The idea for today’s off-topic note came to me when I read “Microsoft’s Lost Decade“, an aptly titled Vanity Fair story. In the piece, Kurt Eichenwald tracks Microsoft’s decline as he revisits a decade of technical missteps and bad business decisions. Predictably, the piece has generated strong retorts from Microsoft’s Ministry of Truth and from Ballmer himself (“It’s not been a lost decade for me!” he barked from the tumbrel).
But I don’t come to bury Caesar — not, yet, I’ll wait until actual numbers for Windows 8 and the Surface tablets emerge. Instead, let’s consider the centerpiece of Eichenwald’s article, his depiction of the cultural degeneracy and intramural paranoia that comes of a badly implemented performance review system.
Performance assessments are, of course, an important aspect of a healthy company. In order to maintain fighting weight, an organization must honestly assay its employees’ contributions and cull the dead wood. This is tournament play, after all, and the coach must “release” players who can’t help get the team to the finals.
But Microsoft’s implementation — “stack ranking”, a bell curve that pits employees and groups against one another like rats in a cage — plunged the company into internecine fights, horse trading, and backstabbing.
…every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor…For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings.
Employees quickly realized that it was more important to focus on organization politics than actual performance:
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.
This brought back bad memories of my corpocrat days working for a noted Valley company. When I landed here in 1985, I was dismayed by the pervasive presence of Human Resources, an éminence grise that cast a shadow across the entire organization. Humor being the courtesy of despair, engineers referred to HR as the KGB or, for a more literary reference, the Bene Gesserit, monikers that knowingly imputed an efficiency to a department that offered anything but. Granted, there was no bell curve grading, no obligation to sacrifice the bottom 5%, but the politics were stifling nonetheless, the review process a painful charade.
In memory of those shenanigans, I’ve come up with a possible antidote to manipulative reviews, an attempt to deal honestly and pleasantly with the imperfections of life at work. (Someday I’ll write a Note about an equally important task: How to let go of people with decency — and without lawyers.)
A review must start with three key ingredients, in this order:
- First: Because your performance meets/exceeds requirements, we’ll renew our vows, our work relationship will continue.
- Second: Here are your new numbers: salary, bonus, stock.
- Third: We’re sufficiently happy with your performance as it stands today, so feel free to disregard the observations and suggestions for improvement I’m about to make. Now let’s talk…
This might sound a little too “different” (that’s Californian for “batty”), but there’s a serious purpose, here. We’ve all been reviewed, we all know the anxiety — and sometimes the resentment — that precedes the event. Mealy-mouthed comments about team-spirit, loyalty, how the company cares for its people and other insufferable HR pablum only makes things worse. You tune out, you can only hear the noises in your own head: Am I being led to the exit? Am I being shafted out of a raise/bonus/stock? Am I supposed to think that loyalty is its own — and only — reward?
To be heard, the reviewer must silence these questions. Hence the preamble: Your job is safe; here are the $$; we like what you do enough that you can safely continue to behave in the manner we have come to expect, no need to course-correct.
There follows a pause to let the news sink in. Anxiety quelled, the reviewee is now prepared — and willing — to listen.
On to the observations and suggestions. It’s probably a good idea to start with the minus side of the ledger — this isn’t much different from a sales pitch: Get the product’s negatives out of the way first. Stick to specific comments about goals missed, undesirable habits, and the like. “When you arrive 20 minutes late at our staff meetings, you’re being disrespectful to your colleagues, including me.” Defensive reactions to the negative part of a review are unavoidable, so you sing the refrain: The objectionable behavior, while imperfect, doesn’t jeopardize your job.
(As an aside, and seriously: Objecting to a behavior that you insist will be tolerated because of the overall goodness of the relationship…this approach works wonders outside of work. It’s a lot more constructive than the comminatory “You must stop doing this”, which invites the sarcastic and unhelpful response: “And if I don’t? What? You’ll divorce me?”)
The review can now proceed to the positive, to praising the individual’s performance and giving thanks. Saccharine is to be avoided, examples are a must, and exaggeration is only welcome in moderate doses.
Finally, ask for feedback… but don’t kid yourself: Hierarchy trumps honesty, so you may have to ask twice. Explain that you understand the challenge in giving feedback to the reviewer. You might get some useful tidbits, especially if they sting a bit.
Back in the real world, this simple, direct approach might not fit a large organization where you need to protect the rest of the team from the demoralization of a metastasized employee. The habitual backstabber, the knee-jerk naysayer, the self-appointed “Fellow” must be excised before too much harm is done. It’s a difficult task that requires a degree of human judgment and courage that’s not afforded by a mechanical ranking system.
Next week, we might return to topics such as Apple’s uneasy relationship with file systems, Android tablets and phablets, or some such tech disquisition.
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8 Comments
HR, the the adult world, they are the equivalent of Guidance Counselors in high school. They are generally worthless, and best avoided, until you need their signature on an official form.
As for stack ranking, it was big at GE in the days of Jack Welch. I’m sure that’s where Microsoft copied the idea. (Microsoft never being known for originality.) At GE, the practice has been discredited; now it is beginning to be discredited at MS.
