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Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

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Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#141

Post by michaelochurch »

seiji wrote: post #109
michaelochurch wrote: post #93

Earlier quoted context omitted.

Valve "stack ranking" is for bonuses only. In other words, an error that puts you toward the bottom of the stack reduces your payout from a pool of money you were never promised and to which you are not entitled. You get another chance next year to excel and come out on top. Over time, the errors should smooth out. Microsoft-style stack ranking, on the other hand, completely fucks up your career in the company, even…

You get another chance next year to excel and come out on top. A year is a long time to be passed by for additional compensation. Our technostartup environment makes a year feel even longer since the rate of change and adoption of new products is accelerating. How do companies justify holding paltry bonus parties when teenagers are selling companies for $30 million or raising valuations at $4 billion for things that…

I don't know anything internal about Valve, and I'm sure their system isn't working perfectly, but I'd imagine that the people generating 10-100x salary are getting bonuses that they're happy with, at least in most cases.

That would be the more rare case of an employee getting screwed (delivering massive value, underpaid). Much more common is an employee who's screwed by being given inappropriate work, few or no opportunities to advance, but then compensated accurately (this might mean getting laid off) for the value delivered (with no allowance made for the error being in that person's work allocation).

No evaluation process is perfect, but a system where being unlucky means you live on your salary for a year is better than one where being unlucky fucks up your career, possibly beyond that job if you get fired abruptly with no severance. Microsoft-style stack-ranking is the latter.

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#142

Post by joe_the_user »

Facebook is the company that surprised me here.

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.

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#144

Post by HelloMcFly »

mseebach wrote: post #33

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 mana…

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.

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.

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#145

Post by sokoloff »

calinet6 wrote: post #117
macspoofing wrote: post #94

Earlier quoted context omitted.

>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 employ…

You'd think that, but in fact, statistically and scientifically speaking, the opposite is true. This is the disconnect. "the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one." No, it isn't. This creates a company in which people are constantly afraid of the stick and fighting for the carrot. This generates in-fighting, corporate politics, ladder-climbing, game-playing, and…

> The answer is to remove it all; enable true pride in work, fair compensation, leadership, continual improvement, education and self-improvement. This works better.

A key question in the idea of "fair compensation" is what do you mean by "fair"?

If one of your superstar outliers is contributing 5x, 10x or more business value than the average, what does fair compensation look like? Is it 100% of the compensation of the average? 110%? 150%? 250%?

In my experience, few firms have compensation structures so flexible as to reflect the true range of contributions of different employees. As a result, their compensation philosophy tends more towards "equal compensation" than "commensurate compensation".

The question is whether fair lies closer to "equal" or to "commensurate" on the spectrum.

(I obviously understand the argument that equal might result in a more cooperative workforce and a stronger company, all other things being equal. But the very strongest performers, assuming their strength is portable to another firm, will have an incentive to migrate to a firm willing to compensate them more commensurately to their contribution, again, all other things being equal.

Once one of these firms springs into being, they may become a magnet for talent as great people like to work with and for other great people. If one can do that to a greater extent at this magnet firm AND have a higher income, enabling more retirement and family financial security, better vacations, etc, those will be powerfully aligned forces.)

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#146

Post by amaks »

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.

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#147

Post by amaks »

"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.

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#148

Post by frozenport »

calinet6 wrote: post #87

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 w…

Its called stock options.

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#149

Post by cwp »

duaneb wrote: post #82
cwp wrote: post #75

Earlier quoted context omitted.

The problem with stack ranking isn't that it's unfair to individual employees, it's that it inhibits cooperation. If "success" is defined as performing better than your peers, it creates an incentive to prevent your peers from performing well. If everybody is actively sabotaging each other's efforts, or even just not helping each other, that hurts the company's overall performance.

Sure, but it's not clear cooperation should be prioritized over e.g. loyalty. (I happen to think it is, but it's not at all an objective inference.)

Well, if we were talking about car salesmen, I'd buy that. But building software? Cooperation is critical.

Re: Why are Amazon, Facebook and Yahoo copying Microsoft's stack ranking system?

#150

Post by InclinedPlane »

craigyk wrote: post #54
varunsrin wrote: post #26

Earlier quoted context omitted.

Stack ranking at Microsoft has a min populaton size (x) - you generally walk up the org chart until the number of employees >= x, and then apply stack ranking to that group.

but the mechanism by which it migrates up is 'calibrated' by managers arguing with one another, isn't it? In which case the politics and opinions of a small number have a disproportinately large effect on people's scores in aggregated groups.

Precisely. And because the consequences of stack ranking are so significant you can bet your ass that anyone who can use office politics to game the system will do so. And at MS there are already a lot of politics in play, so stack ranking just brings it to the forefront.

Instead of being a meritocracy it ends up being about whose managers play the game better and have more political power.

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