That is exactly what is done, and is why stack ranking is both abhorrent and dysfunctional (it incentivises in-team politics and sniping, each team member tries to ensure he's not the one in the bottom slot).

It also incentivises top employees to not work together and to not be put in the same team, as it decreases their chance of being in the "superior" rung and increases their chance of being in the bottom one, something more or less impossible if they're clearly the top of their own rank-and-file team.

The first iteration can work very well. But what about the next iterations? People will adapt to the process and change their behavior.

Under stacked ranking, if you are interviewing someone brilliant that can potentially be the strongest member on your team, is it in your best personal interest to hire that person?

The answer is: no. Because if you add high performance members to your team, with each iteration of stacked ranking not only it will be harder for you to be promoted, but you will be closer to being terminated.

So what ends up happening is that people hire the worst possible candidates, which defeats the purpose of stacked ranking. With stacked ranking, instead of iterating towards stronger people, you iterate towards mediocre, political people.

It indicates 4 things:

1: Your hiring isn't up to scratch such that this needs to be done (i.e. rank and yank). Raise the hiring bar and reduce firings.

2: You don't trust your employees to do the work you hired them too - this breeds mistrust and increases the level of politics used in the work force. You need to let creative employees freely do what you pay them to do.

3: You don't give projects enough time to mature.

4: You allow randomeness and false causation to determine employee outcomes. For example AIG Finance was completely ripping the other departments during the bubble run up. But come the crash - they almost took the entire firm down.

It doesn't. Ever.

I'll give you two examples.

I currently work at a company that does stack ranking. The first year I started at the company, I started in the middle of the year. I was told because of that, I wasn't eligible for a bonus or salary increase. I later found out this was total BS.

Second year? I work my ass off. Stay late, develop new tools for the team which are then used on other teams. I got some visibility with those tools with several managers. I consistently take on extra work, present to project leaders, go to any and all conferences, make reports, and suggest new technologies my manager and other managers. I feel like I hit it out of the park. Nope. Two project managers didn't like me and rated me low. My manager ranked me in the lower tier. I got a pittance for a bonus and no salary increase.

Third year? I'm a bitter, frustrated developer. I decided, "Well fuck it, I gave you a great effort and got nothing in return. This year, the company gets fuck all." I barely worked. I did the absolute minimum. I was "quiet quitting" before it was cool. I'd log off early every day. I refused to take on more work. I missed or ignored meetings that weren't absolutely required. I worked on several side projects instead. I was getting paid a high six figure salary to do as little as possible. It was completely glorious. We get to the end of the year, I get the same low ranking. Same pittance of a bonus, and because it was my third year, I got a small raise in my salary.

That was the end result of stack ranking. It didn't matter what YOU did, it only mattered what your co-workers did and how they felt about you. You could have the best year of your life, be totally plugged in and kicking ass, but if someone didn't like you? It was all for not which I soon realized very quickly.

Its incredibly hard to try and be your best when you're constantly looking over your shoulder. Its impossible to be "all in" when you absolutely know your effort will be for nothing.

Even Microsoft famously gave up on it when they realized it cost their company a decade of progress because stank ranking encouraged managers to sabotage their co-workers projects in order to look good on their own year-end reviews.

https://slate.com/technology/2013/08/stack-ranking-steve-bal...

Its absolutely staggering to think there are companies still out there using this to measure employees performance. Its beyond toxic and will suck the life out of your team, your managers and your employees.

Sabotage is the wrong word. I would say more that it rewards doing things that are flashy and look good (which can involve cooperation with like-minded ambitious peers) than boring but important stuff that keeps the business running. There's little "sabotage" in an active sense because if it gets perceived as such, it will backfire onto the saboteur. What's more likely to happen is people not bothering to help out others where it doesn't advance their own interests even if it's the right thing to do for the team or the business.

"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"

This was originally popularized by GE and borrowed by dozens of companies as a HR best practice. Now every major corporation tries to rank their employees along a bell curve as 1's, 2's, 3's and 4's and inevitably, they lose the 1's who quit in disgust rather than put up with this.

My hope is at least a few HR decision makers read this article, look at what is happening in their own companies and come up with a better way to motivate and get the best of employees. Quickly before this cancerous policy eats up the best talent in in the organization.

I didn't know this existed until now. The problem with this (among others) is that I can never personally know where I stand. If I'm doing well, but being excelled by others, I still get penalized. There's no guarantee, it's almost random.

Also, I now have a new question to ask in interviews, and if it does exist in a hiring company, I can negotiate by declining bonus pay performance reviews and in lieu of ask for higher wages (not that any company would go for this).

However, this statement in the article is pretty dumb: "If you don’t trust the people you hired, why did you hire them?" How about because they interviewed well and you thought you could trust them but once they started working they proved themselves untrustworthy. That's not rocket science; it's something that happens and is not particularly rare.

absolutely, it may work (possibly) if you could apply that 5% over an entire large department

but each line manager only has visibility over their (hopefully) small number of reports

so if you have 3 excellent reports on a high performing team: who do you dump in it?

the usual answer is the person with the least leverage/ability to resign, which is grossly unfair

In Amazon you will be PIPed (or rather put in focus, which is a first step that may lead to PIP) if you are marked as "Least effective" which is the bottom 15%.

Your manager has to demonstrate why you are "Least Effective", and they have to demonstrate why you are "Top tier". However, they don't really have to justify themselves to put you in the middle of the pack, where you will be safe from PIP.

So, for sure, you may not be ranked in the top of the team if you're buddy with your boss, which means you won't get a salary increase for example, but at least you won't be PIPed, which in the end is what I assume most people care the most about.

In a big enough company, you can't sabotage other people (because you might not work closely with them) and it's pretty transparent when you do so.

