Read for instance Tales of an ex-Microsoft Manager or The Poisonous Employee-Ranking System That Helps Explain Microsoft’s Demise. (Aside: did someone at Slate get a shitty review years ago and now they are determined to get their payback?). If you believe these, Microsoft failed in part because of its corrosive review system, everybody hated it, not a single person at Microsoft liked it, its existence was hidden, etc etc etc. Man that place must have been utter hell to work at.

http://www.flickr.com/photos/33037982@N04/I was at Microsoft from 1988 to 1999 and have a different experience. Stack ranking (sometimes called the lifeboat drill) was in effect and the system worked fine. It wasn’t hidden, everyone knew they were being ranked. Yes there was stress around review season and yes people could be unhappy, but it didn’t immobilize the organizations I worked in, and people still worked hard and were committed. Perhaps the system in place at Microsoft in the last dozen years is dramatically different than the system in place when I was there.

In my working and academic life, stack ranking has been pervasive and omnipresent. I was stack ranked in high school via grades and class standing. I was stack ranked in college, every course I took had a curve. I was stack ranked in graduate school. I was stack ranked aggressively at Booz-Allen & Hamilton: it was an “up or out” organization, you either got promoted every two years or you were “counseled out”, and everyone knew exactly what everyone else was getting paid. I was stack ranked at Microsoft. We’ve kept track of individual partner returns at Ignition so I am effectively stack ranked now. The notion of stack ranking doesn’t offend me. The last time I wasn’t stack ranked was when I got my 5th grade “Certificate of Participation” for pony football.

Every team I have been on has a distribution of people with a distribution of effectiveness. The people at the bottom of the stack rank are not bad people, they are just the least effective people on the team. It could be a bad fit for them. Or maybe they had other things going on in their life this year that hampered their effectiveness. Whatever the reason, there are real differences across a team in performance and effectiveness. And some part (not all) of compensation will be tied to effectiveness, that seems pretty fair to me. Every manager and company I have worked for has been honest about this system and has explained it well.

My annual review results have never been a big surprise to me. And for a lot of people on my teams, the annual reviews were never a surprise to them either. Because annual results are not something that get unveiled once a year. You build your own annual results (and thereby your review outcomes) one month, one week, one day, one hour at a time. Your story is getting built all year long, and you should know where you stand all along the way. I was always very observant of my own results and those of my peers and tried to adapt along the way each year. People that aggressively manage their career and their work are generally not surprised by year end results.

So — for me anyway, stack ranking has been omnipresent, it is not irrational, it has never been an ugly surprise. But a lot of people think it is awful at Microsoft, and that eliminating it would have helped the company. I will offer a different view.

When things are going great at a company, as they were at Microsoft in the 90s, no one complains about stack ranking. When things aren’t going great, then people complain about stack ranking and about everything else. Why aren’t things going great?

  • The mission for the company is unclear. Employees are not excited, not inspired. Customers are not excited and inspired. Developer interest is waning. Analysts are not excited, the company is no longer viewed as a bellweather.
  • And growth in stock price has stalled, partly as a result of the lack of compelling mission. The rising tide is not lifting all boats. Comp starts to feel like a zero-sum game.
  • And the organization is not growing dramatically. The opportunity to move around the company and find better fits is more limited. A low performer on one team may be a star elsewhere due to a better skill match, better team meshing, or whatever. Having a ton of new teams starting up is a great release valve to have in a company

If you took a magic wand and “fixed” the stack ranking system at Microsoft, but left everything else constant, people still wouldn’t be happy. The underlying problems of mission and growth need to be attacked, and the other dominos will fall. I suspect, as Ben Slivka has articulated, these problems are easier to solve in Microsoft broken into some parts with separable and clear missions. But the stack rank is not at the heart of Microsoft’s problems, and is not at the heart of issues to address going forward.