Microsoft does away with stack ranking

Microsoft does away with stack ranking

Summary: Stack ranking, an employee-evaluation process that has been roundly criticized by many current and former Microsoft employees, is being abolished at the company.

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Stack ranking -- considered by a number of current and former Microsoft employees as a major detriment, both career- and morale-wise -- is no more at the company.

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Microsoft is announcing to its full-time employees on November 12 that there will be no more curve and no more reviewing "on the curve" at the company. Lisa Brummel, head of human resources for the company, sent an e-mail to employees notifying them of the change today, according to my contacts. 

There will be "no more curve," Brummel said in her email, and there "will no longer be a pre-determined targeted distribution."

While other companies, including Amazon, Facebook and Yahoo, have their own versions of stack ranking that allows them to weed out "low performing" employees, it's Microsoft that's been criticized in the press for the stack ranking process.

A 2012 cover story by Vanity Fair, entitled "Microsoft's Lost Decade," famously bashed Microsoft and CEO Steve Ballmer for the stack ranking process, via which leaders need to rate a percentage of employees as top performers, good performers, average and poor.

Brummel's mail said that the decision to change the way employees are ranked is part of the company's "One Microsoft" philosophy and strategy. Teamwork and collaboration are going to be given more priority in the way employees are evaluated, going forward, she said.

Here's a copy of Brummel's mail to the troops:

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.

To learn more about the new approach to performance and development, please join me for a Town Hall today at 2:00pm PT, either in person in building 92 or via webcast (see details below).

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 

A few readers have wondered aloud as to why Microsoft is making this move now, given that CEO Steve Ballmer's replacement is expected to be named any time now. My personal guess is this is a move meant to calm the troops (and keep them loyal and engaged) in a time when there's lots of upheaval at the company. 

Topics: IT Employment, Microsoft, IT Policies

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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74 comments
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  • Stacked against them

    MJ

    Stacked rank is a great tool one can use when taking over a failing company... when the dead wood needs to be eliminated. But to use it year in and year out? Not recommended.
    JeffinLondon
    • Experienced Stack Ranking at EDS 10 Years Ago

      Ten years ago this was the technique used at EDS (left about eight years ago on my own, so I don't know if the practice continued). For the regional office I was in, all were very talented relative to the competition in the region. So the low end was always assigned to those that weren't going to be working for the company very soon; planned retirements, employees moving out of town, and some that were about to go on maternal leave (makes me shake my head even writing this now).

      It was a terrible, blunt-force method to cull out employee issues that the company truly had in other regions. Created bad morale, and much anger and vocal disrespect targeted at the 'corporate' policy makers.
      achilles heal
    • re: dead wood

      Dead wood is usually found at the top of any org chart, not the bottom.
      Sir Name
      • In my experience

        the dead wood can ocurr at all levels.
        wright_is
        • The problem with stack ranking isn't the dead wood.

          Stack ranking means you get the most money by doing your own work quickly and making sure everyone else on your team does slower or poorer quality work than you. If you help someone else out, it increases the chance that they get the big bonus and you don't get the big bonus and may even get fired.

          So instead of building a team, stack ranking builds backstabbers. Stack ranking is probably the reason the company has such a high turnover rate and almost certainly the reason the company is famous for fighting between departments.
          Michael_Sw
        • The difference

          being that the higher up the dead wood is the truly more it costs the company. Not just in wages paid but damages wrought. Dead wood at the top affect all those below them.
          harrim47
    • Google

      I have yet to see a stack ranking system that was in any way fair to the employees. If its based on peer reviews, the result is mob rule. If its based on management review, the results are highly political and nepotistic. In either case, the actual value of the employee to the company is largely not a factor.
      cypheranarchist
  • excellent

    LONG overdue move. This can help make Microsoft healthy.
    Texrat
  • We're going to see a significantly improved Microsoft, I predict

    Microsoft staff are no longer competing with each other - only with competitors. That is going to make the reorg a much more effective thing. This is a really big deal - bigger than any Microsoft news this year, including Ballmer's departure.
    Mac_PC_FenceSitter
    • Generally Microsoft employees don't feel like they are "competing"

      Except, of course, at stank rank time. In the nearly 12 years I was there, I always felt that the teams that I was on had my back (and that I had theirs). I occasionally encountered folks who did their best to be recognized as better performers than they were (and regrettably, that sometimes worked), but I never felt that someone was working to "push me down the stack".

      But, what was insidious about the stack rank was that there were pre-set buckets. To some extent this will always happen, but at Microsoft, it pretty much meant that the low 10% of every team got fired each year - no matter how well the team was doing as a whole, and no matter how "wide" the gulf was between the "highest" and "lowest" performer (or what the definition of "high" and "low" meant).

      That, in turn, bread a management culture that was on the lookout for who the best "firing" candidates would be. They could terminate just about anyone for "performance" each year, simply by jury-rigging that person's performance review. Someone could have a "knock it out of the park" year, but if management decided it was time for them to go, they could just write up a bad performance review and that was that.

