Here's a question to which most people experience revulsion, but must be thought of and answered honestly:
Why not give everyone the same bonus based on company performance? Make it collective good.
You'll probably think of reasons, like "good people should be rewarded," or "people who do things wrong need to have consequences," but you must realize the alternative is this vile demotivational anti-pattern with even worse consequences.
The right way is to align the company goal with the individual goal, and do it simply and clearly.
American companies need to understand and follow Deming's principles (http://en.wikipedia.org/wiki/W._Edwards_Deming#Key_principle...), or we'll continue falling into the soul-sucking black hole we're already halfway into. He already knew all of this, every bit of what we're experiencing, and our objection to his ideas is nothing more than an ideological almost religious belief that the most effective way to motivate individuals is to rank, rate, measure, and reward them accordingly. In fact, those archaic methods of management only serve to demotivate and systemically destroy culture and productivity alike, and reduces the quality of whatever you produce, be it innovation or physical products.
We know this. Deming's ideas work. They are truth in writing, and knowledge in practice. He pulled Japan out of a post-war recession and made them legends of quality production for pete's sake. Why can't we learn?
I am currently reading a bunch of the Toyota Way books, Deming, etc. and sometimes I wonder if one of the most basic assumptions in the West is that the individual is the root and the system is a derived thing. This assumption starts, maybe, with Christianity which tells us that we stand alone before God judged on our individual character, not on our wealth or social position. Buddhism, on the other hand, tells us that even our perception of selfhood and autonomy is an illusion to be rooted out and discounted.
To toss out an assumption as fundamental as these would require a huge realignment of all sorts of things -- how we punish and reward, our sense of self worth, who is good and who is bad, etc. So we don't really want to go there.
I think the West could benefit from a swing to the Systems/ Wholeness side of the dichotomy, but I wouldn't want to discount how powerful and what a creative force our individualism has been throughout the last 2000 years.
(EDIT, PS: Deming is the real deal, and the Toyota Way/ Lean books and movement tries to take some of his surface ideas and implement them without challenging their readers in the way Deming wanted to.)
(EDIT, PPS: Toyota / Buddha says "You see a problem? Change the system." Microsoft/ Jesus says "You see a problem? Roast the culpable individuals, reward the virtuous individuals.")
(EDIT, PPPS: Hegel and his philosophical descendants have the best take on the dynamic movement between individual and collective, without discounting either of the two viewpoints.)
>Why not give everyone the same bonus based on company performance? Make it collective good.
Because like all collective goods you suffer from the tragedy of the commons. If you work for a large company your individual contribution is so small it has a negligible effect on your bonus. Unless you're interested in moving up the management ladder the smart thing to do is just work hard enough to avoid getting fired. Of course not everyone will adopt this attitude, but enough will to affect the overall performance of the company.
Also your top performers will leave. People who are passionate about their jobs and put in long hours expect to be rewarded for their efforts. If you give them the same bonus as the guy in the next cubicle who's out the door at 5:00 PM sharp they're not going to like it very much.
My company used to have two bonuses - one based on individual performance and one based on company performance. A few years back the individual performance bonus went away and the results have been disastrous. Once you get a significant percentage of people slacking off the entire character of the office changes.
This is the basic cooperation vs. competition problem. If you have competition then people spend a lot of resources fighting because what matters most is being faster than your friends, even if that means working to slow them down. Whereas if you have cooperation then you get complacency because then nobody has to be faster than anybody, so everybody can sit on their duff.
It seems to me the solution is to rate people against absolute standards, never against each other. The article seems to think this doesn't work because you can't give a large bonus to everyone, but that smells like BS to me. If everyone is legitimately doing an outstanding job then the company as a whole should be doing outstandingly well, which means you should have plenty of money to pay everyone a large bonus. (Unless the metrics you're using are bunkum, in which case there's your problem.) The key is to make it absolutely without individual benefit to sabotage one's coworkers while still creating the incentive to excel personally.
Along similar lines, if you want to deal with the quarterly results bias, average it out. Publish numbers quarterly (or even more often than that) but set compensation based on an employee's five year average, not what they did just now. If you do poorly this quarter then you don't lose $1000 from your bonus this quarter, instead you lose $50/quarter for the next five years. At the same time, you still get a ~$1000 bonus this quarter, and you still want that number to go up next quarter, so you're keeping an eye on that average -- just not doing it this quarter at the expense of next quarter, because the psychological instant gratification of doing that goes away.
I agree. Having worked in the military, where there were no bonuses whatsoever, and salaries were based on a standard scale, I found that what made the good employees good was that they were proud of / enjoyed their work, and not money (a different problem was that people could not be easily fired (to say the least), which did lead to some slacking). I personally believe that people whose main motivation is the bonus are not the employees one should look for.
"The American Dream" is meritocracy, and meritocracy is basically a lie, any which way you slice it. Measures don't discover merit, merit doesn't correlate to rising,and rising is only available to the few.
