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"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.


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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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.

"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller

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