08 Jan R.I.P. Microsoft’s Stack Ranking System
It’s about time! Microsoft just reported it is removing its “stack rank system.”
During my 11 years of working for Microsoft (recently retiring as a general manager) I saw the move from a manager-empowered bonus/rewards program to a computer-calculated reward system based on a forced stack rank with a curve.
I remember the conscious transition from a more flexible rewards system to the GE-like stack rank. The leadership team had good intentions. For example, who could argue that the top performers should not receive a higher bonus than low performers? But we soon learned that the execution triggered more flaws than benefits.
As a manager of a team, the forced stack rank process was disempowering. Due to the curve requirement, I had to force my employees into a lower category, even if I could demonstrate their high performance as a team.
The stack rank was done by level groupings or “bands” of levels. However, there was little-to-no functional comparison. So, within one team, a staff training manager would be ranked against a sales person, a marketing person, or engineer. Really?
I would recommend my team members’ ratings (1 being high, 5 being low), and then my manager would go into another “calibration meeting” and my people’s ratings would get bumped around, typically lower, due to the curve of the larger team curve.
The most negative impact was on the employees, as the process triggered dissatisfaction, disengagement and departures. The majority of employees received ranks of 3 due to the forced curve percentages, and over the years, the 3s saw their bonuses decline. Monetary or stock bonuses were shifted to the 1s and 2s.
The number of top performers (1s, 2s) was strictly limited, and I heard many employees say, “I’ll never get a 1 or 2 so I might as well stop trying.” Naturally, those who got 1s and 2s were thrilled.
Why the sudden change this week? There’s something here I don’t get. The announcement by Microsoft clearly highlighted that the reason for the change is, “to better align with the goals of our One Microsoft strategy… designed to promote new levels of teamwork…”
Microsoft has been team focused since I started there 11 years ago. What changed? It has been clear for a long time that the rewards system did not recognize the work of great team players and had a bias to the individual performer. Better now than never.
All in all, bravo to Microsoft for listening to the negative feedback on the prior system and for making changes. I’m still a raving fan of the company and truly believe it is trying to do right by its No. 1 asset: its employees.