Microsoft is a company in transition, and the company's "stack ranking" system, the bane of many managers and employees, is getting left behind.
According to a Wall Street Journal report, Microsoft "said it would no longer require managers to grade employees against one another and rank them on a scale of one to five. The system—often called 'stack' or 'forced' ranking—meant a small percentage of Microsoft's 100,000 employees had to be designated as underperformers."
Stack ranking has increasingly come under fire over the past year for crushing employee morale and stifling innovation at the software giant. Last year in an interview with the Seattle Times, Microsoft CEO Steve Ballmer defended the program, saying, "I think top talent wants to know that they're going to a company where top talent gets rewarded.
"You always want to have a system that has a chance to recognize people who are doing a great job, a good job, and helping people who are still doing maybe even a decent job, but they're not doing as good a job as the other folks," added Ballmer.
Microsoft's rank and file wasn't as supportive. In an August 2012 Vanity Fair article titled "Microsoft's Lost Decade," Kurt Eichenwald wrote, "At the center of the cultural problems was a management system called 'stack ranking.'"
Eichenwald's reporting suggested that the enmity directed at the management technique was widespread. "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," he wrote.
Under the program, developers risked an unfavorable review based on how they were compared to their peers, often regardless of the quality of their work or the innovations they brought to the table. Executives told Eichenwald that "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."
Stack ranking left more than bruised egos in its wake. "And the reviews had real-world consequences: those at the top received bonuses and promotions; those at the bottom usually received no cash or were shown the door," Eichenwald informed.
Right for Yahoo?
While stack ranking may have turned tech talent against Microsoft, Yahoo is said to have adopted a similar system.
Yahoo's Quarterly Performance Review (QPR) employs a stack ranking-like process that "forces managers to rank some of their staff with designations of 'Occasionally Misses' and 'Misses,' even if it is not the case, via what is essentially a modified bell curve," revealed All Things D's Kara Swisher in a Nov. 8 article.
Although Yahoo CEO Marissa Mayer refutes that QPR is a requirement, staffers paint a different picture. Swisher said that "dozens of perturbed Yahoos are sending me emails complaining that managers perceive it as required, in missives that are similar in tone to when Mayer suspended work-from-home privileges for Yahoos last year."
Mayer sparked fierce debate in tech circles when she called for the end of remote-working arrangements at Yahoo, essentially banning the practice of working from home.
In an email sent to employees, Jackie Reses, head of human resources at Yahoo, wrote, "To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. ... Speed and quality are often sacrificed when we work from home. We need to be one Yahoo, and that starts with physically being together."