When it comes to managing employees, many large corporations kneel at the altar of Saint Jack Welch formerly of GE.  St Jack, a street punk from Salem MA who clawed his way to the top of GE, was famous for saying he wished he could build his factories on barges and tow them to the lowest cost labor markets around the globe.  St Jack also infected American business one of the most pernicious forms of organizational cancer ever to come down the pike - the stack rank. 

Briefly - the stack rank says that 20% of your employees will be top performers, 70% of your employees will be adequate performers, and 10% will be subpar performers and should be replaced every year.  Every company has its own breakdown, but you get the rough idea.

While many CEO's love this method of managing employees, I have long thought that it is a pox on American business and transforms the workplace and work teams into versions of Survivor or The Hunger Games (except without the cool prizes at the end). It turns colleagues into competitors. It weakens team effectiveness because people are not only worried about accomplishing whatever the most pressing team goal is, but are also about looking better at it than their teammates doing it. Team cohesion falters because - well - why should I help you if you'll end up higher in the rank than I do at the end of the year?

The stack rank method might be a bit more tolerable for employees in growing organizations because of the yearly influx of new meat. In static organizations (orgs where hiring has been frozen for cost containment reasons), it is simply a corrosive and demoralizing way to reduce staff and contain payroll expense. Many proponents of the stack rank will say that it rids companies of dead wood. I will grant them that for the first one or two iterations of the process. After that - companies effectively lay off solid contributors every year because they have no more dead wood. For companies wishing to contain payroll expenses, here's the best part of the stack rank:  You get to tell these formerly solid contributors (who are now in your bottom 10%) that they are now performance problems. Once this happens - all sorts of organizational processes kick in, most of which result in termination of the employee - with a reduced severance package because - well - they were a bottom performer. A solid win all around - except for the employee and their former team.

This all brings me to the point of this post. Vanity Fair just did a short piece of the steady and brutal decline of Microsoft which focuses on management blunders and blown opportunities. The full article is in the August issue of VF.  

Contained in the shorter article is this money shot:

Eichenwald’s conversations reveal that a management system known as “stack ranking”—a program that forces every unit to declare a certain percentage of employees as top performers, good performers, average, and poor—effectively crippled Microsoft’s ability to innovate. “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,” Eichenwald writes. “If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

When Eichenwald asks Brian Cody, a former Microsoft engineer, whether a review of him was ever based on the quality of his work, Cody says, “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.”

I could go on and on about the weaknesses inherent in this malignant management method.  I could explore its inherent subjectivity, where rankings are made on the basis on how well one fellates (it's - mostly - a metaphor..) one's manager (as happened in Enron), or how the rankings seem to target older workers (as happened at Ford), or how even the Harvard Business Review (aka - The Journal of the Staggeringly Obvious) has written that the stack rank is contraindicated for workplaces that require collaboration - but I won't.  I'll just end here with a note of gratitude to VF for shedding a bit more sunlight on this blighted practice. I offer my fervent prayer that CEO's and HR VP's will wake up and change the way they manage and evaluate talent in their companies. I am well aware that this is not likely to happen. That's OK. I'm used to praying for things that don't come to pass - like peace for instance