Equally shared bonus pools were fairly common in top-tier professional services firms until the late 1990s, and even when they changed, most kept fairly equal distributions of profits between partners and to associates.
However, almost all of those firms used a stack ranking system that was even more aggressive - those at the top got promoted, those in the middle got worked out over time, and those at the bottom got fired.
Shared bonus pools work when a company has an aggressive performance management culture, but this doesn't become visible as long as the company is doing well.
When things are good, everyone is getting an extra lump of cash, even if it has nothing to do with their individual performance. But when the market changes, top performers flee because they realize they can make a lot more money someplace else, and that they'll never hit their goals until the company gets rid of the stragglers at the bottom and stops settling for mediocrity among everyone else.
I did experience revulsion, but I think that you're right, it's an important concept to think about. I perused the link you provided, and here are some random thoughts:
- The article lists as a deadly sin: "Evaluation by performance, merit rating, or annual review of performance"
But then the question remains: how do you make sure your best employees don't get poached by other companies who are willing to acknowledge the fact that they are superior, and pay them accordingly?
- Another point listed as a deadly sin: "Mobility of management"
I can agree with that, only if we also agree on the fact that management is just an administrative position, like at Fog's Creek or Jane Street. In other words, salaries and positions in the hierarchy are decoupled. If not, then the system you mention doesn't solve the problem of: "how are we going to promote people?"
I admit that I didn't read the entire Deming article, so please correct me if I'm missing something.
>Why not give everyone the same bonus based on company performance? Make it collective good.
Company performance is not dependent on the performance of any one single individual. That is, I can be the laziest, most incompetent developer or middle manger, and it would have no bearing on quarterly earning. So if you're using company-wide performance bonuses to stimulate productivity, in a company of thousands of employees, you're doing something wrong. The incentive in that case is for each individual to do as little as possible because why exert yourself if you're just going to get as much as the next guy anyway, and the result is everyone loses. This is a classic "tragedy of the commons" scenario, where the incentive is to be a cheater.
So the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one. That's what you need to do, and that's how you properly set up the incentives. The problem is that in a company of thousands of employees, creating a ranking system that works perfectly is pretty darn hard, especially since metrics are usually ambiguous and subjective. So you're not going to get it right 100% of the time.
> Why not give everyone the same bonus based on company performance? Make it collective good.
I don't know whether this is common in other industries, but at top American law firms, salary raises and bonuses are lockstep. That means everyone gets paid based strictly on seniority. At many firms, this even carries through the partnership ranks.
There are benefits and disadvantages to such a system. The benefit is that it reduces competition between workers, and reduces unproductive credit-seeking. When you rank people against each other, the focus ultimately shifts to optimizing to the ranking metric, which is inevitably different than actually optimizing job performance. Such systems favor people who are good at taking credit, not people who get the best results. Lockstep systems also increase cooperation: nobody avoids helping someone else or avoids working on a stronger team for fear of the zero-sum nature of rankings.
The downside is that strict lockstep systems keep you from giving superstars extra compensation. This can be a liability if you don't have a uniformly high quality of employee, because superstars will leave for companies that offer individualized compensation. That being said, the advantages of individualized compensation decrease as it becomes more difficult to achieve true measures of individual performance. Nobody complains about individualized performance ratings on Wall Street, because it's easy to compute how much money a trader made for the firm or the value of the deals an investment banker worked on. The relevant metrics are objective and hard to game. It's much more difficult to evaluate a programmer's contribution to a development team.
The most troubling thing to me about stack ranking is not ranking per se, but the fact that stack ranking is applied by HR departments. This issue has come up before in the context of hiring, and what I said then is the same thing I'll say here: HR should not be involved in hiring, or firing! It's perfectly okay to identify weak performers and fire them, but it should be an organic process that happens based on the decisions of technical leadership. HR folks are administrative people. They're there to fill out W-2 forms and keep you from getting sued by disgruntled employees. They do not have domain expertise and do not know what makes for an effective technical employee.
This is an area where tech companies need to take a page from Wall Street rather than traditional Big Corps. At an investment bank, a banker decides who to hire and who to fire, not some HR person who has no understanding of banking. To make this system tractable, firing decisions are made at a low level, early and often. That prevents getting into a situation where the organization builds up a glut of weak performers that need to be fired in some comprehensive and systematic culling.
> Why not give everyone the same bonus based on company performance? Make it collective good.
I wholeheartedly agree. Apart from niche examples, like measuring sale people on sales, there is no good reliable way to measure employees based on performance/outputs. IO Psychologists have been looking at this for years and even mathematicians (like Leonard Mlodinow in The Drunkard's Walk) agree.
The evil, destructive, part of stack ranking is when you need to apply the 20%/70%/10% breakdowns to all teams equally, meaning that even a team of 5 people needs to have one and only one "exceeds expectation" person and one person who "needs improvement", regardless of overall team level. It's not clear from this writeup that Amazon and Facebook are applying curves at such a micro level.
