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 worse consequences.
The right way is to align the company goal with the individual goal, and do it simply and clearly.
American companies need to understand and follow Deming's principles (http://en.wikipedia.org/wiki/W._Edwards_Deming#Key_principle...), or we'll continue falling into the soul-sucking black hole we're already halfway into. He already knew all of this, every bit of what we're experiencing, and our objection to his ideas is nothing more than an ideological almost religious belief that the most effective way to motivate individuals is to rank, rate, measure, and reward them accordingly. In fact, those archaic methods of management only serve to demotivate and systemically destroy culture and productivity alike, and reduces the quality of whatever you produce, be it innovation or physical products.
We know this. Deming's ideas work. They are truth in writing, and knowledge in practice. He pulled Japan out of a post-war recession and made them legends of quality production for pete's sake. Why can't we learn?
I am currently reading a bunch of the Toyota Way books, Deming, etc. and sometimes I wonder if one of the most basic assumptions in the West is that the individual is the root and the system is a derived thing. This assumption starts, maybe, with Christianity which tells us that we stand alone before God judged on our individual character, not on our wealth or social position. Buddhism, on the other hand, tells us that even our perception of selfhood and autonomy is an illusion to be rooted out and discounted.
To toss out an assumption as fundamental as these would require a huge realignment of all sorts of things -- how we punish and reward, our sense of self worth, who is good and who is bad, etc. So we don't really want to go there.
I think the West could benefit from a swing to the Systems/ Wholeness side of the dichotomy, but I wouldn't want to discount how powerful and what a creative force our individualism has been throughout the last 2000 years.
(EDIT, PS: Deming is the real deal, and the Toyota Way/ Lean books and movement tries to take some of his surface ideas and implement them without challenging their readers in the way Deming wanted to.)
(EDIT, PPS: Toyota / Buddha says "You see a problem? Change the system." Microsoft/ Jesus says "You see a problem? Roast the culpable individuals, reward the virtuous individuals.")
(EDIT, PPPS: Hegel and his philosophical descendants have the best take on the dynamic movement between individual and collective, without discounting either of the two viewpoints.)
That's a really good point. Its not just the useless people that reduce a team's effectiveness.
A few jobs back, I worked with a person that was incredibly brilliant, and a very prolific developer. Unfortunately he made everyone around him miserable in countless ways (definitely a prima donna). He would rewrite large sections of code and change core user functionality without asking product managers or other developers. When confronted, he refused to revert his changes because he had done it right and "everyone would see once it was released".
His abilities and contributions would likely put him at the top of a stack rank, but overall he may have hurt the company more than he contributed.
"The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good.
I'd say Christianity goes along with the original poster's idea of everyone getting the same reward - ie grace - nothing you do can merit it - it's a gift.
The parable of the vineyard workers explains it - it doesn't matter how late in the day the workers start working - they all get the same reward.
This is a really interesting observation, and one I've thought about before.
I've noticed that companies tend to fall into two philosophical camps, both of which can be successful if executed right. One camp says that you should create a great process so that you can stick anyone in it and they can be successful. Another camp says you should get great people and the process will work itself out. I'm illustrating the extremes to clarify the picture: even process-driven firms need good people, and people-driven firms need good processes.
I'm not sure there's actually a "right" answer to the question, so much as you need to make sure you execute in the right way against the strategy you've chosen, although I do think that certain industries and firm sizes tend to advantage one over the other.
Completely agree, I think you have the roots of the different paradigms entirely correct. It's also the same dichotomy that produces the bisected political extremes in the US.
I disagree that we don't want to go there. One of these seems to produce better results, companies, and societies, while the other produces effectively dysfunctional ones, like the example we just read.
>Why not give everyone the same bonus based on company performance? Make it collective good.
Because like all collective goods you suffer from the tragedy of the commons. If you work for a large company your individual contribution is so small it has a negligible effect on your bonus. Unless you're interested in moving up the management ladder the smart thing to do is just work hard enough to avoid getting fired. Of course not everyone will adopt this attitude, but enough will to affect the overall performance of the company.
Also your top performers will leave. People who are passionate about their jobs and put in long hours expect to be rewarded for their efforts. If you give them the same bonus as the guy in the next cubicle who's out the door at 5:00 PM sharp they're not going to like it very much.
My company used to have two bonuses - one based on individual performance and one based on company performance. A few years back the individual performance bonus went away and the results have been disastrous. Once you get a significant percentage of people slacking off the entire character of the office changes.
If you make the same as someone that leaves at 5pm sharp, you don't have to like it. If monetary compensation is your motivation for staying later, you're likely making the wrong choice. Bonuses in those instances do set the wrong tone, though. I would consider getting the same as a non-performer just expected salary increases but its still a kick in the nuts either way.
Your last line is crucial and one my experience can echo. If you strip away incentives, ones that attracted people to your place to begin with, you can expect turnover. You might as well be walking then to the door. You can fool new hires to a degree until they hear that there were performance bonuses at one point and then the same resentment starts to grow inside them too. You're only real recourse is to have every one of the "old guard" leave so you can continue your downward spiral into cheapness.
