Receiving one or two “failing grades” has disastrous consequences and likely means the end of the employee’s tenure.The main purpose of the company is to create value.In most cases, each employee’s job is different, even if they have the same job title.Receiving one or two failing grades has few consequences students can re-take failed classes.The main purpose of the course is to teach and evaluate the students. Every student completes the same assignments and takes the same exams.Yet the context of a college course could not be more different from that of the workplace. I can recall one college physics final exam I took where the median score was 17 out of 100 “stack ranking” made a lot more sense to me than simply failing 90% of the students. College courses are often graded on a curve, a fact that draws little protest. Let’s consider a common situation in which stack ranking seems to make sense: education. The fact is that the implicit assumptions required for stack ranking to make sense simply don’t apply in the real world. Yet stack ranking suffers even more fundamental problems. According to critics, stack ranking produces excessive and unproductive internal competition, and discourages employees from helping their peers. Most of the criticisms of stack ranking center on the seeming arbitrary nature of the practice, which requires managers to grade their people on a bell curve, with a mandatory proportion of both 5s (excellent employees) and 1s (underperformers), regardless of the actual distribution of performance. So rankings can end up being arbitrary, unpleasant, and poorly linked with performance.Yahoo CEO Marissa Mayer has been criticized for implementing the practice of stack ranking, most notably in an excerpt from Nicholas Carlson’s upcoming book, Marissa Mayer and the Fight to Save Yahoo! that was published in the New York Times. Tallying the number of phone calls someone makes is hardly valuable. What's more, Stevenson argues that it's extremely difficult to truly measure many workplace skills. When expectations are poorly explained and the process seems unfair or political, people underperform. That's exactly what happened at Microsoft, and why it's chosen to drop the practice. And at its most extreme, employees may focus on preventing others from excelling. Instead, the incentive is to focus on the most visible and individual aspects of performance, rather than working together toward broader goals. In a hyper-competitive workplace, where management is essentially asking employees to outperform the people sitting next to them, employees don't have an incentive to share ideas or collaborate. That's certainly a better way to review employees. There is also more focus on consistent feedback and how people can improve. Employees may still be rated or ranked, but not along a bell curve or with strict cutoffs. Most companies have shifted to systems that are more flexible. In fact, they were finding negative correlations to employee engagement and especially to innovation." We started to see the rise of evidence-based human resources, and when they looked at the numbers they weren't finding success. "What's happened in the last 15 or 20 years is that HR has started to take a more analytical approach," Stevenson said. It's also been a huge source of employee discontent. The news that Microsoft would kill its review system isn't too surprising, since aggressive stack ranking was a pet policy of outgoing CEO Steve Ballmer. The use of stack ranking, which has been almost ubiquitous at large companies for years, has recently plummeted, since many companies now realize it can actually hurt performance. In this case, it looks like Microsoft is on the right side of history, and Yahoo is still in the stone age. At the same time, Yahoo CEO Marissa Mayer embroiled herself in yet another HR controversy after employees' complaints on an internal message board about its "Quantitative Performance Ranking" became public via AllThingsD. This week, stack ranking popped back into the news when Microsoft announced it was eliminating the process. Meanwhile, a set number must be labeled as low performers and are often fired or pushed out, giving the system the popular nickname "rank and yank." Only a small percentage of employees, typically about 10%, can be designated as top performers. Account icon An icon in the shape of a person's head and shoulders.
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