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Don't Call It Stack Rank: Yahoo's QPR System For Culling Non-Performers
An anonymous reader writes "Employees don't like to be graded on the bell curve (or any other curve except for Lake Wobegon's) — we know that from the Microsoft experience. But Yahoo is struggling with what some say is vastly bloated headcount, and CEO Marissa Mayer has implemented a 'quarterly performance review' system that requires, or strongly recommends, that managers place a certain quota of their charges in the less-than-stellar categories. That sounds a lot like the infamous GE-Microsoft stack rank system. But according to AllThingsD's Kara Swisher, who (as usual) broke the latest story about life inside Mayer's Yahoo, Mayer's curve may more similar to the elaborate evaluation system used by her old employer, Google."
The main effect of this is to chill work-place climate, and foster distrust and back-stabbing. The result of that is always the ones that have alternatives (i.e. the best ones) leaving first. Sure, you can get rid of some dead wood that way too, but the overall effect is disastrous. A real manager know that, but Mayer has shown several times now that she does not even understand the basics of management.
Most ACs are not even worth the keystrokes to insult them. Be generically insulted by this and ignored otherwise.
Having worked for an organization that decided to follow this strategy, I did what all the good employees at my company did: we left for better jobs elsewhere. Yahoo is on its way to the dustbin of history, helped along by its senior management. My recommendation to Yahoo employees: get out while the gettin's good! Otherwise, you're in for the demoralizing experience of riding a sinking ship to the bottom!
The problem extends beyond even that basic fact of statistics. In a large company with 10% average annual turnover, if they could selectively get rid of the bottom 10% and replace them with randomly-performing people, ranked performance would actually work pretty well.
The problem here comes comes from the sample size per manager for consideration of these rankings. Let's say you have a department with three top-level managers, each having a team of 10 subordinates. You should ideally end up ranking three of them as the bottom 10% and three of them as the top 10% - And you will! Except, each of those managers will pick a top-1 and a bottom-1, rather than picking from the pool consisting of the entire department.
As a result, even if team-A consists of all stellar performers and team C consists of all wastes of flesh, team A will have one member unfairly fired, and team C will have one member unfairly rewarded more than the average for team A.
Now, under natural conditions, that distinction between team A and C probably wouldn't exist to any notable degree - Until you extend a policy like this across the entire company. Instead of losing the bottom 10% and promoting the top 10%, you end up actively selecting for a corporate culture that favors pooling into over- and under-performing teams exactly like A and C. The high performers, by definition, will pick teams that actually get things done; while the low performers will pick teams where they feel "safe" from flawed performance reviews.
Yet another stunning win for Ms. "paid maternity leave for me, fuck the rest of you" Meyer.
The whole performance review one's got to go quota system has been going on at SpaceX for a couple years now as well. Elon passed down a "one from every group" quota where at least one person in each group would be given 90 days to improve or get fired. Some of the managers refused to put any of their team on a "process improvement plan" but others just picked someone. It's shitty to watch good employees who are working long hours and getting it done get scared into working harder and faster. The real problem this creates is some of the fluff groups with good managers hold onto their crap employees because the manager will stick up for them whereas the hardcore groups that have bad managers will lose someone who's making good contributions because it's gotta be someone.
There isn't much concern from the top about losing the good ones though, there seems to be a general consensus that some smart kids from college will replace them in a few months once they're gone.
Sorry to post as AC, but...
I have worked for a large American ISP and (more recently) entertainment company based in Philadelphia for quite some time.
Departments are routinely forced to bucket X% of their full-time staff into the "needs improvement" category regardless of the performance of the department or the employees involved. It leads to horse trading among the departmental managers where mid-managers take turns accepting one or more of these dings (on behalf of some member of their team). If it was only a check mark in the employee's personnel file, I doubt many would care. However, it directly impacts the annual raise (for cost of living adjustments) and annual bonus amounts paid to the poor sap who gets hit with the NI rating and that impact can be quite substantial. This makes no real sense and is devastating for morale for smaller departments that tend to be very careful with hiring in the first place. Every year, the company has a public catharsis where employees are encouraged to vent and this comes up all the time, but the policy continues. And I would agree that it leads to employees with the most options to explore those options more regularly than they would otherwise.
If the goal is to strive for mediocrity, then it is being achieved.
I've been in one of those companies. The top performers have a few options: Set things up to be the one competent developer in a team, thus getting good reviews but lots of stress and zero. They can go into the good team, and then play politics, because once all developers are pretty good, most managers can't tell who is actually the best of the lot, or just quit. Then there's option 3: Leave for a less horrible employer, and then quickly poach all those other good developers who hate the system. The lucky company gets a much better staff than average, while the other loses a good percentage of their top talent, needing even deeper staffing cuts. Repeat until all development is sent overseas, because the local talent the company has is now so bad, you are better off with an average team 10 time zones away.
The best it can tell you is the relative work abilities of one small group and really tells you nothing at all abou the qualities of each member. This method would have fired Pauli and Born because they ranked 'ranked' below Einstein, Heisenber, Shroedinger and Bohr.
There is absolutely nothing wrong with measuring employee performance relative to other employees
Yes there is, because as you allude to later, it's IMPOSSIBLE to do it consistently and fairly across teams, and rankings within a given team have absolutely no relation to each other. Is a marketing guy who produced a successful campaign more or less important than a salesperson who actually sold the products being marketed, or an R&D engineer responsible for the innovative feature that the marketing guy highlighted and the salesperson sweet talked customers with? How about the IT person who developed innovative solutions to provide R&D, marketing, and sales with the systems, tools, and support they needed to do the above? What about each of those folks' direct managers who motivated and directed their teams to excel? It's just not possible to compare those people to each other objectively.
If you want a lame car analogy, how about we get rid of the low-performing car parts, but we have the driver pick which ones to keep? You can get in the end you'll still have a comfortable seat, A/C, and the stereo, but the car probably won't actually be able to move...
Just hire competent managers, do some manager and job rotation, encourage high performance and risk-taking without fear of consequences for ideas that didn't end up being the next big thing, you often need hundreds of "failures" to get one huge success.. The biggest thing is to treat employees extremely well, show them they are valued, trust them, go the extra mile for them, and they will most often return the favor. Just be very very very very careful in hiring, and if necessary use temporary contractors for grunt-work or temporary demand spikes, etc. The goal should be zero layoffs (you can of course still fire "for cause" IF you have a true problem employee). Avoid unions like the plague if at all possible as they are incompatible with the above, they look out _only_ for themselves, and to some small degree, workers, but not for the company as a whole. You want a culture where everyone across the company is in it together, NOT us-versus-them. You will be richly rewarded if you can succeed at that. In hard times employees will band together and be willing to accept less compensation and go the extra mile because they know when times are good you'll return the favor, the company looks out for its own. There's a huge benefit to being a private company in that respect because there's less pressure from greedy shareholders for short-term quarterly profits.