![]() ![]() Especially, if that position is known to have a high turnover rate. If a great employee fears they’ll struggle in a new role, they can conclude they’re safer where they’re at. Stack ranking can deter top performers from wanting a promotion. But when stack ranking lingers in the background, employees are inclined to focus on their own responsibilities and ignore a teammate in need. Employees are motivated by self-interestĮmployees support each other and work together in a healthy workplace. Taking a chance and failing could be detrimental to the employee’s career so it is often safer for them to focus on the work they’re familiar with. However, that can be a gamble when employees are evaluated with stack ranking. Most managers encourage employees to step out of their comfort zones and take ownership of work no one is responsible for. ![]() Let’s take a deeper look at the concept and explore some of the other disadvantages it presents. The practice also doesn’t mesh with modern workplace cultures that value employee engagement, transparency, and collaboration. There are obvious problems with stack ranking like employee performance being driven by fear and self-interest. It’s still used today by some organizations but others like Ford, Goldman Sachs, Adobe, and even GE all fall into the camp of companies that no longer use stack ranking. Microsoft abandoned the practice in 2013. Stack ranking created an environment where everyone in the organization was jockeying for a favorable position against each other. The profile also included anecdotes about employees taking credit for other people’s work and talking down about their peers behind closed doors. Employees were reluctant to collaborate out of fear that a colleague’s failure would reflect poorly on them. Years after Microsoft adopted the practice, a Vanity Fair profile described an unhealthy culture with dissatisfied employees and workplace politics. Stack ranking became widely used in the 1990s but its disadvantages became apparent. Today, he is remembered as one of the greatest business leaders ever and countless executives try to emulate his management style. The company increased in market value from $12 billion in 1981 to $410 billion in 2001 when he retired. The performance management practice became known as “rank and yank” within GE.ĭespite the harsh management philosophy, GE thrived under Welch’s leadership. The top performers were rewarded with promotions, raises, and bonuses, while the bottom 10 percent were unceremoniously fired without being given an opportunity to improve. Using this version of stack ranking, managers were required to group 20 percent of their direct reports as top performers, 70 percent as adequate performers, and 10 percent as under performers. So Welch responded by implementing a “20-70-10” stack ranking system. However, it resulted in the classic problem of managers overwhelming scoring employees a “3” ( commonly referred to as the central tendency bias ). ![]() GE managers were initially asked to rate their direct reports on a 1-to-5 scale. Stack ranking was popularized in the 1980s by General Electric CEO Jack Welch. In this blog post, you’ll learn how stack ranking came to be, why it fell out of favor, and the role it plays in the modern employee evaluation process. However, being over-reliant on stack ranking is widely considered to be an outdated and overall negative performance management practice. It can also be used to reassign employees, implement performance improvement plans, and, if necessary, terminate under performers. You can use the data to inform compensation and succession planning. Stack ranking provides a big picture overview of performance across your workforce. And the group with the lowest scores are identified as under performers, who prevent the organization from operating at full capacity. The largest portion of employees fall into the middle group and are considered adequate at their jobs-neither overly succeeding nor failing. These are the employees who consistently exceed expectations and deliver better results than their peers. The group with the highest scores are deemed top performers. Using stack ranking, every employees’ performance review score is ordered and grouped. ![]()
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