This is the basic cooperation vs. competition problem. If you have competition then people spend a lot of resources fighting because what matters most is being faster than your friends, even if that means working to slow them down. Whereas if you have cooperation then you get complacency because then nobody has to be faster than anybody, so everybody can sit on their duff.
It seems to me the solution is to rate people against absolute standards, never against each other. The article seems to think this doesn't work because you can't give a large bonus to everyone, but that smells like BS to me. If everyone is legitimately doing an outstanding job then the company as a whole should be doing outstandingly well, which means you should have plenty of money to pay everyone a large bonus. (Unless the metrics you're using are bunkum, in which case there's your problem.) The key is to make it absolutely without individual benefit to sabotage one's coworkers while still creating the incentive to excel personally.
Along similar lines, if you want to deal with the quarterly results bias, average it out. Publish numbers quarterly (or even more often than that) but set compensation based on an employee's five year average, not what they did just now. If you do poorly this quarter then you don't lose $1000 from your bonus this quarter, instead you lose $50/quarter for the next five years. At the same time, you still get a ~$1000 bonus this quarter, and you still want that number to go up next quarter, so you're keeping an eye on that average -- just not doing it this quarter at the expense of next quarter, because the psychological instant gratification of doing that goes away.
> It seems to me the solution is to rate people against absolute standards, never against each other.
The problem is that some desirable activities and behaviours aren't objectively measurable, but proposing any given measurement and then tying it to reward and punishment will change activities and behaviours.
In fields where you can have "total supervision" of a task, it can be made to work. If your metric is "widgets screwed together that pass QC", that's easily measured and paid.
If your goals are stuff like "elegant, modifiable software" or "communicates well with colleagues" then these can't be measured objectively. You have to pick proxies (cyclomatic complexity, number of emails sent) as your measurement. But then all that happens is that the proxies are optimised for. People will write peculiar software and treat email like twitter.
The book to read is Measuring and Managing Performance in Organizations by Robert D. Austin. His 3-party model of performance tracking neatly demonstrates why, under most conditions, an "objective" system is impossible.
> "The article seems to think this doesn't work because you can't give a large bonus to everyone"
Indeed. Why can't you simply measure people against a consistent, externally-defined bar, and reward them based on their share of their performance group?
e.g., Employees who hit the bar are in group C, employees who exceed it are in group B, employees who are extraordinary are in group A. Each group has a portion of the bonus pool, and each member of a group gets the same as every other member of their group.
You can still get rewarded for better work, but now you're no longer working against an arbitrary bar defined by your peers. If you, hypothetically, have a team full of rockstars then everyone shares the bonus pool equally. Done.
Also, what's up with tying raises (not bonuses) to performance rankings? At the end of the day people will leave if they can get paid more elsewhere. The best/only way to ensure your employees don't leave is to keep paying them at or near what they can get on the open market today. That guy may be the weakest engineer on your team, but he's still a good engineer and can do a lot better than the shitty 2% raise you've stuck him with.
I agree. Having worked in the military, where there were no bonuses whatsoever, and salaries were based on a standard scale, I found that what made the good employees good was that they were proud of / enjoyed their work, and not money (a different problem was that people could not be easily fired (to say the least), which did lead to some slacking). I personally believe that people whose main motivation is the bonus are not the employees one should look for.
I think this only works in a situation like the military, where the "industry standard" as it were, states there are no bonuses. The introduction of bonuses are a perk, but in our culture of software development its also par the course at most places. From the company perspective, this can be seen as a somewhat salary cap. Instead of requiring I pay all workers x + 5%, I can get them to gladiator it out for that bit of money I don't really want to pay them. I can also correlate this to our US tip culture where its expected to pay people abysmal hourly rates and let the stack ranking of good tippers make up the difference.
I do think the military system would be preferable but it requires a huge industry shift and divorcing the idea that x gets a bonus so company y is more attractive, which seems near impossible. I'm also for abolishing our tip culture to replace it with Euro's but there would be some in that culture that make good money and would balk because their employer would never make up the difference in a million years. Its definitely hard not to see either as a form of extortion but some play the game really well in spite of it all. You can still enjoy the work you do and play the game though, but it just becomes that much more difficult due to outside pressure.
"The American Dream" is meritocracy, and meritocracy is basically a lie, any which way you slice it. Measures don't discover merit, merit doesn't correlate to rising,and rising is only available to the few.
Equally shared bonus pools were fairly common in top-tier professional services firms until the late 1990s, and even when they changed, most kept fairly equal distributions of profits between partners and to associates.
However, almost all of those firms used a stack ranking system that was even more aggressive - those at the top got promoted, those in the middle got worked out over time, and those at the bottom got fired.
Shared bonus pools work when a company has an aggressive performance management culture, but this doesn't become visible as long as the company is doing well.
When things are good, everyone is getting an extra lump of cash, even if it has nothing to do with their individual performance. But when the market changes, top performers flee because they realize they can make a lot more money someplace else, and that they'll never hit their goals until the company gets rid of the stragglers at the bottom and stops settling for mediocrity among everyone else.
