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  (Source: dice.com)
"Stack ranking" made Microsoft employees want to compete with one another instead of other companies

In an effort to move toward a more collaborative culture within Microsoft's walls, the software giant is axing its longtime system of "stack ranking." 

Microsoft's stack ranking system was a management technique where each unit has a certain percentage of employees that are identified as top workers, good workers, average workers and poor workers. In other words, if there is a unit of 10 employees, it's understood that two people would be designated the top workers while seven employees would receive good or average reviews and the last one would get a poor review.

Using this stack ranking technique not only put a lot of pressure on employees, but also made employees want to compete with one another instead of other companies.

But today, Microsoft HR chief Lisa Brummel issued a memo to all Microsoft employees saying that stack ranking is a thing of the past. 

The following is the full memo:

To Global Employees,

I am pleased to announce that we are changing our performance review program to better align with the goals of our One Microsoft strategy. The changes we are making are important and necessary as we work to deliver innovation and value to customers through more connected engagement across the company.

This is a fundamentally new approach to performance and development designed to promote new levels of teamwork and agility for breakthrough business impact. We have taken feedback from thousands of employees over the past few years, we have reviewed numerous external programs and practices, and have sought to determine the best way to make sure our feedback mechanisms support our company goals and objectives.  This change is an important step in continuing to create the best possible environment for our world-class talent to take on the toughest challenges and do world-changing work.

Here are the key elements:

 

  • More emphasis on teamwork and collaboration.  We’re getting more specific about how we think about successful performance and are focusing on three elements – not just the work you do on your own, but also how you leverage input and ideas from others, and what you contribute to others’ success – and how they add up to greater business impact.
  • More emphasis on employee growth and development. Through a process called “Connects” we are optimizing for more timely feedback and meaningful discussions to help employees learn in the moment, grow and drive great results.  These will be timed based on the rhythm of each part of our business, introducing more flexibility in how and when we discuss performance and development rather than following one timeline for the whole company.  Our business cycles have accelerated and our teams operate on different schedules, and the new approach will accommodate that.
  • No more curve.We will continue to invest in a generous rewards budget, but there will no longer be a pre-determined targeted distribution.  Managers and leaders will have flexibility to allocate rewards in the manner that best reflects the performance of their teams and individuals, as long as they stay within their compensation budget.
  • No more ratings. This will let us focus on what matters – having a deeper understanding of the impact we’ve made and our opportunities to grow and improve.

We will continue to align our rewards to the fiscal year, so there will be no change in timing for your rewards conversation with your manager, or when rewards are paid. And we will continue to ensure that our employees who make the most impact to the business will receive truly great compensation.

Just like any other company with a defined budget for compensation, we will continue to need to make decisions about how to allocate annual rewards.  Our new approach will make it easier for managers and leaders to allocate rewards in a manner that reflects the unique contributions of their employees and teams.

I look forward to sharing more detail with you at the Town Hall, and to bringing the new approach to life with leaders across the company.  We will transition starting today, and you will hear from your leadership in the coming days about next steps for how the transition will look in your business. We are also briefing managers and will continue to provide them with resources to answer questions and support you as we transition to this approach.

I’m excited about this new approach that’s supported by the Senior Leadership Team and my HR Leadership Team, and I hope you are too.  Coming together in this way will reaffirm Microsoft as one of the greatest places to work in the world.

There is nothing we cannot accomplish when we work together as One Microsoft.

Lisa


Last year, Vanity Fair's contributing editor Kurt Eichenwald focused on stack ranking as one of Microsoft's biggest contributors to what he calls its "lost decade," where a few bad management decisions led to the company's fall starting in the year 2000. 
 
Eichenwald used internal corporate records, interviews and emails between Microsoft executives to dictate his analysis, which was that stack ranking and the inability to move up to new technologies were Microsoft's main issues during that decade. 

Microsoft is now working on a restructuring plan that aims to unify device units (more specifically, the Windows Phone, PC and Xbox units) for a more seamless experience across multiple devices. The new restructuring plan -- called "One Microsoft" -- has already shifted executive positions, including that of CEO Steve Ballmer, who will retire within the next year. 

Microsoft has already shortened its list of potential CEOs down to about five external candidates and at least three internal possibilities. The only known external candidates are Ford CEO Alan Mulally, former Nokia CEO Stephen Elop and Computer Sciences Corp. CEO Mike Lawrie. The names of the others could not be disclosed at this time.
As far as internal candidates go, former Skype CEO Tony Bates (who is now head of Microsoft's business development) and Satya Nadella (Microsoft's cloud and enterprise chief) are just a couple of potentials up for the part.

