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Problems With Forced Ranking at Microsoft

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If you want to improve employee productivity, you might think that a little competition is healthy. But one article explains how forced ranking not only impacted employee productivity but ruined employee morale.

A Vanity Fair piece on the topic gives a good explanation of how this system works:

A management system known as “stack ranking”—a program that forces every unit to declare a certain percentage of employees as top performers, good performers, average, and poor—effectively crippled Microsoft’s ability to innovate. “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,” [journalist Kurt] Eichenwald writes. “If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

Business consultants discuss Microsoft

© Flickr user Robert Scoble

You might be wondering why Microsoft would use this kind of system. What’s the rationale behind forced ranking? Does it really improve employee productivity? Or is as horrible as the article implies?

An analysis from CBS News explains:

Forced ranking is a controversial workforce management tool that uses intense yearly evaluations to identify a company’s best and worst performing employees, using person-to-person comparisons. In theory, each ranking will improve the quality of the workforce.

Forced ranking tends to be popular with large corporations that have hundreds or thousands of employees and need to systematize their HR processes… The long-run impact should ideally be increased productivity, profitability, and shareholder value. But sometimes a company culture can shift due to forced ranking, creating a more competitive atmosphere and decreasing morale.

Critics also claim the system creates a competitive environment that can result in cutthroat, unethical behavior; limit risk-taking, creativity, and teamwork; and discourage workers from asking for help or extra training out of fear that they’ll be identified as low performers. The strategy has also resulted in legal troubles [for many companies.]

Although American business is known for innovation, risk-taking, and adapting to change, management policies and employee productivity don’t seem to be an area where many companies pay attention to well-established facts. We’ve known for decades that competition and workplace productivity tend to not mix well. We know that performance reviews and corporate productivity ineffective at best.

To summarize it best, we only need to quote the famous management consultant W. Edwards Deming:

The supposition is prevalent the world over that there would be no problems in production or service if only our production workers would do their jobs in the way that they we taught. Pleasant dreams. The workers are handicapped by the system, and the system belongs to the management.

That passage comes from the book Out of the Crisis, published in 1982.

Odds are you don’t run a corporation the size of Microsoft, so hopefully you haven’t fallen in line with this outdated way of thinking. But if you have, the time to re-evaluate how you view performance is far overdue. Don’t fall prey to taking the easy way out and working within the constraints of archaic evaluation systems.

Still struggling with how to implement these principles within your own organization? Then don’t hesitate to reach out. We can help and would be happy to do so! The business improvement consultants at AccelaWork have seen all sorts of organizational problems and we can get you on the fastest route to success.

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