The stack ranking system is really known as the "GE Way" and is one of the reasons Jack Welsh is famous and made a ton of money selling management books.
IBM also employed the 20/70/10% concept to employee reviews in the 90s.
Sure, but there seems to be a difference between divesting of a conglomerate's lowest performing business units, lavishing on the highest-performing ones, and putting the rest on notice, and applying a similar system to a small team. The latter reminds me less of Welch than of Glengarry Glen Ross: "First prize is a Cadillac Eldorado. Second prize is a set of steak knives. Third prize is you're fired."
For anyone who hasn't seen the movie: it doesn't end well.
With respect to employees, the point of a "forcing function" has less to do with motivation than with finding some way to make change possible in a crumbling organization of fiefdoms whose managers insist that, nevertheless, "all my children are above average." If I recall correctly, Welch even points out that "C" players often go on to be "B" or even "A" players in other organizations, which doesn't change the fact that everyone can't be doing everything right when the overall organization is underperforming, so there are either weak spots, or no alternatives to immediate liquidation.
Finally, I'm quite confident Welch would agree that "blindly applying a vague principle you read in some book, then sticking with it for years because 'it worked for $MEGACORP'" is a stupid idea, regardless of who wrote the damn book!
Well, wasn't Welsh largely applying this to sales people? If what the people do is essentially known and fully measurable then it's easy to look over a few years and say "John consistently delivers less than anyone else" and know you have the whole story. As soon as you get into software development it gets a lot hairier.
Another problem with any ranking system is that a ranking is static but actual performance is fluid. Just look at K1 results and then look at the records of the fighters. They've all fought each other and they've all lost to each other. So Hoost was better than his peers four times, but he also lost to those same people. You can say he is better in "win points", but this would never help you predict if he would win his next fight.
As per Welch, stack ranking works because managers are themselves stack ranked. All the way up to the CEO.
Therefore if a manager plays politics and promotes his inefficient pets, sooner or later he comes ranked last among his peers. So if though he wants, he can't.
He also says that the stack ranking system makes it very difficult for the managers in the 3-4 year after it was implemented, because now they may have to let go some good people to retain the very best.
However it did work to a large extent in GE. Jack Welch's immediate reportees all went on to become CEO's of top companies.
But things like this blind copied and applied don't fly much. You need to implement them in spirit and that's difficult.
jasomill|13 years ago
For anyone who hasn't seen the movie: it doesn't end well.
With respect to employees, the point of a "forcing function" has less to do with motivation than with finding some way to make change possible in a crumbling organization of fiefdoms whose managers insist that, nevertheless, "all my children are above average." If I recall correctly, Welch even points out that "C" players often go on to be "B" or even "A" players in other organizations, which doesn't change the fact that everyone can't be doing everything right when the overall organization is underperforming, so there are either weak spots, or no alternatives to immediate liquidation.
Finally, I'm quite confident Welch would agree that "blindly applying a vague principle you read in some book, then sticking with it for years because 'it worked for $MEGACORP'" is a stupid idea, regardless of who wrote the damn book!
flyinRyan|13 years ago
Another problem with any ranking system is that a ranking is static but actual performance is fluid. Just look at K1 results and then look at the records of the fighters. They've all fought each other and they've all lost to each other. So Hoost was better than his peers four times, but he also lost to those same people. You can say he is better in "win points", but this would never help you predict if he would win his next fight.
kamaal|13 years ago
Therefore if a manager plays politics and promotes his inefficient pets, sooner or later he comes ranked last among his peers. So if though he wants, he can't.
He also says that the stack ranking system makes it very difficult for the managers in the 3-4 year after it was implemented, because now they may have to let go some good people to retain the very best.
However it did work to a large extent in GE. Jack Welch's immediate reportees all went on to become CEO's of top companies.
But things like this blind copied and applied don't fly much. You need to implement them in spirit and that's difficult.
SatvikBeri|13 years ago
It's worth noting that Welch himself almost got fired from GE early in his career-so he knows that performance evaluations aren't 100 just!
whyleyc|13 years ago
SatvikBeri|13 years ago
specialist|13 years ago
I couldn't imagine anything worse that the Stalinistic "360 degree" reviews I've experienced. I was wrong.
mrvir|13 years ago