I did experience revulsion, but I think that you're right, it's an important concept to think about. I perused the link you provided, and here are some random thoughts:
- The article lists as a deadly sin: "Evaluation by performance, merit rating, or annual review of performance"
But then the question remains: how do you make sure your best employees don't get poached by other companies who are willing to acknowledge the fact that they are superior, and pay them accordingly?
- Another point listed as a deadly sin: "Mobility of management"
I can agree with that, only if we also agree on the fact that management is just an administrative position, like at Fog's Creek or Jane Street. In other words, salaries and positions in the hierarchy are decoupled. If not, then the system you mention doesn't solve the problem of: "how are we going to promote people?"
I admit that I didn't read the entire Deming article, so please correct me if I'm missing something.
It's more about producing a quality culture in order to produce a quality product. You can still recognize people for performance, but not by an unverifiable and arbitrary rating scale. You can still promote people, but do it in the open by agreed upon skills, merits, and experience. Your goal shouldn't be to demotivate people by negating all forms of reward, but to motivate them by rewarding in the clear based on agreeable reasoning.
The key is in the culture: enable people to take pride in their work. It turns out from 10,000 feet, what most people want isn't, in fact, simple monetary recognition, that this is a by-product of the dysfunctional reward-seeking individualistic culture, looking for any way to find self-worth and recognition in a system devoid of true value. Any port in a storm.
What people really want is autonomy, mastery, and purpose from their work, and a culture that enables them to love what they do while being fairly compensated and challenged. Deming's ideas are meant to enable this type of business, and entirely remove the type of childish game playing over simplistic rewards you're talking about.
You go from a simplistic carrot-and-stick reward-seeking and punishment-avoiding mentality (and all the complex structures of negative reinforcement and behavior avoidance built around it) to a functional culture, devoid of fear, enabling people to do work that they can feel proud of.
If you have people who really are superior, they'll want to be challenged, to work with other great people, and to be fairly compensated. If you have sub-par people, work on raising them to another level: Point 13, "Institute a vigorous program of education and self-improvement."
Furthermore, your top performers are your outliers: the tiny sliver on the end of your bell curve. You need to start by realizing that statistically, improving your entire culture is going to improve your company more than desperately keeping hold of your top 2 rockstars using methods that are demotivating everybody else. It turns out, the things you do to improve your systems and culture are the same things that top performers want. They'll leave if they're not feeling fulfilled—if bonuses and money is all they want, screw 'em, they're culture thieves anyway. But what they probably really want is work that is real.
Easier said than done, but Deming gives an excellent prescription for how to do it, and it's fully backed up.
The key is to realize that you cannot do these things in isolation. That was his last point: "Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job." You can't just remove part of your existing system because of one suggestion: you need to replace it with another, better one.
>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 employees, you're doing something wrong. The incentive in that case is for each individual to do as little as possible because why exert yourself if you're just going to get as much as the next guy anyway, and the result is everyone loses. This is a classic "tragedy of the commons" scenario, where the incentive is to be a cheater.
So the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one. That's what you need to do, and that's how you properly set up the incentives. The problem is that in a company of thousands of employees, creating a ranking system that works perfectly is pretty darn hard, especially since metrics are usually ambiguous and subjective. So you're not going to get it right 100% of the time.
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 a demotivated base (people not being motivated by either end of the bell curve). Your measurements become focus targets (as with standardized testing in schools) instead of your actual product. You lose cohesion, destroy culture, create a network of jealousy, secrecy, and fear. You lose employee loyalty, cause resentment, and lose productivity and effectiveness. Quality is adversely affected.
You're not going to get it right 100% of the time because you're not going to get it right ever. You're generating a dysfunctional culture, only held in place despite itself.
The answer is to remove it all; enable true pride in work, fair compensation, leadership, continual improvement, education and self-improvement. This works better. Not just in theory, but in practice. When you remove all the unpredictable negative consequences of the carrot-and-stick system, you enable an order of magnitude better company.
Read it again, try to understand it better. There's a disconnect, and you're the perfect example of what's fighting this exponential improvement.
I wonder if the individual reward versus collective reward approaches have any actual data for their respective sides?
I am pretty sure Toyota gives collective bonuses or not, and they are kicking the shit out of American auto, but I don't really have the background in this to cite data on either side. Maybe someone on HN does?
> Why not give everyone the same bonus based on company performance? Make it collective good.
I don't know whether this is common in other industries, but at top American law firms, salary raises and bonuses are lockstep. That means everyone gets paid based strictly on seniority. At many firms, this even carries through the partnership ranks.
There are benefits and disadvantages to such a system. The benefit is that it reduces competition between workers, and reduces unproductive credit-seeking. When you rank people against each other, the focus ultimately shifts to optimizing to the ranking metric, which is inevitably different than actually optimizing job performance. Such systems favor people who are good at taking credit, not people who get the best results. Lockstep systems also increase cooperation: nobody avoids helping someone else or avoids working on a stronger team for fear of the zero-sum nature of rankings.
