[sebastianbk]

As a Microsoft employee I am so happy that we got rid of stack ranking a few years ago. It encourages a bad behavior and goes against helping your coworkers with whom you are essentially competing for compensation. I am surprised to see that a company like Valve, which seems to be held in high regard by many developers in the industry, still operates with this compensation system. It's system of the 80's if you ask me.

[AimHere]

I suspect it might work differently in Valve's case. I'm led to believe that Microsoft had a fixed, conventional hierarchy, where every little group and person within the group was backstabbing everybody else to keep their jobs.

If their handbook is to be believed, Valve has a much more flat management structure, where it's basically Gabe at the top, sortof, and everyone else doing whatever they think is best for the company, and there's a fluid system where people can move between groups according to their interests and how they perceive they can add value. So, unlike in Microsoft's case, Valve's people have an easy avenue towards putting 'if you can't beat 'em, join 'em' into practice.

Valve has a radically different corporate culture from most other companies in it's space. It doesn't come from the 80s, or indeed almost any other time. Perhaps the stack ranking works a lot better because of it.

[Karunamon]

Part of me wonders if the Valve management structure isn't almost completely to blame for things like their infamously bad customer service.

I could see why - dealing with support tickets from irate people is not a particularly interesting (or judging by Steam's runaway success: particularly value adding) activity.

Not that I mean to hijack this to complain about Steam, but you have to admit it's a benefit of a traditional management structure: someone is making sure the shitty-but-necessary work gets done.

[iEchoic]

I'm a former MSFT employee that was around when we dropped stack ranking, and I didn't feel like that was a substantial change. Managers still calibrate you against your peers, a stack is still created, and compensation is assigned accordingly. I remember reviews feeling the same before and after. What changed for you?

[localhost]

At any company (Microsoft included) where performance-based compensation exists, there is a budget for that line item. Therefore it is a zero-sum game - to pay someone more because of their performance, that means that someone else gets less (or zero) from that line item.

So, depending on how you interpret the term "stack ranking", you can either look at it as "forced removal of the bottom x% of the company" or "people aren't ranked / bucketized". In the MSFT case, I believe that the former has been removed. But the latter definitely cannot be removed if you are to have performance-based compensation.

[runeks]

    > At any company (Microsoft included) where performance-based 
    > compensation exists, there is a budget for that line item.

I'd like to point out that it's possible to pay bonuses out of profits, rather than a fixed, yearly pre-allocated pool. If employees are only paid a bonus when they add to company profits, there is no competition for bonus funds between employees. So for example, if you have a great idea that saves the company 30% on something, you get half of that saving/profit, or something similar.

[antnisp]

You will be horrified to learn that there is a push to write stack ranking for all public employees into the constitution of Greece.

[dpweb]

Wouldn't it make sense to just pay everyone (in the same type of role) essentially the same amount and then bonus people from time to time on particular outstanding achievements. Nothing is a more powerful inducement than financial incentives and a bonus gives an impact that the ongoing salary doesn't. People don't give a crap about annual reviews unless they think its low enough to get them fired.

My sense is performance evaluations should be banished from the corporate world, for the most part. Usually a waste of time, but that is where managers can be helpful as they are carrying an ongoing assessment of the value of each of their employees at all times.

[ck425]

'Nothing is a more powerful inducement than financial incentives'

Actually there's a lot of research that contradicts this. Essentially as long as people have enough money that they don't worry about money ie a comfortable middle class lifestyle for country/area, and they don't think they earn significantly less that their peers, money is very inefficient and occasionally negative incentive for tasks that require a decent level cognitive ability.

[usrusr]

Extra money for excellence comes with an implied message that the regular money is just for showing up. You really don't want your employees to feel that way.

[f2f]

that guide is from 2012. things may have changed by now. i know we gave up stack ranking at $GIANTCORP since then.