Stack Ranking Performance Management Systems

My boss’ voice was visibly shaken on the other end of the phone. “I’m so sorry,” he whispered. “We have too many ‘leadings’ this year. You won’t be able to rate your top performer leading, or give her the extra pay.”

“What?” I was shocked. This woman had a hell of year. Plus, I had only submitted one name at that level. “How can that be?, I questioned, still stunned.

“Well you see, I’ve rated you as leading and that counts in the same bucket. It’s either you or her.

“Then let it be her, I responded.” This was unfair but if it was going to be unfair, let it be for me, not her. I’ll have another shot next year.

“No way. It’s done. The forms are submitted. You need to stop arguing. We’ll find another way to ensure she’s recognized.

Scenarios such as this play out in companies every day. Stack ranking performance management systems force leaders to choose between top performers, leaving a wake of frustration and disappointment.

Why More Companies Should Follow Microsoft

Last week the world echoed with virtual high-fives as Microsoft announced the abolishment of their stack ranking performance management system. Marissa Mayer received equally intense grief as Yahoo put one in place. It’s estimated that 30% of Fortune 500 companies still use stack ranking.

I’ve written before about making the best of such systems, inspiring a vision that motivates sacrifice, defining “extraordinary” as behaviors as well as results, involving the team in the evaluation. If you’re stuck in such a system, you must work it well to keep your team highly motivated. I’ve been there, done these things. But this is duck tape on a broken system.

Stack ranking is most destructive when you’ve:

  • attracted a team of rock stars
  • built extraordinary teamwork
  • managed out your lowest performers throughout the year (such systems can actually encourage holding on to poor performers until review time)
  • been given a stack rank curve to achieve at a micro-level
  • accomplished groundbreaking results

The strongest leaders with the strongest results are the victims of such systems.

And so I encourage our LGL community to share their perspectives and stories. Let’s make a timely ruckus. If this resonates, please share your story or opinion. Make up a name if you wish; just enrich the conversation, either way. 

PS: If you know others who would be enriched from, or enrich this community, please encourage them to subscribe. Every day we grow more interesting thanks to each of you.

A greata lternative to the stack rank: The Crowd Sourced Performance Review (download a free chapter).

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Posted in Career & Learning, Results & Execution and tagged , , , , .

Karin Hurt

Karin Hurt, is CEO of Let’s Grow Leaders and a former Verizon Wireless executive. Karin was named on Inc.’s list of 100 Great Leadership Speakers for Your Next Conference, the American Management Association List of 50 Leaders to Watch, and as a Trust Across America Top Thought Leader in Trust. She’s the award-winning author of two books, Winning Well: A Manager’s Guide to Getting Results— Without Losing Your Soul, and Overcoming an Imperfect Boss. She’s regularly featured in business publications including Fast Company, Entrepreneur, and Inc.

16 Comments

  1. There has been lot of news about stacked rankings lately and the unintended consequences they bring. As one commentator mentioned, even if you dont do stacked rankings, you are doing stacked rankings (you are always being judeged) The alternative might be to set only quantitative objectives/goals for employees and rate where people perform relative to these goals.

  2. Great post, Karin,

    Stacked rankings try to solve a leadership problem by using an algorithm. If leaders and managers throughout the organization are hiring the best people, training and equipping them to do excellent work, reinforcing expectations, and practicing accountability, then stacked rankings with mandatory consequences punish good performers, prevent leaders from leading, and demotivate everyone.

    If that’s not happening, stacked rankings may seem like an easy solution, but they fail to address the real problem: poor leadership and management.

  3. I completely agree with your post! I hate stacked ranking and have always hated it. I always believe in a collaborative effort and being a leader in that group. I believe sometimes that leaders just don’t get the credit they deserve.

  4. One of my biggest concerns with stack ranking is the false sense of “I’m awesome!” it gives to some folks. When you approach someone who is ranked highly in an effort to discuss a behavior or an opportunity that you’ve observed and would like to discuss, the tendancy is to tune it out because, “Well there can’t be anything wrong with how I do my job, look at where I am on the stack rank!”
    Unfortunately most of the time stack ranking measures only the metrics that influence the business, but I think most would agree that some achieve those metrics with a “by any means necessary” approach and not always doing everything needed and doing all the right things.
    My hope is the world moves back to a, “let’s take it all in” approach and takes the time to know and evaluate everyone in a more comprehensive measure.

    • Mike, Thanks so much. Great addition. I have seen that as well. I too would favor “let’s take it all in” approach to stack ranking…. in fact, it’s not a bad approach to life 😉

  5. The advantage of working in a small company is that I don’t have to deal with this, thank goodness.

    I always thought of stacked ranking as automated micro-managing. As in, we don’t trust you to evaluate your own team so we’re telling you what the rankings are going to be and you just slot in the names. Not only is it not fair to the employees, it is not fair to the managers. If they are unable evaluate their team properly they are not going to learn to do so with stacked ranking.

  6. Bonnie, I’m curious, does your company have a small company process that works well that bigger companies could learn from? Automated micromanaging…. yes… and I agree it’s often hardest on the manager.

    • For years we tried all kinds of ranking systems from general performance ranking to detail skill assessments. What we eventually realized is that all of those methods were about us not about the employee. If you measure something then people work to the measurement.

      We ask employees to fill out a self-evaluation that includes 9 open ended questions. The questions include what projects did you enjoy most, what accomplishments stand out for you, how have you been able to apply your strengths, and a series of questions related to setting goals for next year. Those involved with directly managing an employee read the self-evaluation, add to the goals set by the employee for the next year and make a list of habits or behaviors that is getting in the way of the employee’s advancement. Direct managers suggest pay raises with justification (which are taken into consideration by top management when making final compensation decisions ).

      Annual reviews are discussions. Since we work in a pool system, everyone you work for during the year is included in your review with one manager leading the discussion and the others adding ideas as necessary. The discussion itself is not ever just a list of things the employee didn’t do but a focus on goals that will allow the employee to move ahead. Finally I end everyone of the reviews I do with a thank you. Letting the employee know that we enjoy having them work there and hope they continue to do so.

  7. For 11 years I worked for a company that used stacked ranking. I don’t think I appreciated how hard it was for our leadership team when I was “just an employee” Later in my career I was a part of the actual laddering meetings (which were 12+ hour marathons that had multiple prep meetings in advance) Managers would tell amazing stories and carefully pick their super-stars most of whom would never earn the golden star. What sucked was when we had to put people in the bottom part of the curve – Requires Improvement (which usually meant we’d “counsel them out”) More than a few years there was nobody to put there so we fought and suffered and ultimately moved the required number of people into that crappy bucket from the happy middle.

    I strongly agree that more companies should follow the lead of Mircosoft. Too bad Yahoo is going in the other direction.

  8. While I agree with the dialogue entirely, let’s get to the next question. You have a specific bucket of cash allocated to raises for the next year. How do you allocate the money? Equally? Across a team? Some other measurement? Quantitative or Qualitative? Interested in hearing the ideas. Stacked rankings are the worse, but you still need to reward people in your organization and you have to have a way to do that is equitable and fair.

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