Isn't there a fundamental difference between the FB rule of restricting the top rating to just 2% of employees and the Microsoft rule of decreeing that there must be a bottom 10% of "poor quality , less talented, undesirable elements" in the workforce.
The FB system doesn't make the non 2% feel rejected and unhappy - it just makes it very hard to be crowned the superstar which I think most people find perfectly acceptable.
To address the relatively longer period of MS employee retention, Microsoft employees (esp the technical ones) in general work on a set of technologies (C#, NT Kernel, SharePoint,...) for which MS is the place to be. They build up expertise and then if they have to leave to join a comparable company, they need to rebuild in a different set of technologies most likely open source stuff of which there is very little in Microsoft.
Now if you are a Linux kernel hacker / Python guru/... at Google/Amazon the world is your oyster - everything you are good at transfers readily to companies/roles of similar stature outside.
Its almost like Microsoft technologies are a moat around its castle that keeps talent from leaving.
full disclosure I worked at Microsoft for about 7 years before leaving.
There are lots of companies that love hiring former Microsoft employees because they use the same stacks. Its only when moving to a new tech like google or some startups that there would be a problem, but then again google and facebook opened offices in Kirkland/Bellevue for some reason....the moat ain't that deep.
So, the obvious pathologies of the Microsoft stack ranking model aside, what are the reasons that a company will want to do this?
The main reasons I can think of has to do with the dangers of getting comfortable in a large company.
It's very easy for a lazy manager to just hand out "A"s to everyone on the team and just cruise along. Slackers are poisonous, but painful to deal with for a conflict-shy, comfortable manager. Actually being forced to think critically about which of your employees are the top performance, and which aren't (and it's a mathematical fact that they're not going to be the same) is a useful tool to keep such a manager on his toes.
Another effect is simply to encourage a certain rate of churn in all teams, to get some fresh blood flowing through the system.
Stack-ranking directly forces the manager to use his human capacity for critical thinking to evaluate his employees, and in such is a useful distraction from that even more disastrous evaluation method: Objective metrics (hours worked, lines of code committed, bugs closed, sales numbers etc).
Forced Distribution Rating Systems (commonly referred to, incorrectly, as Stack Ranking Models) are intended first and foremost to identify the top performers and keep moving them up the company. Secondarily, it helps "trim the fat". People focus most on the latter, but the main draw is the former. It also is meant as a way to keep raters accountable for the performance management process and avoid rating errors, most obviously the leniency bias but also the halo bias.
Finally, in some organizations it's just a convenient way to distribute rewards (comp, promotions). While this is a highlight of it in any application, the focus on that as the primary benefit is less than ideal. But convenience is its own reward for many.
This concept is intended for use at the more senior levels in the company and typically not meant to be done within teams/groups/divisions, but rather across teams/groups/divisions.
The whole system is designed around creating a workforce with maximum potential, if not maximum performance. There are some simulation studies that have borne this out, but I'm wary of trusting the validity of simulated models in complex systems and social phenomenon. While evidence suggests neither raters or ratees react well to the system, actual evidence of behavior (e.g., attrition) and performance generally don't show the expected negative outcomes.
It's thought level of interdependence in one's role would be positively associated with poor performance, but I don't know of any evidence about this either way. It's also thought that the system works best in a culture that sends similar signals, like high-performance consulting cultures. Again, I know of no data about this.
I think managers are inherently in a bad place to review the performance of individuals in the team below them. They're primarily affected by the mean performance of the team, so if one guy is slacking off and the rest of the team needs to pick up the slack, the manager might not notice. I think peer reviews will be more honest. If a peer is doing next to nothing, or providing little to the team while everyone else is working like crazy, you're in a much better position to see that.
Standard Big 4 Consulting implementation. It provides value for a few years until employee realize that it's a lot easier to:
1. Get a job elsewhere
2. Hide in mediocrity because the effort to achieve a high ranking is greater than the reward by a lot.
In my personal experience with force ranking systems, is that it also drives politics within the organization. As an example:
I once was skipped a promotion because when we went to demo a unit the shipping department did a poor job packing the prototype equipment that I had just spent an entire summer building. Due to the packing job, a single RS-232 pin because slightly unseated causing intermittent behaviors for one of many features. It was still the most successful demo the company had ever given. So success we received a request for pricing the Military 24 hours later, which is unheard of. Despite this the Chief Engineer blasted me for the failure, and our inability to find the issue on site (mind you he was there too). When I brought this up at my review I was indirectly told by my boss that he didn't agree with my rating/rank but it was over his head. After that, I practiced both Items 1 & 2 but discovered that my new company also followed this practice. So it was a rinse and repeat to make sure force ranking is not within my new companies.
You need a documented system. If you don't have a documented system then there will be an undocumented system which is the same problem with less documentation.
