Microsoft announces stack ranking is dead

Microsoft has announced to staff it is killing off its controversial “stack ranking” management system.

The system required each of its business units that required each manager to nominate a certain percentage of his or her staff as either “good”, “average” or “poor” performers.

Stack ranking has come under fire from analysts and commentators, with Vanity Fair’s Kurt Eichenwald blaming the company’s “lost decade” under Steve Ballmer on the controversial practice.

“Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees,” Eichenwald wrote.

According to its critics, the system discourages teamwork within teams and inter-departmental communication and co-operation, with employees rewarded for not passing on crucial information to their colleagues.

“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review,” a former software developer told Eichenwald.

“It leads to employees focusing on competing with each other rather than competing with other companies.”

The system was inspired by a similar program run by lauded GE chief executive Jack Welsh.

Under Welsh, the company divided its employees into three groups every year – a top 20%, who were rewarded, the next 70%, who were kept and given coaching and mentoring, and the bottom 10%, who were fired.

In a story broken by Mary Jo Foley from ZD Net, Microsoft’s head of human resources, Lisa Brummel, told staff in a leaked email the practice would be removed as part of the company’s recently announced One Microsoft strategy.

“I am pleased to announce that we are changing our performance review program to better align with the goals of our One Microsoft strategy,” Brummel says.

“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.

“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.”

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