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Microsoft Abandons 'Stack Ranking' of Employees
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The system of using performance evaluations for "forced" or "stack" ranking of employees started with Jack Welch at General Electric. Microsoft adopted the system under Ballmer till 2013, when it decided that the need for teamwork was more important and discontinued the practice. Welch used it to get rid of "underperformers" or managers who did not conform to his requirements when he became CEO of General Electric. It was his personal style and way of bringing change to GE. The practice of "forced" ranking increases competition inside the company instead of teamwork, say managers, and leaves a lot to the caprice of individual managers. In December 2013 Ballmer facing criticism from his Board for missing some of the disruptive technologies in the information tech business and falling behind Apple and Google, sought the advice of Alan Mulally of Ford Motor Company. Mulally had to fight entrenched Japanese competitors and pull Ford out of a crisis in which even Ford's logo had been put up as collateral for loans. Meeting for 4 hours on Mercer Island in Seattle Mulally told Ballmer that he focussed on teamwork and simplifying the way Ford did things. Ballmer phased out the "forced" ranking system as one of the last major steps before he leaves Microsoft. In today's environment for tech companies of intense competition worldwide and disruptive technologies without teamwork and employees looking to come up with new and exciting products the future is surely lost. Having the "bottom" 50% of the employees compete for limited positions can be dangerous or suicidal without the dominant position in markets that GE and Microsoft had. It also makes no sense to substitute internal competition and capricious manager behaviours for teamwork. It is the responsibility of managers to do as much as possible to make good hiring decisions, and then motivate and help employees to achieve their best performance with frequent helpful feedback, and to promote teamwork. This is the lesson Ford learned through its crisis and Microsoft is now learning.
Microsoft and "Stack" or "Forced" Ranking of employees
11/17/2013
Microsoft phases out this system of forced ranking of emplyees and puts in place more frequent feedback for employees from managers. The idea is to encourage teamwork. Ballmer makes this change in 2013 as he prepares to leave Microsoft. CEO Welch introduced the stack ranking system in General Electric and it was a way to rid GE of "underperformers" or those who did not conform to the new CEO's requirements. A professor at UCLA's School of Management sees the evaluation system at companies failing in many respects if it sees the manager's job to evaluate and not to get performance up to a high level by training, motivation and team work. Ballmer sat down for four hours in December 2013 with Alan Mulally to understand how Ford made its comeback and Mulally told him it was teamwork and simplifying the way Ford did things. Welch was addressing a problem not faced by many companies having to fight competition and come up with exciting products and technologies. He was trying to change an old established industrial company quickly- the same approach which did not put highest priority on teamwork would be disastrous for companies needing to fight entrenched competition.
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