The problems I saw were threefold:

1) Bad Managers - Far and away #1. The example of a manager leaving the ratings meeting comes to mind. Conversely, a manager who just has it out for you: that's the sabotage that I saw on more than one occasion (but that's not exclusive to stack ranking). [Edit: also worth noting that word got around and bad managers were avoided, so the system eventually would self-correct.]

3) Comparing Stretch Roles - Pure performance is tough. I never thought we gave enough credence to great people doing good in tough roles vs. good people doing great in easy roles.

3) Comparing Different Impact - We got to the point where we were trying to compare developers with business analysts. The former would have outcomes like "developed 75 test cases" and the latter would be "convinced the CEO to invest $1M". It didn't help that the business managers were better at quantifying outcomes than IT managers. (See #1.)

New Kid on the block? All the best. Stack ranking means you are by far the most easy person to be down ranked fired because you are new, fairly less important, you don't have friends in the hierarchy. All this while people want to rank their friends well and protect them.

The only reason this person did well was because he got lucky. Most of the times people are not. I even know of people who make such jumps and get demoted. They go into a new structure and realize there is an entire ladder of people wanting to take your job with powerful friends up management. Most of the times you will be made to make way for them.

If you are having a bad time, no risk is small. Every change can likely trigger a bigger catastrophe than the hell you are already sitting on. Risk taking works only when you are winning well luck wise in your career. For everybody else risks are basically exposing yourself to a fairly powerful gravity well without a harness.

Then fire them. It's also important to note that the 2-3 who suck suck in relation to a consistent standard, not in relation to the other employees.

There is a fundamental disconnect between the justification of stack ranking and the actuality of stack ranking. In a sufficiently large population of employees you get some duds - that's a statistical certainty. The giant leap and non sequitor is that relatively ranking will expose said duds better than measuring against a consistent, non-relative bar.

Where I work right now we've had the displeasure of having hired some duds. Very few mind you, but in all cases they were let go soon after it became apparent they were duds and could not be reasonably improved. All of this was done without the need for stack ranking, and (thankfully) outside the scope of some annual remove. If you've hired someone who's actively detracting from your company, why in the frell are you waiting a whole year to remove them?!

I've been thinking about stack ranking for a long time. In one place I worked, a large rival of Goldman, you would be ranked (secretly) on a curve, typically from 1-5. If you were the manager of a group of, say, 6 people, you couldn't just give everyone a 5 or a 1. You had to even it out, pepper in a few different numbers in that range. Maybe you had one 4 or one 5, say. This would go up to your manager, who would, in addition to rating you with your peers, would take a look at what you rates your employees and 'adjust', ensuring that the curve is adhered to, maybe moving numbers up or down depending on how they felt about your employees and also as compared to other groups (since it's a hierachy, a pyramid where each layer up managers more groupings of people).

This system was applied to the layoff selection (1's are out, some 2's are downgraded to 1's as the rankings made their way up the chain of command), and may have applied to bonus system as well (which is more complex). There were layoffs at least yearly, most years. Goldman is worse because the reputation was to always cull the bottom 5%, and I heard 10%, of staff yearly and (in good economic times) get a new fresh set of people not long after that.

Regardless, the takeaways of a system like this is that, regardless of your INDIVIDUAL performance, what matters is your performance relative to your peers. There are few issues with this.

The first issue with this is that the ranking system like above, or any ranking system, makes a lot more sense when you're in a role that has tangibly quantifiable measurements. For example, sales, or -- especially, in a place like GS -- bond or equity or other trading. In either one, if I make the company 1M, and you make it 1.2M, it's clear you added more value.

Well, what about IT staff? Is it lines of code? No, of course not. So there are these nebulous, subjective measurements pretending to be something more useful than they are. Performance reviews, the impact/importance of the projects you completed (which you didn't even get to CHOOSE, in most cases), and (at the place I worked) items like letters from senior managers about you that were positive, all counted.

The second issue is that competition doesn't necessarily make the work done better or more efficiently. The worst part for me was competing with people on my team. Instead of the team competing with other teams (if we want to ideologically just adopt the notion that competition makes everything more efficient and effective [which I think is overstated heavily], at least team competitions are a little better), we would compete with one another.

There are two ways to compete. I work harder, or better, or perform better than you. The second way is, we perform the same, or I perform the same, but I undercut you somehow. What's an example of undercutting? Well, let's say that on conference calls when it was your turn to speak I'd take knowledge about your project and use that to show that I know more publicly, or let's say that you undercut me by taking over my project and that of others, to show the boss how smart you are, etc. Most managers are so busy themselves that they don't have time to notice these things, which seem like petty infighting / childishness in their eyes. I saw the 'project takeover' scenario happen everywhere I've worked in these competitive environments. I saw one guy take over a bunch of people's projects, find himself overworked, complained, and got himself staff to work under him.

Hey, it's not easy to figure out what to do with regards to ranking, or whether to do it at all. When you're a full-time IT worker or professional in America, you get a salary, but it kind of doesn't say your hours in your contract; or if it does and is (rarely) enforced, at the end of the day in a competitive environment it's not fair if some people have to pull the weight of others. So there has to be some differentiator. On the other hand, what I've seen in IT is a downward spiral of misery. There's always someone on the team who puts in 60 hours a week so he can show how smart he/she is, trying to get that bonus or promotion above you.

And it's entirely possible that the above is more pronounced in the large, Northeastern American city (and industry) I live and work in.

During the stack ranking heyday there was a manager who spent his year compiling a list of mistakes by other teams. When it came to year end reviews anyone asking about the ranking of this manager's people ended up deflected with questions about their own team members. People learned to just leave this manager's rankings alone and work around him. He was wildly successful, getting promoted early and often before leaving the company to go start a recruiting firm which allegedly applies some sort of AI principles to picking good candidates.