an off-the-shelf consumer laptop that was brickified by adding Win8 to it. If I could do so, I would revert to Win7 in a second.

Instead, I’m now for the first time, using an IPad.

You - and MS for all I care - can dismiss the real complaints of tried and true customers as just Apple aficionados in disguise if you like, but MS lost a long term customer here and I doubt I’ll be back for Win9.

Here’s the real problem, in a nutshell: MS doesn’t care about me as a consumer because I’m not a company or professional sale; sales to individuals are an afterthought because they have a captive audience in off-the-shelf computers.

Except they don’t.

[ken in texas]

... there is great pressure to classify at least 10% of staff who as underperforming, whether they are or not.

Yep, especially if the rating standards are subjective so the manager can play favorites and take care of his butt kissers.

[pierrem15]

It it weren't for Office, no one-- and I mean no one-- would use Windows.

I just spent three hours fixing a performance problem on Win7 yesterday due to some Microsoft installed "features" that behaved indistinguishably from malware.

There were thousands of complaints about related issues on MS' website without a hint from MS about how to fix it.

Sorry, but most of Microsoft's products are a POS. They're great for 'toy' applications that you can quickly prototype something with-- but try a real world app with load and you'll spend an endless amount of time trying to figure out how to 'tune' Windows because you have no idea what MS' software is doing (or failing to do) behind the scenes.

[gogeo]

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

I think that's true. How many businesses of a certain size do NOT have an HR Dept? Any?

Why?

I think it's partly the mindset of many businesses that "expertise," however defined, is valued. The thought is that hiring and managing people is such an important function that we need "experts" which is in this case HR professionals. The results speak for themselves.

However, HR depts. serve a much more important function for a company...they PROTECT THE COMPANY FROM ITS EMPLOYEES.

I believe the #1 priority of any HR Dept is...don't let us get sued. So there are all kinds of methods and processes for hiring and firing that are legally sound but functionally null (at best).

[SunkenCiv]

Heh...

I’d be running one, but my job was destroyed by a combination of ATMs and ethanol subsidies. /zing /zing

Built-in backdoor: German govt warns of significant Windows 8 security danger
http://www.freerepublic.com/focus/news/3058623/posts

[gogeo]

Except...there’s a strong correlation between the timing of the success enjoyed by Apple...and the presence of an employee named Jobs.

[SunkenCiv]

I think there was an article about Ballmer’s upcoming retirement, and this article seemed like a nice companion piece. I don’t think much of his management approach, but we need to remember than Microsoft was handed over to him by its founder, and doing the old me-too approach isn’t in the bloodstream of the small number of people who manage whole companies. He wasn’t there to see the reasons that things had gotten to where they were, which must have been a problem for him, even if he wasn’t aware of it.

Church management is different, not just due to the budgets involved, but also in the way in which income is generated. Typically the local churches have longterm participation by an ever-transitioning (that is, they die) board, all of whom know each other.

As long as they don’t do anything daffy like spend $20K on a networked copier/printer/fax/scanner/document server (the latter of which rarely works) for use by the very small staff that works in the office, and keep recruitment efforts high (that’s more important now than ever before), they should be all right.

[machman]

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.

Good points. If "management" was doing their job in hiring, they would be getting the people at above average on the curve. There wouldn't be a group of dolts to evaluate....maybe the managers are the problem, not the employees....... Naaah, couldn't happen, let them fire 5% of their employees every year and get a big bonus and big stock award, after all, they are "management", they are special...their bosses have said so.....