The downside is that strict lockstep systems keep you from giving superstars extra compensation. This can be a liability if you don't have a uniformly high quality of employee, because superstars will leave for companies that offer individualized compensation. That being said, the advantages of individualized compensation decrease as it becomes more difficult to achieve true measures of individual performance. Nobody complains about individualized performance ratings on Wall Street, because it's easy to compute how much money a trader made for the firm or the value of the deals an investment banker worked on. The relevant metrics are objective and hard to game. It's much more difficult to evaluate a programmer's contribution to a development team.
The most troubling thing to me about stack ranking is not ranking per se, but the fact that stack ranking is applied by HR departments. This issue has come up before in the context of hiring, and what I said then is the same thing I'll say here: HR should not be involved in hiring, or firing! It's perfectly okay to identify weak performers and fire them, but it should be an organic process that happens based on the decisions of technical leadership. HR folks are administrative people. They're there to fill out W-2 forms and keep you from getting sued by disgruntled employees. They do not have domain expertise and do not know what makes for an effective technical employee.
This is an area where tech companies need to take a page from Wall Street rather than traditional Big Corps. At an investment bank, a banker decides who to hire and who to fire, not some HR person who has no understanding of banking. To make this system tractable, firing decisions are made at a low level, early and often. That prevents getting into a situation where the organization builds up a glut of weak performers that need to be fired in some comprehensive and systematic culling.
I don't think you want to be replicating the management practices of major law firms, which are generously considered awful places to work. Lockstep bonuses only apply to associates, and are usually a function of the senior attorneys' inability to provide meaningful feedback and performance management, not a desire to reduce competition.
Competition at law firms is fierce. They are rife with unproductive credit seeking, because the real incentive isn't a bonus, it's promotion to equity partner, and there are only a small number of spots open at the top.
But you nail the real issue with stacked ranking: HR departments should help design and manage a performance management system, but the feedback and decisions need to be handled by managers who know the business and have direct involvement in their employees' work. I think you're over-estimating how effective this is at investment banks, where you tend to have transparent performance metrics, but awful managers. But there a lot of major companies tend to get it right.
>I don't know whether this is common in other industries, but at top American law firms, salary raises and bonuses are lockstep. That means everyone gets paid based strictly on seniority. At many firms, this even carries through the partnership ranks.
This is really only true for the associates any more, and it's a source of a lot of frustration. Mostly, I hear complaints about how either senior associates or junior partners are "carrying" the senior partners in some cases because their billing rate and total hours billed is grossly disproportionate to their income. Also, while salary might be locked based on which year an associate is in, there are all kinds of games played with which year associates get slotted into, especially if they move laterally between firms.
I don't agree that lock-step systems increase cooperation; if anything, they turn competition into a winner-takes-all game because they're generally associated with a strong "up-or-out" culture where you either get promoted or culled over time. That's not likely to encourage cooperation between peers.
> Why not give everyone the same bonus based on company performance? Make it collective good.
I wholeheartedly agree. Apart from niche examples, like measuring sale people on sales, there is no good reliable way to measure employees based on performance/outputs. IO Psychologists have been looking at this for years and even mathematicians (like Leonard Mlodinow in The Drunkard's Walk) agree.
And measuring salespeople on sales has demonstrable negative effects as well, such as the popular "salesman will promise the world in order to make a commission, leaving the developers to hold the bag" trope.
To expand on this: John Lewis is a chain of department stores and supermarkets (Waitrose), which is owned by its employees. Each year, a sizable fraction of its profits go to a bonus distributed in proportion to salary (17% on top of each salary last year, according to Wikipedia).
The evil, destructive, part of stack ranking is when you need to apply the 20%/70%/10% breakdowns to all teams equally, meaning that even a team of 5 people needs to have one and only one "exceeds expectation" person and one person who "needs improvement", regardless of overall team level. It's not clear from this writeup that Amazon and Facebook are applying curves at such a micro level.
Completely agree, and I didn't know this practice had spread so widely. While doing the HR-sanctioned stack ranking requires X > MIN_POP_SIZE, in practice each line manager (i.e. lead) provides a pre-sorted list up the chain for merge-sorting. That way the line managers minimize the number of arguments during the official org-wide stack ranking. Many managers have gotten good at balancing their teams with high and low performers so they come "pre-sorted" as the lingo goes. If you don't believe me, ask about "pre-sorting." The fact your manager recognizes the term should be telling... Remember, managers get graded on how well they appear to their peers in stack ranking. It's ok as a manager to have low performers so long as you are "managing them." Managers have a disincentive to overrepresent their team to their peers, and managers are perfectly fine pre-sorting their lists. Again, it's easier and better for them to do so.
The unofficial pre-sorting when X < MIN_POP_SIZE is what most individual workers notice (managers play favorites, careers are differential functions anyway), and HR has prepared the logical response (MIN_POP_SIZE is larger than your team) for managers to say when an employee asks.