Source: The Verge



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Awesome
By Reflex on 11/12/2013 4:46:31 PM , Rating: 5
As a former MSer, this is awesome news. Stack Rank was by far the most hated aspect of my career there and virtually everyone else seemed to feel the same way. The hope is that this does not lead to the kingdom building that plagued MS in the 90's. Personally I think Stack Rank makes sense as a short term solution to a company that has built up cruft, but over the long run it chases people away.

BTW, MS is not the only company who uses it. Its virtually the industry standard. I've worked for several big tech companies, every single one has used some form of Stack Rank.




RE: Awesome
By Argon18 on 11/12/13, Rating: -1
RE: Awesome
By Motoman on 11/12/2013 5:01:55 PM , Rating: 2
LOL.

Whatever it is you're smoking...I want some.


RE: Awesome
By maugrimtr on 11/18/2013 7:37:49 AM , Rating: 2
Imagine a team with 10 excellent members. As a manager, you were required to rate at least one of these as a poor performer who may be encouraged to leave the company (or they'll understandably feel resentment and lose any enthusiasm anyway). So you boot an excellent team member, throw the remaining team's morale down a toilet and hire a replacement who'll need months of training.

Then you do it all again next year.

Stack Ranking - Telling your employees that they'll be fired for doing a good job because it's, you know, good statistics.


RE: Awesome
By kleinma on 11/12/2013 5:07:17 PM , Rating: 2
yeah, they are a dead dinosaur of a tech company. Now if only they could stop posting record profits quarter over quarter and stop dominating the enterprise facing services business, they could just hurry up and die already.

Of course, what exactly do you think takes the place of a gorilla? A bunch of chimps? Or another Gorilla? If you don't like Microsoft, and you like Google, then your sentiment makes sense from a favortism standpoint, but it is just replacing one company with another at the top of the ladder.


RE: Awesome
By Argon18 on 11/13/13, Rating: -1
RE: Awesome
By Ammohunt on 11/13/2013 2:13:22 PM , Rating: 2
Busted! Argon18 = RMS


RE: Awesome
By Argon18 on 11/13/13, Rating: -1
RE: Awesome
By Etsp on 11/13/2013 12:43:47 PM , Rating: 3
You're comparing companies whose core business was very focused around one thing with little-to-no diversification. Plus, Nokia shouldn't be included in that list. They aren't out of business, they weren't going out of business. They were bought.

Blackberry is a completely different beast. They were years too late to embrace apps, and their touchscreen efforts were half-baked. They should have taken Android, forked it to meet their security, usability, and environment standards, and then released it in a device that could use the google play store to buy apps.

Granted, Apple doesn't have a lot of diverse products either, but both Google and Microsoft have multiple revenue streams (Google from ads mostly, but the method of delivery is still quite diverse.)


RE: Awesome
By Nekrik on 11/14/2013 2:20:17 PM , Rating: 1
"Besides, the record profits are irrelevant" - laughed out loud a little when I realized this may actually be something you have convinced yourself of. But then I also realized ignorance is ignorance and those sorts of conclusions can be expected when that becomes a factor in the logic.


RE: Awesome
By ClownPuncher on 11/12/2013 6:48:42 PM , Rating: 2
I wish there was a "never worth reading" function.


RE: Awesome
By Motoman on 11/12/2013 4:55:35 PM , Rating: 4
It is completely retarded, and always has been.

If you've got a group of misfits, some of them are going to be praised and help up as "be like him" regardless of the fact that they're useless. And if you have a group that's truly comprised of nothing but superstars, some of them are going to be punished for sucking...when in fact they're among the best there is.

The entire thing is a product of people being too lazy to spend the time to adequately do their jobs...in this case, evaluate employees. Because it's hard to actually look at an employee's output, find out how he works with his team, whether or not he focuses on the company's mission, so on and so forth. Much easier to just assign a number to everyone and call it a day.


RE: Awesome
By Ktracho on 11/13/2013 8:19:59 PM , Rating: 2
It also tends to favor seniority: a newcomer will very likely be ranked at or near the bottom, since s/he is in the process of tackling the company's learning curve, hence productivity is low relative to other employees. This is demoralizing, because it means that if there are lay offs, guess who gets the boot first? In addition, the new employee will likely not get a bonus regardless of how hard s/he works, because s/he cannot compete with employees who have already mastered the learning curve. Furthermore, new employees are under tremendous pressure to surpass (not equal) the level of other employees who have been there a while, or else.