      Microsoft has done a good job at rewarding their top performers. Where they failed was in judging the next two layers (the nearly top performers and the folks who do a great job, day-in and day-out, but who don't get recognized). Hopefully this will fix some of that.
      Flydog57
      • In my 10 years at Microsoft ...

        ... I saw similar things as Flydog.

        Before stack-ranking was introduced, I saw teams formed by people who were measured and rewarded for the contribution they made to their team's output.

        After stack-ranking was introduced, I saw MANY more instances of people trying to one-up their peers and saw far too many people receive a poor rating despite having done excellent work, just because everyone's performance had to snap to a curve.

        This resulted in Microsoft losing more good people due to the stack-ranking process than losing poor-performers which had a very detrimental effect on the culture, morale and feel of the company.

        I hope we'll now see Microsoft return to being a true meritocracy and that people who do a good job are rewarded appropriately while those that do not are encouraged to seek other opportunities.
        bitcrazed
      • This is what just happened to me

        They gave me nothing to work on at the end, things they knew I couldn't do while others couldn't do them either. I had automation skills while another couple of people did not. They still got rid of me after rigging my performance review twice in a row while discrediting me for my accomplishments. It was so incredibly obvious and demoralizing. Meanwhile they replace you with a fresh college grad ONLY. If you looked at the age of people they fired over 10 years vs hired/and those who left with the threat of being fired for example those who got a 4 and knew they would get a 5 ranking the following yer....you would have a huge age discrimination lawsuit!!!! It would be a one two knockout punch! If you get fired at Microsoft and collect unemployment, they do not contest it in fear of being sued. So they pseudo fire you for "perf" reasons when in fact its a forced bs curve.
        Pissed@...
        • There are two sides...

          I worked for Microsoft Consulting Services and thought the stack ranking was very well handled by my PDM [Professional Development Manager - for those who dont know]. But then again I have always liked a curve, going all the way back to high school and before.
          TheCPUWizard-2011
          • Grading On The Curve

            It's insane. I am a former teacher now working in the tech industry. The infamous bell curve... gag! Stated statistically, it means there are 10% doing excellent work, 20% doing good work, 40% doing average work, 20% doing fair work and 10% doing poor work. Essentially, you take the average and work both ways, up and down, from there. The classic example of this type of scale failing is from the classroom: if everyone gets 100% on a test, then everyone is doing average work; after all, the average score is 100%. This means, in a classroom setting, everyone gets a C, even though everyone got 100%.
            benched42
          • That is an incorrect application of the bell curve.

            The tests for a single class are to show the ranks of the students in relationship to the collection of students in ALL classes.

            Just because everyone in a specific class got 100% does not mean they get a "C", it means they get an "A".
            jessepollard
          • You are missing the point.

            What she is saying is hypothetical. To stretch it, if every student in the grade (or the entire school) got 100%, everyone would still be getting a C. The point is that everyone one should be encouraged to reach the goals. If everyone gets there, everyone deserves an A or be rewarded.
            gamoniac
          • the major flaw here

            is that for statistics to work correctly, one needs to work on a statistically random sample.
            http://en.wikipedia.org/wiki/Sample_(statistics)

            One can not apply bell curve to a hand-picked set of data. Obviously, when you hire people, you hand-pick them, and so their performance distribution can not be desribed by the bell curve.
            ForeverSPb
          • Don't forget the psychology or sociology of the situation!

            I absolutely accept that some employees are more skilled or more productive than others. That aspect of stack ranking and curves is not in dispute.

            The problem is that using a ranking system that governs bonuses and firing adds a financial incentive to divisive behavior. If I notice a bug in my colleague's code and report it directly to him immediately, he can fix it right away and get a good performance review. If I wait until it's in production and then report it to my manager, he gets a bad performance review, I get a good performance review, his relationship with me suffers, and the company on the whole suffers.

            If I manage department X and you manage department Y, and I ask for your department to assist ours to get a certain task done, then you benefit by putting red tape in my way. That lets you accomplish more of your own assigned tasks, and I accomplish fewer of mine.

            The examples go on and on. I am sure there are individual teams, departments, and managers that escaped this problem. But generally "you get what you pay for", and here you're paying for counterproductive behavior.
            Michael_Sw
    • They'll still be competing

      Of course Microsoft staff will be competing with each other. All large corporations have staff competing with each other. That's how they get improved performance. It's how they manage the competition and use it to help staff improve that can makes such intramural competition beneficial or detrimental. If MS can make such competition friendly and beneficial instead of dog-eat-dog and detrimental, they can be more effective.
      DM108
    • You won't

      All they have done is taken away the illusion of being unfairly ranked and fired. You can still have 10 Einsteins in the room. One isn't getting any stock or bonus and will be headed to Google. Things won't make sense to the 1 and 2 ranked folks. Their feelings are now hurt as their egos no longer are 1 and 2 ranking. Now every shmuck will want some of that cash pile as though they were a 1 ranking. People will start talking amongst one another about what their stock and bonus was. Anger will prevail in the ranks. No one will want to help each other. Bad habits die hard. They trained the dogs to hate each other. Now untrain them. Remember 1 and 2 rankers knew they were special. They no longer are :)
      Pissed@...