It's clear that the primary effect of stack ranking is to induce churn in the org at the expense of loyalty and morale. The people making the decisions are smart, so I presume the effect is part of the strategy. My theory? Software development isn't as skilled as we like to think it is, and it's often cheaper to hire a young kid and pay a "high" entry-level salary with vested bonuses than invest in long-term employees. Think about all the unvested money that the company saves by pushing employees out before 4 and 5 year maturity cycles. Plus, actual senior engineers (not the title!) tend to say "no" more often to clueless middle management and create unnecessary headaches.
I think you're exactly right. The vast majority of enterprise software development is commodity work that can be done acceptably well by junior staff. The senior folks and leaders will bitch about it, but not to the point of getting themselves fired for insubordination.
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.
I think opponents of stack ranking generally overlook this fact. Yes, it's terrible if you have a 5 person team, but the data becomes more normal as you add more people.
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.
My understanding of my group (which may not apply to all parts of Microsoft, of course) is that our 6-person groups are too small to stack rank, so stack ranking rolls up to the next level. So Microsoft doesn't apply stack ranking at such a micro level either.
My understanding is that they don't /officially/ apply them at such a micro level, but it requires an unusually persuasive manager for the "low ranks" not to be shared around evenly between the people having to rank their workers.
I've wondered if recursively propagating down "bonus points" would be a fair way of solving this.
For example, Acme, Inc ranks on a 1-5 scale, and all things being equal, a manager will get (direct reports)x3 points to allocate for his performance reviews.
But Acme has a good quarter due to a strong engineering effort, so the CEO decides that Bob, VP of Eng, gets a 4, and he gets to allocate (direct reports)x4 points among his directors, who each get to allocate (their score)x(their direct reports), and so on.
I think there needs to be some adjustment to the equations, because it doesn't make sense that everyone under a superstar also should be rated a 5. But I like the general idea of having groups be accountable as a group, and having that propagate downwards into the organization.
I always wanted to experiment with a system where all employees have a currency that they can pay other developers who help them or that they think are doing really well. As well as the credits that all employees have, there are also large numbers of credits distributed to the product owners of products in proportion to how much money they make. Come bonus time, the bonuses are paid in proportion to how many credits you have received from others.
I wonder if you could fix that by exempting employees from individual ranking if they work in groups smaller than n, and then rank those groups as if they were individual contributors. That way, a mid-level manager with five groups of five people would have to cut the least promising group loose.
... Nah, still sounds like a stupid idea. Any ranking system where an individual's outcome depends on their number of colleagues is bafflingly broken. This process can't build a cathedral or a bazaar, just a bureaucracy.
> Any ranking system where an individual's outcome depends on their number of colleagues is bafflingly broken.
From the perspective of the company, it's not as clear how this approach is broken. Assumably promotions, hirings, and firings should be based on the current needs of the company, not what's fair to the employees or some ideological vision. I'm pretty sure attempting to apply any one method for evaluating so many different employees in so many different roles will fail in some manner.
I think the following anecdote may illustrate the silliness of the ranking systems:
My wife works in a big manufacturing company (which is just slightly related to IT). She started to work in a just-opened position for some department. As the position is new, they are not sure about her obligations.
After one year, she had a end-of-year review, where her immediate boss rates her performance. Because she completed everything she was asked to (which was not a lot... given that they still are defining the role), her boss gave mainly 9s or 10s (out of 10) for her rating.
Well... apparently, nobody in that company is supposed to get 9s or 10s, as that would mean that their work is perfect, and their motto is that everyone can improve. So my wife's boss was scolded by her boss, and had to decrease my wife's ratings.
The worst thing is that my wife is the only person in her actual position, so she is not competing against anyone.
When I bought a car recently, the sales person said the company would send me a survey about his service. On a scale of 1 to 10, he claimed (and I did believe him) that the company treats a 10 as a 10 and a 1-9 as a 0 when determining employee bonuses.
In fact, with Amazon it seems they are not, that's probably what Molly Graham meant when she wrote:
> Facebook has seven performance assessments as well as a guideline for what % of employees should be at each level, however it is explicitly not a forced curve, particularly for small teams.
I think the author completely missed the point of the original criticism they were responding to -- the criticism was very specifically about the specifically required distributions in each category, within each team.
The author of OP, on the other hand, seems to just be making the case that there are reasons to rate some people high and others low, and all the tech giants do it! That's the proverbial straw man.
The even more evil part is where the stack ranking figures are adjusted to suit hr's desired outcome with no direct link between an individuals performance and your final score.
too true. i'm being forced to do this to my team at another very large tech company. the large data-set curve approach is completely toxic in small teams that are destroying themselves to meet crazy goals.
Isn't there a fundamental difference between the FB rule of restricting the top rating to just 2% of employees and the Microsoft rule of decreeing that there must be a bottom 10% of "poor quality , less talented, undesirable elements" in the workforce.
The FB system doesn't make the non 2% feel rejected and unhappy - it just makes it very hard to be crowned the superstar which I think most people find perfectly acceptable.
