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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 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.

"There is a single light of science, and to brighten it anywhere is to brighten it everywhere." -- Isaac Asimov

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