Microsoft has always known to be a fierce competitor quite unlike the everyday simpleton found on the old PC v/s Mac ads. But they also actively promoted an internal environment within the company that pitted employees against each other, until now.
Microsoft has scrapped their stack-ranking system, lessening the pressure on employees and hopefully promoting cooperation and teamwork instead of the previously cannibalistic corporate culture that was widely considered rather counterproductive.
Although these effects will take time to reflect on the sales and the huge bottom line of the company, it will certainly have an immediate effect for the current and future staff working in Microsoft.
Microsoft’s stack ranking consisted of an employee performance review by the management of each business unit. The employee would be rated as a top, average, or poor performer. Employees have been known to overly compete with each other when some in a group had been ranked poorly. Microsoft CEO Steve Ballmer is actively trying to reinforce a more united, collaborative company before he retires.
Despite Microsoft dropping this, Yahoo is starting to adopt it.
Kurt Eichenwald, contributing editor to Vanity Fair, blamed the ranking approach for systemic deterioration in this once mighty company.
In an article published last year, Eichenwald wrote, “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. The system—also referred to as ‘the performance model,’ ‘the bell curve,’ or just ‘the employee review’—has, with certain variations over the years, worked like this: every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor.
“For that reason, executives said, 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. 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,” wrote Eichenwald.
“But even achieving every M.B.O. (Management Business Objectives) was no guarantee of receiving a high ranking, since some other employee could exceed the assigned performance. As a result, Microsoft employees not only tried to do a good job but also worked hard to make sure their colleagues did not.
“Worse, because the reviews came every six months, employees and their supervisors—who were also ranked—focused on their short-term performance, rather than on longer efforts to innovate.”
Eichenwald blames the tech giant’s ”lost decade” on internal politicking that killed innovation and threw out employees with different ideas and suggestions from the mainstream.
“They used to point their finger at IBM and laugh,” said Bill Hill, a former Microsoft manager in the Vanity Fair excerpt. “Now they’ve become the thing they despised.”
Published by The Verge, an internal memo issued to Microsoft employees by HR chief Lisa Brummel said, “This is a fundamentally new approach to performance and development designed to promote new levels of teamwork and agility for breakthrough business impact. We have taken feedback from thousands of employees over the past few years, we have reviewed numerous external programs and practices, and have sought to determine the best way to make sure our feedback mechanisms support our company goals and objectives.
“Here are the key elements:
“More emphasis on teamwork and collaboration. We’re getting more specific about how we think about successful performance and are focusing on three elements—not just the work you do on your own, but also how you leverage input and ideas from others, and what you contribute to others’ success—and how they add up to greater business impact.
“No more curve. We will continue to invest in a generous rewards budget, but there will no longer be a pre-determined targeted distribution. Managers and leaders will have flexibility to allocate rewards in the manner that best reflects the performance of their teams and individuals, as long as they stay within their compensation budget.
“No more ratings. This will let us focus on what matters—having a deeper understanding of the impact we’ve made and our opportunities to grow and improve.”
To read the full memo, visit http://www.theverge.com/2013/11/12/5094864/microsoft-kills-stack-ranking-internal-structure
