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Microsoft Abandoning Employee Ranking System

Written by Gregory Horvat

Edited by Sarah Mejia
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Microsoft, one of the biggest and most well-known firms today, has abandoned its employee review and compensation system. The system forced managers to rank employees on a comparison level rather than just on independent performances. This management technique, known as a “stack” or “forced” ranking, was seen as one of the more favored techniques to keep employee performances high (Ovide and Feintzeig).

The “stack” technique is essential to determining whom to promote within the company and whom should receive the next biggest bonus; on the other hand, “a small percentage of Microsoft’s 100,000 employees had to be designated as underperformers,” and as a result could have had their jobs terminated (Ovide and Feintzeig). The ethicality of this method can be called into question for those employees who are tagged as underperformers when they actually are actually doing a satisfactory job. Some may call the increased tension between the employees good motivation, but to some former Microsoft employees the method causes unhealthy competition (Ovide and Feintzeig).

To those who are familiar with Enron, the system Microsoft used mirrors Enron’s “rank and yank” method. Another user of the “stack” ranking is General Electric. Jack Welch, Chief Executive from the 1980s-2007, implemented and still today defends the “stack” ranking. Welch believes “there is no cruelty like waiting and telling people late in their careers that they don’t belong” (Ovide and Feintzeig). Welch claims that it is not cruel to perform the “rank and yank”. Ever since Welch has resigned in 2007, General Electric has steered away from the “rank and yank” method.

It is quite evident that many companies are still on board with the “stack” ranking, because at least “30% of Fortune 500 companies [still] continue to rank employees [but] 2% must be in the bottom,” as opposed to the 10% Welch used to utilize (Ovide and Feintzeig).

Getting rid of this method raises an important question: how can technology companies accurately rank their employees? Microsoft has used the “stack” ranking for decades and may not know many other methods that are effective. As of now, Microsoft managers “have more flexibility” in giving bonuses and evaluating their employees, rather than using the old numerical system (Ovide and Feintzeig). Steve Ballmer, the current CEO of Microsoft, is retiring within the next 12 months. This also brings instability, as anything can happen once his successor comes in, because the “stack” ranking may make another appearance, if not a more controversial employee evaluation method.

At the end of the day, Microsoft is still known for “fairly rich employee compensation” (Ovide and Feintzeig). I believe it is a wise move to get rid of the system. Although I do not necessarily think the “stack” system was unethical, I believe it can give employees more breathing room and help one another work together to be more productive than before. There must be a way to promote healthy competition and cooperation rather than the lone-wolf mentality. Such a possible system may be to “stack” within small teams of 5-7. This would promote healthy competition, as well as teamwork to achieve the firm’s economic and other goals.

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**Due to technical difficulties, we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.

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Ovide, Shira, and Rachel Feintzeig. “Microsoft Abandons ‘Stack Ranking’ of Employees.” Wall Street Journal. N.p., 13 Nov. 2013. Web. 13 Nov. 2013.

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