Performance appraisal are one of the hardest tasks a manager is asked to carry out, especially when they are used to reward or even worse discipline an employee. A performance appraisal can be defined as the process by which an organization evaluates employee performance based on preset standards, this processes main purpose is to help managers to effectively staff companies. The article titled “Microsoft Abandons ‘Stack Ranking’ of Employees” talks about ending the controversial “rank and yank” process where managers are forced to grade their employees as stars, acceptable, and under-performers.
The forced ranking system better known as “rank and yank” was popularized by Jack Welch when he was the CEO of General Electric. This system is one of the most scrutinized of the different forms of forced ranking systems due to its ruthless management style. This system lumps groups (departments) together ranking the employees from best to worst on a numerical basis, those in the lower 10% are either terminated or considered for termination. According to Jack Welch’s system every team has 20% of star employees, 70% of acceptable employees, and 10% of under-performers.
Although implemented in the 1980s still today it remains a controversial management practice with one main downfall, increased competitiveness among workers. Under this ranking system workers can become less focused on the group effort and more worried about where they individually will fall in the numbers. The overall effect can be poor team effort and have a negative effect on overall productivity. Microsoft is the latest in one of many companies to eliminate a forced ranking system, including GE who since Jeffrey Immelt has taken over prefers reviews that candidly tell an employee where they need to improve.
Microsofts ranking was a bit different then Jack Welch’s placing employees in 5 buckets of predefined size 20% are outstanding, 20% are above average 40% are average 13% are fair and 7% are poor – all compensation is pre-defined by the bucket they are placed it. Microsoft will be replacing the numerical-ranking system with more frequent feedback on how employees are performing, along with this change managers will have more flexibility in how they give out bonuses.
Lisa Brummel, Microsofts executive vice president of human resources spoke about the new review system being overhauled in part to reflect an emphasis on teamwork a main idea in Mr. Ballmer’s new strategy. Steve Ballmer Microsofts CEO is reshaping the company’s strategy and culture in his last months with the company. In the article Ms. Brummel also spoke about how they decided to make a change from the system that they had embraced for many years before to a new and by some standards more relaxed program.
“Not all employees or managers embraced the old review and compensation system” and that being said Microsoft conducted interviews and gathered research from over 10,000 employees and more than 50 senior executives. An important part of any performance appraisal review is everyone being on board with the process, from the managers giving the reviews to the employees receiving the reviews. If the managers do not believe in the system that they are using they will be less likely to put in the time and effort that is takes to conduct such an in depth and important review.
Its equally as important for employees to understand and be able to interpret their evaluations so they can continue to grow in their field and help over all productivity of the company. Another feature of the new systems is that appraisals will come more then one a year, when they feel that a employee needs to be spoken to about their performance they will handle the situation at that time. According to Samuel Colbert of UCLA’s Anderson School of Management “annual reviews are a misuse of managements time, and are long overdue for a yanking at companies like Microsoft.
”By managing in a way that some may take as a more informal, managing on a day to day basis will most likely have a more substantial effect on the employee then a review given once yearly. When managing like this you can help employees identify the cause of the problem, and give direct attention to the cause of the problem rather than letting problems build up over the course of a year. Once identified an action plan to empower the employees to reach a solution will help not only the employee build self confidence but also ensure the productivity of that employee.
Managing in this way is one of the most effective ways to keep the lines of communication open between management and employees, which is such a key factor in these types of situations. By being able to give effective feedback constantly it is a two way street that manager and employee are on together to solve a common issue. Performance appraisals should be future oriented, providing workers with useful feedback that helps them achieve higher levels of performance in their careers.
I think that the ‘rank-and-yank’ approach does the exactly opposite of that. Employees are forced to do what will help their personal performance which can mean not doing what is good for the company on a whole. Microsoft is revamping its image, it wants to incorporate ‘teamwork’ into its company culture and I think this is a great step to do so. By providing employees with individualized attention, problem solving, and effective communication about their performance they are setting the company up to succeed on many different playing fields.