How about approaching managers in the same way we always like companies to approach developers, i.e., hire good ones and empower them do their job in the best way they know how?
Using a system that is enforced from the top down is a perfect way to guarantee you'll only get the kind of below mediocre managers we love to bitch about.
All of these systems are based on the assumption that companies can't trust the people they hire to delegate responsibility to. They're basically methods of maintaining a toxic environment instead of dealing with the root causes.
And it's a self-fulfilling prophecy, because it attracts the wrong people. What good manager you ever worked for would want to function in that kind of a system?
Productivity lost to that can't possibly be worse then the culture of backstabbing that stackrank promotes.
For another point, the article seems to be making a heavy statistical error in assuming that Google's average developer lifespan is 1 year. Taking the average lifespan biases the result heavily towards new hires (Of which there are a lot of).
A more relevant metric would be average time between an engineer joining, and leaving.
You need a documented system. If you don't have a documented system then there will be an undocumented system which is the same problem with less documentation.
So don't complain when your kid gets expelled from the second grade for pointing his finger like a gun and saying "Bang."
Less documentation isn't always a bad thing. If you can't appeal to a written authority, you have to rely on your own judgment in the face of ambiguity.
Eh. I'm in Facebook bootcamp now. Between this article about the ranking system, a truly uninspiring (to me --- YMMV) choice of teams to work on, and the press Facebook has been getting lately, I'm seriously considering parting ways and going somewhere else. Nobody can beat Facebook's pay or food, but what good is it if I feel like I lack direction and purpose? How much would it damage my career to say I tried FB bootcamp and didn't feel it was a match?
I can't speak for anyone else, but it depends a bit on what you do next. One or two solid jobs down the road, I doubt anyone will really care, but if you do it enough that it looks like you have made a habit of joining up and then not giving it a fair chance based on gossip from outside the company, then yes, that will count against you.
Hey, since I can't find your name or contact info on your account I figured I'd comment saying that I run Bootcamp and it sounds like we should chat ([email protected]) :)
As a complement to dr's offer above, if you want to talk to someone who has been at FB for a while and worked with a bunch of infrastructure (traffic, core systems, &c.) and product (graph search, site integrity, &c.) teams, hit me up. My unixname is neil (and my non-work contact details are in the HN profile).
I'd like to help you and dr find you a good match - FB has been a great opportunity for me, but I stumbled a bit so I know how important finding the right thing to work on is. I can also offer you my frank impression of the performance review system here, which I've been through a few times as an IC and as a manager.
It seems to me that stack ranking can only work for companies that are so attractive for new talent that any new hires are likely to be more valuable than the lowest-ranked current employees. Once a company is no longer so attractive, as seems to be the case with Microsoft today, you're actually pushing out better talent in exchange for worse.
Eh? Do you really think their pool of applicants is worsening quickly enough that a bottom-10% performer is better than the median new applicant? They still have bags of money to pay people, you know.
Stackrank seems like umpteen other methods whose ultimate aim is to vacuuming people dry and discarding them. This "works" in the sense that if you can't motivate someone with the challenge, excitement and etc of working for you, there's always money, fear and the-other-etceteras.
Yahoo and Microsoft have lost all cachet to their workplace, and Amazon has always been innovative in the "our engineers have calculated exactly the profit made from turning off the air-conditioning in warehousing and legal has drafted the matching don't-ask, don't-tell contract" sense.
But Facebook using this seems like an indication they've reconciled themselves to being on the way down. That was quick.
The title of this post assumes MS's stack ranking system is bad. Based off of personal experience, MS has dramatically improved how they do stack ranking. All companies stack rank, even startups. The only difference is that when that is formalized, everyone is on the same page and culture is more transparent.
Since you seem to have more knowledge of this than the general public here, can you provide info on how it's been improved of late?
As I understand stacked ranking, there doesn't seem to be many improvements that help when the underlying premise (forced attrition of "poorly performing" employees - where "poorly performing" is a judgement handed down by management) has major downsides.
My impression that these types of systems are more for culling than accurate performance review. Perhaps they need to drop a certain percentage of employees by some target date, and this is the most blame-free way to do it on a large scale.
"one person cannot be evaluated and paid in isolation of budgets" - SteveSi is just wrong on this. This is only true if you have a policy of highly differentiated pay for short term performance and/or have an "up or out policy". ... both of which are in effect at MS.
You can argue it's a bad idea not to have one or both of those policies, but it is certainly possible to have a review system based on what one did, rather than based on the necessary political fight over cutting up the budget pie.