To address the relatively longer period of MS employee retention, Microsoft employees (esp the technical ones) in general work on a set of technologies (C#, NT Kernel, SharePoint,...) for which MS is the place to be. They build up expertise and then if they have to leave to join a comparable company, they need to rebuild in a different set of technologies most likely open source stuff of which there is very little in Microsoft.
Now if you are a Linux kernel hacker / Python guru/... at Google/Amazon the world is your oyster - everything you are good at transfers readily to companies/roles of similar stature outside.
Its almost like Microsoft technologies are a moat around its castle that keeps talent from leaving.
full disclosure I worked at Microsoft for about 7 years before leaving.
There are lots of companies that love hiring former Microsoft employees because they use the same stacks. Its only when moving to a new tech like google or some startups that there would be a problem, but then again google and facebook opened offices in Kirkland/Bellevue for some reason....the moat ain't that deep.
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 manager. Actually being forced to think critically about which of your employees are the top performance, and which aren't (and it's a mathematical fact that they're not going to be the same) is a useful tool to keep such a manager on his toes.
Another effect is simply to encourage a certain rate of churn in all teams, to get some fresh blood flowing through the system.
Stack-ranking directly forces the manager to use his human capacity for critical thinking to evaluate his employees, and in such is a useful distraction from that even more disastrous evaluation method: Objective metrics (hours worked, lines of code committed, bugs closed, sales numbers etc).
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.
I think managers are inherently in a bad place to review the performance of individuals in the team below them. They're primarily affected by the mean performance of the team, so if one guy is slacking off and the rest of the team needs to pick up the slack, the manager might not notice. I think peer reviews will be more honest. If a peer is doing next to nothing, or providing little to the team while everyone else is working like crazy, you're in a much better position to see that.
I think it is a lot more complicated that just that. The root cause here is there is no easy way to quantify one's contribution to the company (or even a team) in software development. Some other professions are easier to evaluate, e.g. stock traders have their own P/L, lawyers/doctors have their own customer billings, etc. Note that I said "easier", but not necessarily bullet proof, because it still encourages people to optimize for short term goals.
Standard Big 4 Consulting implementation. It provides value for a few years until employee realize that it's a lot easier to:
1. Get a job elsewhere
2. Hide in mediocrity because the effort to achieve a high ranking is greater than the reward by a lot.
In my personal experience with force ranking systems, is that it also drives politics within the organization. As an example:
I once was skipped a promotion because when we went to demo a unit the shipping department did a poor job packing the prototype equipment that I had just spent an entire summer building. Due to the packing job, a single RS-232 pin because slightly unseated causing intermittent behaviors for one of many features. It was still the most successful demo the company had ever given. So success we received a request for pricing the Military 24 hours later, which is unheard of. Despite this the Chief Engineer blasted me for the failure, and our inability to find the issue on site (mind you he was there too). When I brought this up at my review I was indirectly told by my boss that he didn't agree with my rating/rank but it was over his head. After that, I practiced both Items 1 & 2 but discovered that my new company also followed this practice. So it was a rinse and repeat to make sure force ranking is not within my new companies.
You need a documented system. If you don't have a documented system then there will be an undocumented system which is the same problem with less documentation.
How about approaching managers in the same way we always like companies to approach developers, i.e., hire good ones and empower them do their job in the best way they know how?
Using a system that is enforced from the top down is a perfect way to guarantee you'll only get the kind of below mediocre managers we love to bitch about.
All of these systems are based on the assumption that companies can't trust the people they hire to delegate responsibility to. They're basically methods of maintaining a toxic environment instead of dealing with the root causes.
And it's a self-fulfilling prophecy, because it attracts the wrong people. What good manager you ever worked for would want to function in that kind of a system?
Managers have a bias to like and want to keep "their" employees, because they know them, because they are friends with them.
Even if Steve is objectively a poor performer, you know him; you met his wife; you saw pictures of his kids. He's a nice guy.
If you fire him, you either don't get a replacement (bad) or you have to interview 20 people to find a replacement (also bad). It's hard to hire - what if you choose poorly the first time and have to do it yet again? Easier to keep Steve.
Corporate problem: figure out a way to get rid of some of the Steves without making life too difficult for everyone else. Go!
You need something more quantifiable than that when you're running a giant organization... Your approach would absolutely work in a startup of 20 people or less, but try that in the 10,000+ man Operating Systems Division at Microsoft and you'll run into some crazy logistics problems.
Productivity lost to that can't possibly be worse then the culture of backstabbing that stackrank promotes.
For another point, the article seems to be making a heavy statistical error in assuming that Google's average developer lifespan is 1 year. Taking the average lifespan biases the result heavily towards new hires (Of which there are a lot of).
A more relevant metric would be average time between an engineer joining, and leaving.
[A peer review-driven process.
Productivity lost to that can't possibly be worse then the culture of backstabbing that stackrank promotes.]
Every methodology has draw backs. Peer Review-driven system result in patting each others back always rather than providing honest feedbacks. I have seen places where no one questions a decision to not hurt a peer (Because thats gonna hurt them in review).
Doesn't seem like an important error to me. His point is that most Google employees haven't spent long enough there to be affected by multiple rounds of stack ranking/attempts to get promoted, and there being a hell of a lot of new hires is exactly why that's true.
