If you want a lot of short term goal people to make money pumping stock, this is a great way to go.
If you want to build long term value for shareholders it's absolutely one of the dumbest things you can possibly do.
It's totally repulsive to me. But as this guy's firing clearly indicates, part of the point is repulsing people who care about staff and want to actually get things done. If an organization focused primarily on being effective, that would be a huge disadvantage to the ladder-climbers and intrigue-lovers that have clawed their way to the top.
[1] https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha...
Rather than an attempt to create fall guys and internal competition, I think executives are doing it sincerely to find and weed out low performers, but fail to understand that works well for 100 employees at a retail store doesn't work well for 6 employees on a SWE team, or even 40 employees under a large heterogeneous tech org.
It doesn't. Ever.
I'll give you two examples.
I currently work at a company that does stack ranking. The first year I started at the company, I started in the middle of the year. I was told because of that, I wasn't eligible for a bonus or salary increase. I later found out this was total BS.
Second year? I work my ass off. Stay late, develop new tools for the team which are then used on other teams. I got some visibility with those tools with several managers. I consistently take on extra work, present to project leaders, go to any and all conferences, make reports, and suggest new technologies my manager and other managers. I feel like I hit it out of the park. Nope. Two project managers didn't like me and rated me low. My manager ranked me in the lower tier. I got a pittance for a bonus and no salary increase.
Third year? I'm a bitter, frustrated developer. I decided, "Well fuck it, I gave you a great effort and got nothing in return. This year, the company gets fuck all." I barely worked. I did the absolute minimum. I was "quiet quitting" before it was cool. I'd log off early every day. I refused to take on more work. I missed or ignored meetings that weren't absolutely required. I worked on several side projects instead. I was getting paid a high six figure salary to do as little as possible. It was completely glorious. We get to the end of the year, I get the same low ranking. Same pittance of a bonus, and because it was my third year, I got a small raise in my salary.
That was the end result of stack ranking. It didn't matter what YOU did, it only mattered what your co-workers did and how they felt about you. You could have the best year of your life, be totally plugged in and kicking ass, but if someone didn't like you? It was all for not which I soon realized very quickly.
Its incredibly hard to try and be your best when you're constantly looking over your shoulder. Its impossible to be "all in" when you absolutely know your effort will be for nothing.
Even Microsoft famously gave up on it when they realized it cost their company a decade of progress because stank ranking encouraged managers to sabotage their co-workers projects in order to look good on their own year-end reviews.
https://slate.com/technology/2013/08/stack-ranking-steve-bal...
Its absolutely staggering to think there are companies still out there using this to measure employees performance. Its beyond toxic and will suck the life out of your team, your managers and your employees.
My first review I got the normal "You're doing a good job" rating that the majority of the company gets.
Next review comes along and my original manager that hired me has quit. For most of the review period a senior dev on the team that had zero interest in managing was leading the team. Right before review time we get a new hire that's a bit of an idiot. I was still the newest person on the team and got ruined in my reviews because there wasn't anyone to advocate for me. I got the lowest rating.
This is when I found out there are apparently two versions of the lowest ratings. One where you're on the way to being fired and one where it was assigned because somebody has to get it. My rating was the latter. My manager then explained that there was a class of employee at MS that simply accepted these low ratings and moved on, collecting their salary. The only good advice he ever gave to me was that if this happened again I should find a better job. (I don't think he ever felt like it was his fault I got that rating.) I almost immediately tried to transfer to a different part of the company, but my low rating prevented me from doing that.
Shortly after that, the team was reorganized and I ended up on a different sub team with a different manager. My new manager told me they were surprised at my previous poor review and nothing in it reflected how they thought of the work I was doing. He started asking me to collect stories about what developers on other teams I was helping to use as ammo during the next review time. It felt very off-putting. I didn't want to throw my coworkers under a bus any more than I wanted to be thrown under one.
So I left the company. That previous review ended up being the last where they used the stack ranking. I think I did get one final review right around the time I left but I never even saw it.