A CEO's passionate defense of stack ranking
management.fortune.cnn.com
management.fortune.cnn.com
I thought the purpose was to fire thousands of GE employees? Most of the articles I've read on this make it should like whatever problems/frustration it caused at Microsoft stemmed from the fact they were using stack rank without the goal of reducing headcount across the board.
But I have heard elsewhere that a big reason behind doing this is it forces managers to not be wishy washy telling everyone how great they are. It's very hard to enforce the discipline of tough conversations in organizations where there are long lines of people waiting to be promoted. GE is a prime example of this. People aren't there to invent great technology, or make a financial killing. Therefore the senior engineer doesn't have status. It's the senior manager that does.
I have often been told that the goal of Welch's management style is to identify the top 10% and reward them heavily, and to identify the bottom 10% and find out how to help them improve.
Honesty is necessary if that is true.
That's not actually a TL;DR, that's all he said in his "passionate" defense.
Agreed. It's stuff you made up. He didn't say everyone performs on a single measurable dimension, nor that teamwork is irrelevant (nor does stack ranking imply either of these).
He also didn't say that forced ranking is the only way to get honest feedback. He said it's the only way he knows of, which is a considerably different statement.
To be clear, I'm not defending stack ranking here. Muddying the facts with blatant mischaracterizations does not help the discussion, though.
The problem with some implementations is that it awards people for individual contributions and only if you are above average. This drives people to avoid contributions to a team so they can focus on their own personal contribution and to not want to help colleagues because that would drive the mean up eroding the value of personal contributions.
Couldnt you have stacked ranking with a criteria that rewards all involved for collaboration?
Ranking all engineers in the department together would be more difficult. Managers have a hard enough time getting a read on the strength of their own people; getting them to agree on how their people rank against the other managers' people would take quite a bit of work, I imagine. But it would give a much better answer to the question of whom to let go first, and it wouldn't provide as much incentive to game the system.
And I agree with you that the ranking should explicitly emphasize how well each employee works with their teammates.
This is a stacked rating.
Couldnt you have stacked ranking with a criteria that rewards all involved for collaboration?
Yes, though it's tougher to measure. People generally know who the best mentors are, and who they can call when they need help with a tough problem. They also know the worst mentors, and the people who don't return calls. It's very hard measuring the people in the middle.
Good people will "choose" to see work elsewhere.
In case this isn't clear to anyone, a manager could have a team of the 10 best people in the company, but given forced stacking and how teams are set, 1 of those people would be a candidate for termination in layoffs, even if there are 99 other people less capable and less critical to the company. No manager will be allowed to keep everyone -- they're all told to rank them and the decision to layoff the "bottom" 10% is done by HR.
And their 2007 IT outsourcing deal is pretty infamous.
I never got the impression it was a company I'd want to work for.
They seem to be in a hot area now - consumer products data.
I should also emphasize from hard, personal experience that how "hot" the area(s) a company is working in is pretty much orthogonal to whether you really want to work for them. Especially a company with such an established brand name and cash cows, which can allow a whole lot of awfulness without killing the company, at least for a while.
I mean, for about half their IT staff it was a terrible place to be in 2007-8 when they were laid off, but not before training their non-resident Indian replacements. Or to put it another way, IT isn't a respected part of the company, obviously viewed as a cost center. Really try to avoid those sorts of outfits if you can afford it.
And their CEO loves stack ranking ... surely that's enough to cool enthusiasm prior to carefully examining the company (e.g. check out the Ask The Headhunter approach).