Microsoft has decided to drop its controversial "stack ranking" employee evaluation system while Yahoo's Marissa Mayer has reportedly embraced it as a tool to upgrade company talent. Once again, Yahoo! appears to be bucking a trend. Is Mayer's heavily scrutinized move a mistake?
The method of ranking employees along a bell curve from worst to best was an idea that came to prominence in the 1980s, but has fallen sharply in recent years.
Its advocates, such as Jack Welch, argue this so-called "forced ranking" system represents a true meritocracy that rewards high performers. The system is also known as "rank and yank," as the Darwinian process results in managers firing under-performers and replacing them with new employees.
After Welch successfully turned GE around, many other companies rushed to imitate his practices. However, as Dick Grote argued in his book Forced Ranking: Making Performance Management Work, forced rankings don't work for everyone.
Critics have argued that forced rankings are flawed from a variety of different standpoints. One argument is that this system of evaluation rewards the wrong behavior. The self-promoters win while the truly productive employees lose.
Another argument, derived from a 2012 study by Ernest O'Boyle Jr. and Herman Aguinis, is that forced ranking doesn't represent reality. O'Boyle and Aguinis found that ranking employees along a Gaussian distribution scale - a model that assumes most individuals will perform in an "average" manner - simply does not reflect the way that individuals perform in organizations.
Most employees, according to O'Boyle and Aguinis's study, are actually slightly below average, while a small number of individuals outperform their peers. "Results are remarkably consistent across industries, types of jobs, types of performance measures, and time frames and indicate that individual performance is not normally distributed," O'Boyle and Aguinis wrote.
"Assuming normality of individual performance can lead to misspecified theories and misleading practices," the authors conclude.
What about the unintended consequences of pitting employees against each other? Earlier this week we examined how unhealthy competition can lead to back-stabbing, low morale and a toxic environment for innovation.
Nonetheless, many Silicon Valley companies have a soft spot for hard data, and that may be why tech companies are three times as likely to institute forced ranking systems than other companies. This trend came to the forefront after Microsoft's forced ranking practices were scrutinized in Vanity Fair. The company reversed course yesterday.
Meanwhile, AllThingsD has reported that Marissa Mayer's embrace of forced rankings at Yahoo! has led to posts like this one on an anonymous internal message board:
I feel so uncomfortable because in order to meet the bell curve, I have to tell the employee that they missed when I truly don’t believe it to be the case.
As AllThingsD points out, "many inside agree that the Silicon Valley Internet giant has long needed to prune its employees and upgrade its talent base." However, as was the case with the change in Yahoo's work-from-home policy earlier this year, poor communication might be the culprit for an "HR disaster" once again. While Mayer reportedly claimed the rankings weren’t mandatory, many employees don't see it that way.
While Mayer's latest move may or may not be the right one, Yahoo! is certainly not the only company to struggle with the issue of performance reviews. Does anyone do it right?
As the management consultant John Beeson points out on Big Think, "even high-performers with top performance ratings get feedback from their bosses that can be vague, contradictory and unhelpful."
So how can this be improved and how can employees actually get the feedback they need to fuel their career development?
As Beeson points out, the feedback you'll most likely receive "will be intended to increase your performance in your current job, at your current level." Therefore, as you prepare for your review, Beeson says you need to "aim to initiate a series of career discussions and get your boss to commit to an ongoing dialogue. During the review discussion convey a sincere desire for feedback that will help you improve your performance and help position you to advance in the future."
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