Apparently Stack Ranking author said that it was designed for reorganization and to be used only for couple of years.
but the real issue is that Stack Ranking was combined with Microsoft culture which was implemented by Bill Gates himself. So when they were successful it was genius and now that long knives are out every one and their tiny kingdoms are using it as weapon.
The Other big problem with Microsoft was that it allowed non tech managers to take over.
If Surface is not successful according to media then real bloodletting will begin then no one will be safe.
“It’s a difficult task that requires a degree of human judgment and courage that’s not afforded by a mechanical ranking system.”
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Ripe for innovation?
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http://www.readwriteweb.com/archives/why_talent_management_tech_is_super_hot_and_bound.php
Great read. I particularly like this important point: “Employees quickly realized that it was more important to focus on organization politics than actual performance.” Stack ranking can create a toxic atmosphere which, in the end, doesn’t do much to improve employee performance. It puts employees against each other, when they should be working together to improve the organization.
The better alternative, as you highlighted, is to enable real-time feedback instead of stack ranking performance reviews. Real-time feedback gives employees the direction they need as they are working on a goal, not during a generic performance review when that feedback isn’t necessary anymore. This is how employees can grow and be better workers, which enables them to positively contribute to the organization.
I seem to remember that Enron implemented a close cousin by the name of “rank and yank”. You have to admit that is a much catchier name…
JLG,
I love your performance review guidance. I have been using something similar and it works like a charm.
As far as MSFT is concerned, I happened to post on that same article a few weeks ago (see here: http://goo.gl/Tb9AF)
It is worth noting that most large companies use “stack ranking” in some way, shape or form. It is widely perceived as a good practice, as it forces rigor in staff evaluation and development, and helps with “rating fairness” among other things. But like every “good practice”, it often fails to achieve its purpose because of poor execution.
There are many questions to consider when thinking about implementing “stack ranking”. Here are 2 specifically focused on the “bottom end” of the rating distribution.
1- Is my bottom quota aligned with my forced attrition expectations ?
If, as in the article, you expect 10% of low performers, you should be ready to ask 10% of your staff to leave. This % is on top of voluntary departures (medium- to high- performing employees that will leave you anyway). If you are not actually following through and letting people go, why are you telling these low performers that they are bad . In practice, except in high “forced attrition” industries, you are often much better off having a bottom quota <10%.
2- Am I enforcing the distribution at the right level ? This is basic statistics: if you expect 10% of your staff to be low performer on average , you need about 1,000 employees to be reasonably confident that the % of low performers will indeed be 10%. In a group of 10 people, there is a very high likelihood (read one chance out of two) that the right number of low performers is NOT 1, rather 0, 2 or more. This problem is more complicated than it looks, as it is quite hard to stack rank 1,000 individuals (most likely managed directly by over 100 managers), but getting that piece right is key to useful stack ranking
Back to MSFT, while I can easily see how stack ranking can go wrong, I believe that MSFT's lost decade's root cause has to be more than a poor performance evaluation system. I would not be surprised if the key issue was a poor decision making/accountability system instead.
I would like to introduce a counter example, illustrated by the old french administration’s evaluation system from many years ago.
Back then, there was no “quota”, no obligation to give more or less points (this has probably changed since).
So what happened ?
A few decision-makers quickly understood that to be “loved” by their ultra-protected employees, they’d better give them a 5-stars rating. On a ranking system going from 0 to 20, this means everyone was having a 20, except badly loved people (independant from actuel performance) which could possibly get a 19/20, or a minor annotation alongside the 20/20. Anyway, since it was impossible to fire bad elements, it became useless to make them even more angry with a bad note, which would “poison” the atmosphere for the months to come.
Obviously, managers which did not understood the strategy were quickly over-run, since the note tend to be “sticky” in such an administrative organisation, and had real effects/consequences on career and salaries opportunities.
The system quickly generalised, with everyone getting a 20, and occasionnal bad performers getting a 19. Attempting to give a 18 was bound to trigger a war with the local union representative.
It looks funny, but it was real. A full generation of administration workers have lived with such rules. You can guess that “bad performers” were completely hidden in this system, which suited them quite perfectly.
So the question is :
how to avoid “stack ranking” evaluation system, without leading into such system-wide collusion problems ?
@ Cyan: You’re right, I’ve seen this ”at work”, so to speak. We have related problems in the US in organizations/institutions where everyone must get an award and praise, both devalued by insincerity. Evaluating and ranking cannot be avoided, underperformers can’t be kept in jobs where they demoralize the rest of the troops who ask themselves why bust their butt while Joe coasts along.
But it must be done humanely (I have to write this note about firing people), large organizations sometimes can put people in positions better suited to their skills. There no substitute for honesty: ‘I’m letting you go because, in our/my judgment, your contribution isn’t what we need (it could be new taks or below par performance). Management is hired to exercise judgment, among other things. There are legal or ethical restrictions and remedies.
Sorry, I relaize I sound a bit like ‘To lose weight all you have to do is eat less and exercise more’…