There was a really interesting article in Vanity Fair recently that covered the demise of Microsoft and one of the key things that is killing the company is the use of stack rankings. For those that are not familiar, stack ranking is a practice whereby you force a % of employees to be ranked as excellent, average or poor.
The reason I am writing about this is because I have experienced this first hand. It is a very dangerous and destructive way to incentivize your employees, so for any startups out there building your culture please stay far away from this. It’s destructive in a few ways:
It just doesn’t make sense. Obviously not everyone is going to excel and there will be some average people in your company, however, forcing these rankings prevents employees from behaving naturally, which leads to my second point.
It creates a culture of undercutting and politics. Generally when you have this kind of structure there is a committee of senior managers that will normalize the rankings once reviews have been completed. Most employees then focus on playing the politics game to get exposure and visibility, and to become friendly with senior management. Meanwhile you have other employees whose heads are down actually working and adding value, but their performance is minimized because they don’t play the game and aren’t friends with the senior managers.
Has anyone else worked somewhere that had this kind of structure?