I'm more interested in why employees don't band together to game the system and ensure a given outcome, then split the winnings. Like a sort of a pyramid scheme - you and a buddy agree that this quarter it will be you who gets promoted and split the bonus/raise with your buddy. Then you get a third buddy and get him in on it if he agrees to let the second buddy be promoted this quarter. Now you're splitting 3 raises among 2 people. Then you get a fourth buddy in and promote the third one and so on. The system ends once the group has too many people at a high position. At that point any new employee joining the company at a low position is screwed, probably. Also at this point infighting will probably break out from people who don't want to split their raises with the ones with less money, given that they don't have a way of advancing any further. Obviously the only way to win at this is to be the very first person who, after everybody leaves, gets left with the highest position and highest salary. Which is why I called it a pyramid scheme.
"Although there isn’t forced ranking in place, it does looks like Google one-upped Amazon in making it difficult to climb up their corporate ladder by having a promotion process based on pleasing everyone."
This is not true. First, I think it's great that promotion-readiness is decided by an employee and not her manager(s). Second, when promotion packet is written, it gets reviewed by a promotion committee, most likely in another campus, and there is a very high likelihood that promotions are granted more objectively compared to the manager's peers (and up the chain, depending on a target level like it's done in Microsoft, long before peer feedback is written). Promotion committee decisions get reviewed and iterated to satisfy the promotion budget, and those lucky ones who meet the bar, get promoted. Sounds like a pretty fair system to me.
It depends on whether there are any checks so that such ranking systems are not abused. I know first hand that such systems are ripe for abuse by those who are connected. I know of an incident when a well connected long term employee performed very poorly and was put in the weeding out category. However because of his connections with Vice Presidents was able to engineer so that someone else was given his place in the ranking and fired. In a way a person was specifically hired to that team, reviews were engineered to give him a bad review in order to remove the well-connected but badly performing manager from the bottom list. This was not uncommon and would happen invariably in order to save the well connected but poorly performing person.
That's not how stack ranking works. The only thing that is inevitable is that you will have many teams where almost everybody is either top-performer or low-performer, but they will get ranked on the global scale as if they are equally productive.
Of course there is a curve in all companies. The question is of interpretation how review scores get assigned (stab in my back and lunches with manager's peers like in Microsoft and perhaps in Amazon), or based on a peer reviews like in Google. Besides, to the best of my knowledge there is no fixed bottom 10% (or any number of percents) in Google/Facebook which ought to let go after each review period, compared to Microsoft.
I recall Valve having a stack ranking system as well? I haven't heard anything bad about their ranking system though. Maybe it is different considering the lack of managers with the flat culture that makes it better.
[+] [-] calinet6|12 years ago|reply
Why not give everyone the same bonus based on company performance? Make it collective good.
You'll probably think of reasons, like "good people should be rewarded," or "people who do things wrong need to have consequences," but you must realize the alternative is this vile demotivational anti-pattern with even worse consequences.
The right way is to align the company goal with the individual goal, and do it simply and clearly.
American companies need to understand and follow Deming's principles (http://en.wikipedia.org/wiki/W._Edwards_Deming#Key_principle...), or we'll continue falling into the soul-sucking black hole we're already halfway into. He already knew all of this, every bit of what we're experiencing, and our objection to his ideas is nothing more than an ideological almost religious belief that the most effective way to motivate individuals is to rank, rate, measure, and reward them accordingly. In fact, those archaic methods of management only serve to demotivate and systemically destroy culture and productivity alike, and reduces the quality of whatever you produce, be it innovation or physical products.
We know this. Deming's ideas work. They are truth in writing, and knowledge in practice. He pulled Japan out of a post-war recession and made them legends of quality production for pete's sake. Why can't we learn?
[+] [-] forkandwait|12 years ago|reply
To toss out an assumption as fundamental as these would require a huge realignment of all sorts of things -- how we punish and reward, our sense of self worth, who is good and who is bad, etc. So we don't really want to go there.
I think the West could benefit from a swing to the Systems/ Wholeness side of the dichotomy, but I wouldn't want to discount how powerful and what a creative force our individualism has been throughout the last 2000 years.
(EDIT, PS: Deming is the real deal, and the Toyota Way/ Lean books and movement tries to take some of his surface ideas and implement them without challenging their readers in the way Deming wanted to.)
(EDIT, PPS: Toyota / Buddha says "You see a problem? Change the system." Microsoft/ Jesus says "You see a problem? Roast the culpable individuals, reward the virtuous individuals.")
(EDIT, PPPS: Hegel and his philosophical descendants have the best take on the dynamic movement between individual and collective, without discounting either of the two viewpoints.)
[+] [-] tsotha|12 years ago|reply
Because like all collective goods you suffer from the tragedy of the commons. If you work for a large company your individual contribution is so small it has a negligible effect on your bonus. Unless you're interested in moving up the management ladder the smart thing to do is just work hard enough to avoid getting fired. Of course not everyone will adopt this attitude, but enough will to affect the overall performance of the company.
Also your top performers will leave. People who are passionate about their jobs and put in long hours expect to be rewarded for their efforts. If you give them the same bonus as the guy in the next cubicle who's out the door at 5:00 PM sharp they're not going to like it very much.