That's equivalent to socialism. :) If the compensation received is proportional to the credits, then there is just one optimal strategy for distributing the credits.
You need a documented system. If you don't have a documented system then there will be an undocumented system which is the same problem with less documentation.
So don't complain when your kid gets expelled from the second grade for pointing his finger like a gun and saying "Bang."
Less documentation isn't always a bad thing. If you can't appeal to a written authority, you have to rely on your own judgment in the face of ambiguity.
A hierarchal system of good management. Hiring processes that don't suck.
Instead of a complex recruiting maze where you need to have 13 people review new hires (and strive for the lowest common denominator between the group), they need more freedom to hire good people. People will and do game the system anyway. To counter that, managers need authority to terminate bad apples on a whim.
If these large corporations managed themselves like a collection of startups, we might see more innovation and less turnover.
Eh. I'm in Facebook bootcamp now. Between this article about the ranking system, a truly uninspiring (to me --- YMMV) choice of teams to work on, and the press Facebook has been getting lately, I'm seriously considering parting ways and going somewhere else. Nobody can beat Facebook's pay or food, but what good is it if I feel like I lack direction and purpose? How much would it damage my career to say I tried FB bootcamp and didn't feel it was a match?
I can't speak for anyone else, but it depends a bit on what you do next. One or two solid jobs down the road, I doubt anyone will really care, but if you do it enough that it looks like you have made a habit of joining up and then not giving it a fair chance based on gossip from outside the company, then yes, that will count against you.
Hey, since I can't find your name or contact info on your account I figured I'd comment saying that I run Bootcamp and it sounds like we should chat (dr@fb.com) :)
As a complement to dr's offer above, if you want to talk to someone who has been at FB for a while and worked with a bunch of infrastructure (traffic, core systems, &c.) and product (graph search, site integrity, &c.) teams, hit me up. My unixname is neil (and my non-work contact details are in the HN profile).
I'd like to help you and dr find you a good match - FB has been a great opportunity for me, but I stumbled a bit so I know how important finding the right thing to work on is. I can also offer you my frank impression of the performance review system here, which I've been through a few times as an IC and as a manager.
It seems to me that stack ranking can only work for companies that are so attractive for new talent that any new hires are likely to be more valuable than the lowest-ranked current employees. Once a company is no longer so attractive, as seems to be the case with Microsoft today, you're actually pushing out better talent in exchange for worse.
Eh? Do you really think their pool of applicants is worsening quickly enough that a bottom-10% performer is better than the median new applicant? They still have bags of money to pay people, you know.
Readit News
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 worse consequences.
The right way is to align the company goal with the individual goal, and do it simply and clearly.
American companies need to understand and follow Deming's principles (http://en.wikipedia.org/wiki/W._Edwards_Deming#Key_principle...), or we'll continue falling into the soul-sucking black hole we're already halfway into. He already knew all of this, every bit of what we're experiencing, and our objection to his ideas is nothing more than an ideological almost religious belief that the most effective way to motivate individuals is to rank, rate, measure, and reward them accordingly. In fact, those archaic methods of management only serve to demotivate and systemically destroy culture and productivity alike, and reduces the quality of whatever you produce, be it innovation or physical products.
We know this. Deming's ideas work. They are truth in writing, and knowledge in practice. He pulled Japan out of a post-war recession and made them legends of quality production for pete's sake. Why can't we learn?
To toss out an assumption as fundamental as these would require a huge realignment of all sorts of things -- how we punish and reward, our sense of self worth, who is good and who is bad, etc. So we don't really want to go there.
I think the West could benefit from a swing to the Systems/ Wholeness side of the dichotomy, but I wouldn't want to discount how powerful and what a creative force our individualism has been throughout the last 2000 years.
(EDIT, PS: Deming is the real deal, and the Toyota Way/ Lean books and movement tries to take some of his surface ideas and implement them without challenging their readers in the way Deming wanted to.)
(EDIT, PPS: Toyota / Buddha says "You see a problem? Change the system." Microsoft/ Jesus says "You see a problem? Roast the culpable individuals, reward the virtuous individuals.")
(EDIT, PPPS: Hegel and his philosophical descendants have the best take on the dynamic movement between individual and collective, without discounting either of the two viewpoints.)
A few jobs back, I worked with a person that was incredibly brilliant, and a very prolific developer. Unfortunately he made everyone around him miserable in countless ways (definitely a prima donna). He would rewrite large sections of code and change core user functionality without asking product managers or other developers. When confronted, he refused to revert his changes because he had done it right and "everyone would see once it was released".
His abilities and contributions would likely put him at the top of a stack rank, but overall he may have hurt the company more than he contributed.
The effect is exactly the opposite of what the words promise." W. Edward Deming - see: http://blog.deming.org/2013/02/the-idea-of-performance-ratin...
I'd say Christianity goes along with the original poster's idea of everyone getting the same reward - ie grace - nothing you do can merit it - it's a gift.