RE: Awesome
By Keeir on 11/17/2013 9:19:10 PM , Rating: 2
I think people are kidding themselves.

"Stack Ranking" will always occur in some form. Now, Microsoft having it as a written down policy was clearly unpopular. But I bet in 10 years time, whatever new policy term is coined will be almost as despised.

The truth is no one wants to end up with the short end of the stick, regardless if they deserve it or not. Any system that suggests you might end up with the short end of the stick is going to be unpopular. But its kind of "tough", 50% of people will underperform 50% of people!

Every "manager" or lead stack ranks the people working for him/her. At large companies, I have never worked with a team that was comprised of "all-stars". At a large company, this is even undesirable. A large company has to figure out how to spread that ~25% of people who are truely excellent and a match for the companies goals to touch all the aspects of the company. Rarely does a product a large company like Microsoft rolls out dependant on only 1 or 2 teams of individuals. It takes many many teams for even the most basic product to be successful long term. And Microsoft has dozens of products in each stage of the product cycle at a time. If a large company can actually afford to staff an area of responsibility with its "undesirables", then it should outsource that area.

Regardless of the its current bad odor, the "stack ranking" system was a marked improvement on some of the early methodology (for large companies) which included seniority, current employee cost, nepotism, and politics. With a half-way honest reviewer, a new employee could actually be regnozied as a top contribiter the first few years and stand a shot at getting good assignments without being in "the know."

I hope whatever Microsoft is moving too will keep the "good" of the stack ranking system, there have been alot worse methodologies over the years.


RE: Awesome
By Belegost on 11/13/2013 11:36:10 PM , Rating: 2
Agreed. A system like this promotes a very hostile work environment, and actively drives away good talent.

An all-star team that really works together can put out a great product (I know I have participated in such teams in the past) BUT if only a few people get rewarded for great work, then other people who are also great workers (but maybe not quite as great) will feel underappreciated, and over time will transition out.

Further, it encourages ugly politics in the office, and the people who have the right connections and can play the game right will get the good ratings even when others may deserve it purely on merit.

I know this, I had friends in grad school who joined MS; people who's work was top notch - all of them left in frustration. I personally refused to even apply there because of it, I heard too much about how viperous the environment was there.

MS needs to invest in putting together a review program that rewards teamwork, allows everyone to get reviewed based on individual merit (not a Mary is better than you, and Joe is worse situation) and discourages negative competitiveness.

With that, it might be worth working there again.


RE: Awesome
By wempa on 11/14/2013 12:21:36 PM , Rating: 2

I agree completely. I work in a company that looks for the cream of the crop every time it hires. It's very likely that we are going to have lots of very high performers. Pre-allocating buckets like top 20% / middle 70% / bottom 10% is silly. If the middle 70% are really just mediocre, then you probably need to change how you hire !


RE: Awesome
By Reflex on 11/14/2013 2:11:02 PM , Rating: 2
I am not aware of a company that does not attempt to hire the cream of the crop every time they hire. I am fairly certain that unless you work for a very few top names you have the same average dispersement of talent that most other companies have...


RE: Awesome
By wempa on 11/14/2013 4:43:01 PM , Rating: 2
quote:
I am fairly certain that unless you work for a very few top names you have the same average dispersement of talent that most other companies have...


Well, I would certainly debate that. My point is that there shouldn't be arbitrary buckets. It's possible to not make the top 20%, but still be an extremely high performer. Therefore, you shouldn't be penalized and dropped into the mediocre category just because you didn't make the top 20%.


RE: Awesome
By Motoman on 11/14/2013 5:03:13 PM , Rating: 2
Oh, I've seen far too many companies who hire based on, as far as I can tell, getting someone to fill the spot for as little pay as possible.


RE: Awesome
By Mitch101 on 11/12/2013 5:11:24 PM , Rating: 2
RE: Awesome
By DFSolley on 11/14/2013 3:04:10 PM , Rating: 2
While working for GM(EDS), we were put into a Stack Rank system (wasn't called Stack Ranking, but the same process). My department had worked diligently to ensure we had top level talent. The project was both challenging and fun, so it wasn't too hard.

With Stack Ranking, we had to lay off several high functioning employees... and then replace them internally with "better talent" that was much inferior.


"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)














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