My company used to have two bonuses - one based on individual performance and one based on company performance. A few years back the individual performance bonus went away and the results have been disastrous. Once you get a significant percentage of people slacking off the entire character of the office changes.
[+] [-] AnthonyMouse|12 years ago|reply
It seems to me the solution is to rate people against absolute standards, never against each other. The article seems to think this doesn't work because you can't give a large bonus to everyone, but that smells like BS to me. If everyone is legitimately doing an outstanding job then the company as a whole should be doing outstandingly well, which means you should have plenty of money to pay everyone a large bonus. (Unless the metrics you're using are bunkum, in which case there's your problem.) The key is to make it absolutely without individual benefit to sabotage one's coworkers while still creating the incentive to excel personally.
Along similar lines, if you want to deal with the quarterly results bias, average it out. Publish numbers quarterly (or even more often than that) but set compensation based on an employee's five year average, not what they did just now. If you do poorly this quarter then you don't lose $1000 from your bonus this quarter, instead you lose $50/quarter for the next five years. At the same time, you still get a ~$1000 bonus this quarter, and you still want that number to go up next quarter, so you're keeping an eye on that average -- just not doing it this quarter at the expense of next quarter, because the psychological instant gratification of doing that goes away.
[+] [-] aaronetz|12 years ago|reply
[+] [-] JulianMorrison|12 years ago|reply
[+] [-] dworin|12 years ago|reply
However, almost all of those firms used a stack ranking system that was even more aggressive - those at the top got promoted, those in the middle got worked out over time, and those at the bottom got fired.
Shared bonus pools work when a company has an aggressive performance management culture, but this doesn't become visible as long as the company is doing well. When things are good, everyone is getting an extra lump of cash, even if it has nothing to do with their individual performance. But when the market changes, top performers flee because they realize they can make a lot more money someplace else, and that they'll never hit their goals until the company gets rid of the stragglers at the bottom and stops settling for mediocrity among everyone else.
[+] [-] abraxasz|12 years ago|reply
- The article lists as a deadly sin: "Evaluation by performance, merit rating, or annual review of performance"
But then the question remains: how do you make sure your best employees don't get poached by other companies who are willing to acknowledge the fact that they are superior, and pay them accordingly?
- Another point listed as a deadly sin: "Mobility of management"
I can agree with that, only if we also agree on the fact that management is just an administrative position, like at Fog's Creek or Jane Street. In other words, salaries and positions in the hierarchy are decoupled. If not, then the system you mention doesn't solve the problem of: "how are we going to promote people?"
I admit that I didn't read the entire Deming article, so please correct me if I'm missing something.
[+] [-] macspoofing|12 years ago|reply
Company performance is not dependent on the performance of any one single individual. That is, I can be the laziest, most incompetent developer or middle manger, and it would have no bearing on quarterly earning. So if you're using company-wide performance bonuses to stimulate productivity, in a company of thousands of employees, you're doing something wrong. The incentive in that case is for each individual to do as little as possible because why exert yourself if you're just going to get as much as the next guy anyway, and the result is everyone loses. This is a classic "tragedy of the commons" scenario, where the incentive is to be a cheater.
So the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one. That's what you need to do, and that's how you properly set up the incentives. The problem is that in a company of thousands of employees, creating a ranking system that works perfectly is pretty darn hard, especially since metrics are usually ambiguous and subjective. So you're not going to get it right 100% of the time.
[+] [-] rayiner|12 years ago|reply
I don't know whether this is common in other industries, but at top American law firms, salary raises and bonuses are lockstep. That means everyone gets paid based strictly on seniority. At many firms, this even carries through the partnership ranks.
There are benefits and disadvantages to such a system. The benefit is that it reduces competition between workers, and reduces unproductive credit-seeking. When you rank people against each other, the focus ultimately shifts to optimizing to the ranking metric, which is inevitably different than actually optimizing job performance. Such systems favor people who are good at taking credit, not people who get the best results. Lockstep systems also increase cooperation: nobody avoids helping someone else or avoids working on a stronger team for fear of the zero-sum nature of rankings.
The downside is that strict lockstep systems keep you from giving superstars extra compensation. This can be a liability if you don't have a uniformly high quality of employee, because superstars will leave for companies that offer individualized compensation. That being said, the advantages of individualized compensation decrease as it becomes more difficult to achieve true measures of individual performance. Nobody complains about individualized performance ratings on Wall Street, because it's easy to compute how much money a trader made for the firm or the value of the deals an investment banker worked on. The relevant metrics are objective and hard to game. It's much more difficult to evaluate a programmer's contribution to a development team.
The most troubling thing to me about stack ranking is not ranking per se, but the fact that stack ranking is applied by HR departments. This issue has come up before in the context of hiring, and what I said then is the same thing I'll say here: HR should not be involved in hiring, or firing! It's perfectly okay to identify weak performers and fire them, but it should be an organic process that happens based on the decisions of technical leadership. HR folks are administrative people. They're there to fill out W-2 forms and keep you from getting sued by disgruntled employees. They do not have domain expertise and do not know what makes for an effective technical employee.
