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Posted: November 27, 2013

Sticking with stacking?

The pros and cons

Todd Ordal

Only in Garrison Keillor’s mythical Lake Wobegon is it possible to ignore the math related to averages (“All the children are above average”). Microsoft is trying to learn new math as well.

A recent article in The Wall Street Journal  notes that the software giant eliminated the practice of stack ranking employees. Once used by many companies, this exercise involves managers stack ranking (best to worst) their team members. Some use this as an input for compensation, some use it for team analysis and building development plans, and some actually fire the bottom X percent. Yahoo’s Marissa Mayer is in hot water with the press again, now for implementing stack ranking.

I was once an executive in an environment where Andy Pearson — former president of Pepsi, Harvard Business School professor, CEO of Yum! Brands (Pizza Hut, Taco Bell and KFC), now deceased — was on the board and espoused this practice. I hated it … sort of. Fortune magazine identified Andy as one of the 10 toughest bosses in America, and I got to see him in action.

Like everyone else who manages others, I had some blind spots and wanted to believe that all of my people were above average (all the weak people were in the other divisions, not mine!). Oddly, as I had a conversation with my CEO about why one VP was better than another, I began to look more closely at their performance and think harder about my evaluation criteria. Yup, we should all be able to do that without a gun to our head (and we should all exercise and eat broccoli every day).

Stack ranking in a highly functioning organization may have some negative unintended consequences. It is also quite an extreme measure to mandate that the bottom 10 percent to 20 percent get fired every year. However, I’ve done some turnaround projects in my career, and one of the first and best tools available when you need dramatic change and new behavior is to stack rank people.

Do you ever watch The Voice or Dancing With the Stars? They’d be pretty bland if everyone got a 10 and they never declared a winner. Likewise, if your house were on fire, wouldn’t you like to know that the fire department weeded out those who didn’t have the physical ability to perform? Do you watch the NFL? Do you think ranking players by talent hurts the game? It’s okay as long as it doesn’t happen to us!

I believe managers and leaders are obligated to help people improve and leverage their strengths. They are also obligated to grow their business.

No one likes to be told that they’re not at the top of the heap. Is it any wonder that stack ranking is not well-liked by most? Unfortunately, business, professional sports and fighting fires is not like intramural soccer. Is it possible that as a society we’ve taken the message that we’re all winners too far?

One of the many stack-ranking critics says a manager’s job is to make everyone a 10 (he’s also a university professor who no doubt works in a system with tenure where performance matters little). I like his objective, and if every person could perform at that high level in their existing job, it would be worthy of all managers’ efforts.

But most of us don’t live in Lake Wobegon, and Marissa Mayer wasn’t hired to coach intramural soccer.

I don’t believe stack ranking is the right tool for all, or perhaps even most, companies. I don’t think that automatically firing the bottom 10 percent of the workforce is right. I believe, however, that most who are opposed to these measures have never had to right a sinking ship. I think that some people are in the wrong jobs. I believe that forcing tough conversations allows you to make better decisions, and I think that you can have an extremely positive culture and still insist on high performance.

Don’t eliminate tools that can be effective just because they’re tough. When my kids were little, I didn’t take a poll to see if they wanted broccoli or cotton candy for dinner.

Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info,  303-527-0417 or todd@appliedstrategy.info

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Readers Respond

Thanks, TC. I read your comment just after reading an article about how our K-12 education system stacks up against the rest of the world. Interesting juxtaposition... By Todd Ordal on 2013 12 03
Todd, you wrote that you can "have an extremely positive culture and still insist on high performance." I concur and will add that sustainable high performance cultures are driven by excitement, not fear and high-performers crave feedback on how they can improve. Coachability (I think I made up that word) is a trait of high-performers. By TC North on 2013 12 03
Well put, Stephen. By Todd Ordal on 2013 11 27
I agree that stacking and the dreaded bell shaped curve are tools. How we use and where we place our focus in using those tools is what makes the difference. When leaders are really good at using a hammer and they think every problem is a nail they use the tool in an improper and often abusive way. Sometimes it is important to get people's attention so they can grow and become better at what they do or decide they may not be a really good fit for their job. In neuroscience studies have shown that we all have blind spots. We tend to be really good at recognizing weaknesses in others and view ourselves as superior. We often need others to help us see what we can't see. By Stephen Moulton on 2013 11 27
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