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).