This is an area where tech companies need to take a page from Wall Street rather than traditional Big Corps. At an investment bank, a banker decides who to hire and who to fire, not some HR person who has no understanding of banking. To make this system tractable, firing decisions are made at a low level, early and often. That prevents getting into a situation where the organization builds up a glut of weak performers that need to be fired in some comprehensive and systematic culling.
[+] [-] squidi|12 years ago|reply
I wholeheartedly agree. Apart from niche examples, like measuring sale people on sales, there is no good reliable way to measure employees based on performance/outputs. IO Psychologists have been looking at this for years and even mathematicians (like Leonard Mlodinow in The Drunkard's Walk) agree.
[+] [-] walshemj|12 years ago|reply
[+] [-] frozenport|12 years ago|reply
[+] [-] brown9-2|12 years ago|reply
[+] [-] ripvanwinkle|12 years ago|reply
The FB system doesn't make the non 2% feel rejected and unhappy - it just makes it very hard to be crowned the superstar which I think most people find perfectly acceptable.
To address the relatively longer period of MS employee retention, Microsoft employees (esp the technical ones) in general work on a set of technologies (C#, NT Kernel, SharePoint,...) for which MS is the place to be. They build up expertise and then if they have to leave to join a comparable company, they need to rebuild in a different set of technologies most likely open source stuff of which there is very little in Microsoft.
Now if you are a Linux kernel hacker / Python guru/... at Google/Amazon the world is your oyster - everything you are good at transfers readily to companies/roles of similar stature outside.
Its almost like Microsoft technologies are a moat around its castle that keeps talent from leaving.
full disclosure I worked at Microsoft for about 7 years before leaving.
[+] [-] seanmcdirmid|12 years ago|reply
[+] [-] pnathan|12 years ago|reply
This is not unique to MS and MS tech, sadly.
[+] [-] mseebach|12 years ago|reply
The main reasons I can think of has to do with the dangers of getting comfortable in a large company.
It's very easy for a lazy manager to just hand out "A"s to everyone on the team and just cruise along. Slackers are poisonous, but painful to deal with for a conflict-shy, comfortable manager. Actually being forced to think critically about which of your employees are the top performance, and which aren't (and it's a mathematical fact that they're not going to be the same) is a useful tool to keep such a manager on his toes.
Another effect is simply to encourage a certain rate of churn in all teams, to get some fresh blood flowing through the system.
Stack-ranking directly forces the manager to use his human capacity for critical thinking to evaluate his employees, and in such is a useful distraction from that even more disastrous evaluation method: Objective metrics (hours worked, lines of code committed, bugs closed, sales numbers etc).
[+] [-] HelloMcFly|12 years ago|reply
Finally, in some organizations it's just a convenient way to distribute rewards (comp, promotions). While this is a highlight of it in any application, the focus on that as the primary benefit is less than ideal. But convenience is its own reward for many.
This concept is intended for use at the more senior levels in the company and typically not meant to be done within teams/groups/divisions, but rather across teams/groups/divisions.
The whole system is designed around creating a workforce with maximum potential, if not maximum performance. There are some simulation studies that have borne this out, but I'm wary of trusting the validity of simulated models in complex systems and social phenomenon. While evidence suggests neither raters or ratees react well to the system, actual evidence of behavior (e.g., attrition) and performance generally don't show the expected negative outcomes.
It's thought level of interdependence in one's role would be positively associated with poor performance, but I don't know of any evidence about this either way. It's also thought that the system works best in a culture that sends similar signals, like high-performance consulting cultures. Again, I know of no data about this.
Here is a decent, if somewhat old, PDF that is classic forced distribution reading. I don't think it's perfect, but it's a good starting spot: http://www.groteconsulting.com/resources/pdfs/Across_the_Boa...
I have more research about this handy on my work desk I can post tomorrow if anyone is interested.
[+] [-] etler|12 years ago|reply
[+] [-] waterlesscloud|12 years ago|reply
Which is a flaw in the people responsible for those managers to train and to bring them along properly.
If we follow that chain to its conclusion...
[+] [-] grumps|12 years ago|reply
1. Get a job elsewhere 2. Hide in mediocrity because the effort to achieve a high ranking is greater than the reward by a lot.
In my personal experience with force ranking systems, is that it also drives politics within the organization. As an example:
I once was skipped a promotion because when we went to demo a unit the shipping department did a poor job packing the prototype equipment that I had just spent an entire summer building. Due to the packing job, a single RS-232 pin because slightly unseated causing intermittent behaviors for one of many features. It was still the most successful demo the company had ever given. So success we received a request for pricing the Military 24 hours later, which is unheard of. Despite this the Chief Engineer blasted me for the failure, and our inability to find the issue on site (mind you he was there too). When I brought this up at my review I was indirectly told by my boss that he didn't agree with my rating/rank but it was over his head. After that, I practiced both Items 1 & 2 but discovered that my new company also followed this practice. So it was a rinse and repeat to make sure force ranking is not within my new companies.
[+] [-] xal|12 years ago|reply
You need a documented system. If you don't have a documented system then there will be an undocumented system which is the same problem with less documentation.
[+] [-] bowlofpetunias|12 years ago|reply
Using a system that is enforced from the top down is a perfect way to guarantee you'll only get the kind of below mediocre managers we love to bitch about.
All of these systems are based on the assumption that companies can't trust the people they hire to delegate responsibility to. They're basically methods of maintaining a toxic environment instead of dealing with the root causes.
And it's a self-fulfilling prophecy, because it attracts the wrong people. What good manager you ever worked for would want to function in that kind of a system?
[+] [-] vkou|12 years ago|reply
Productivity lost to that can't possibly be worse then the culture of backstabbing that stackrank promotes.
For another point, the article seems to be making a heavy statistical error in assuming that Google's average developer lifespan is 1 year. Taking the average lifespan biases the result heavily towards new hires (Of which there are a lot of).
A more relevant metric would be average time between an engineer joining, and leaving.
[+] [-] mtrimpe|12 years ago|reply
Each employee then has to distribute all of his 'credit' to other employees.
Each employee then gives away any credit received according to the same original distribution.
Each employee continues doing so until the credit received and distributed reaches an equilibrium.
Each employee is then ranked by the total amount of 'credit' they've accumulated.
Maybe we should call it 'PeopleRank' ;)
[+] [-] CamperBob2|12 years ago|reply
So don't complain when your kid gets expelled from the second grade for pointing his finger like a gun and saying "Bang."
[+] [-] bguthrie|12 years ago|reply
[+] [-] progn|12 years ago|reply
[+] [-] kybernetikos|12 years ago|reply
[+] [-] daveman692|12 years ago|reply
[+] [-] nbm|12 years ago|reply
I'd like to help you and dr find you a good match - FB has been a great opportunity for me, but I stumbled a bit so I know how important finding the right thing to work on is. I can also offer you my frank impression of the performance review system here, which I've been through a few times as an IC and as a manager.
[+] [-] benmax|12 years ago|reply
[+] [-] cnahr|12 years ago|reply
[+] [-] rm445|12 years ago|reply
[+] [-] joe_the_user|12 years ago|reply
Stackrank seems like umpteen other methods whose ultimate aim is to vacuuming people dry and discarding them. This "works" in the sense that if you can't motivate someone with the challenge, excitement and etc of working for you, there's always money, fear and the-other-etceteras.
Yahoo and Microsoft have lost all cachet to their workplace, and Amazon has always been innovative in the "our engineers have calculated exactly the profit made from turning off the air-conditioning in warehousing and legal has drafted the matching don't-ask, don't-tell contract" sense.
But Facebook using this seems like an indication they've reconciled themselves to being on the way down. That was quick.
[+] [-] bmohlenhoff|12 years ago|reply
[+] [-] gum_ina_package|12 years ago|reply
[+] [-] r00fus|12 years ago|reply
As I understand stacked ranking, there doesn't seem to be many improvements that help when the underlying premise (forced attrition of "poorly performing" employees - where "poorly performing" is a judgement handed down by management) has major downsides.
[+] [-] lifeformed|12 years ago|reply
[+] [-] mseebach|12 years ago|reply
[+] [-] andrewkreid|12 years ago|reply
[+] [-] SteveJS|12 years ago|reply
You can argue it's a bad idea not to have one or both of those policies, but it is certainly possible to have a review system based on what one did, rather than based on the necessary political fight over cutting up the budget pie.
[+] [-] anonymous|12 years ago|reply
[+] [-] amaks|12 years ago|reply
This is not true. First, I think it's great that promotion-readiness is decided by an employee and not her manager(s). Second, when promotion packet is written, it gets reviewed by a promotion committee, most likely in another campus, and there is a very high likelihood that promotions are granted more objectively compared to the manager's peers (and up the chain, depending on a target level like it's done in Microsoft, long before peer feedback is written). Promotion committee decisions get reviewed and iterated to satisfy the promotion budget, and those lucky ones who meet the bar, get promoted. Sounds like a pretty fair system to me.
[+] [-] unsupak|12 years ago|reply
[+] [-] grandalf|12 years ago|reply
These kinds of ranking systems are a mechanism to correct for that error once there is a lot more information known about the employee.
[+] [-] vladimirralev|12 years ago|reply
[+] [-] amaks|12 years ago|reply
[+] [-] winslow|12 years ago|reply
EDIT: Article I found on MS vs Valve stack ranking. http://www.jpuddy.net/2012/stack-ranking-to-gain-team-insigh...