The parable of the vineyard workers explains it - it doesn't matter how late in the day the workers start working - they all get the same reward.
I've noticed that companies tend to fall into two philosophical camps, both of which can be successful if executed right. One camp says that you should create a great process so that you can stick anyone in it and they can be successful. Another camp says you should get great people and the process will work itself out. I'm illustrating the extremes to clarify the picture: even process-driven firms need good people, and people-driven firms need good processes.
I'm not sure there's actually a "right" answer to the question, so much as you need to make sure you execute in the right way against the strategy you've chosen, although I do think that certain industries and firm sizes tend to advantage one over the other.
I disagree that we don't want to go there. One of these seems to produce better results, companies, and societies, while the other produces effectively dysfunctional ones, like the example we just read.
I seek realignment. This can be improved.
Because like all collective goods you suffer from the tragedy of the commons. If you work for a large company your individual contribution is so small it has a negligible effect on your bonus. Unless you're interested in moving up the management ladder the smart thing to do is just work hard enough to avoid getting fired. Of course not everyone will adopt this attitude, but enough will to affect the overall performance of the company.
Also your top performers will leave. People who are passionate about their jobs and put in long hours expect to be rewarded for their efforts. If you give them the same bonus as the guy in the next cubicle who's out the door at 5:00 PM sharp they're not going to like it very much.
My company used to have two bonuses - one based on individual performance and one based on company performance. A few years back the individual performance bonus went away and the results have been disastrous. Once you get a significant percentage of people slacking off the entire character of the office changes.
Your last line is crucial and one my experience can echo. If you strip away incentives, ones that attracted people to your place to begin with, you can expect turnover. You might as well be walking then to the door. You can fool new hires to a degree until they hear that there were performance bonuses at one point and then the same resentment starts to grow inside them too. You're only real recourse is to have every one of the "old guard" leave so you can continue your downward spiral into cheapness.
It seems to me the solution is to rate people against absolute standards, never against each other. The article seems to think this doesn't work because you can't give a large bonus to everyone, but that smells like BS to me. If everyone is legitimately doing an outstanding job then the company as a whole should be doing outstandingly well, which means you should have plenty of money to pay everyone a large bonus. (Unless the metrics you're using are bunkum, in which case there's your problem.) The key is to make it absolutely without individual benefit to sabotage one's coworkers while still creating the incentive to excel personally.
Along similar lines, if you want to deal with the quarterly results bias, average it out. Publish numbers quarterly (or even more often than that) but set compensation based on an employee's five year average, not what they did just now. If you do poorly this quarter then you don't lose $1000 from your bonus this quarter, instead you lose $50/quarter for the next five years. At the same time, you still get a ~$1000 bonus this quarter, and you still want that number to go up next quarter, so you're keeping an eye on that average -- just not doing it this quarter at the expense of next quarter, because the psychological instant gratification of doing that goes away.
The problem is that some desirable activities and behaviours aren't objectively measurable, but proposing any given measurement and then tying it to reward and punishment will change activities and behaviours.
In fields where you can have "total supervision" of a task, it can be made to work. If your metric is "widgets screwed together that pass QC", that's easily measured and paid.
If your goals are stuff like "elegant, modifiable software" or "communicates well with colleagues" then these can't be measured objectively. You have to pick proxies (cyclomatic complexity, number of emails sent) as your measurement. But then all that happens is that the proxies are optimised for. People will write peculiar software and treat email like twitter.
The book to read is Measuring and Managing Performance in Organizations by Robert D. Austin. His 3-party model of performance tracking neatly demonstrates why, under most conditions, an "objective" system is impossible.
Not hard. Impossible.
Indeed. Why can't you simply measure people against a consistent, externally-defined bar, and reward them based on their share of their performance group?
e.g., Employees who hit the bar are in group C, employees who exceed it are in group B, employees who are extraordinary are in group A. Each group has a portion of the bonus pool, and each member of a group gets the same as every other member of their group.
You can still get rewarded for better work, but now you're no longer working against an arbitrary bar defined by your peers. If you, hypothetically, have a team full of rockstars then everyone shares the bonus pool equally. Done.
Also, what's up with tying raises (not bonuses) to performance rankings? At the end of the day people will leave if they can get paid more elsewhere. The best/only way to ensure your employees don't leave is to keep paying them at or near what they can get on the open market today. That guy may be the weakest engineer on your team, but he's still a good engineer and can do a lot better than the shitty 2% raise you've stuck him with.
I do think the military system would be preferable but it requires a huge industry shift and divorcing the idea that x gets a bonus so company y is more attractive, which seems near impossible. I'm also for abolishing our tip culture to replace it with Euro's but there would be some in that culture that make good money and would balk because their employer would never make up the difference in a million years. Its definitely hard not to see either as a form of extortion but some play the game really well in spite of it all. You can still enjoy the work you do and play the game though, but it just becomes that much more difficult due to outside pressure.
However, almost all of those firms used a stack ranking system that was even more aggressive - those at the top got promoted, those in the middle got worked out over time, and those at the bottom got fired.
Shared bonus pools work when a company has an aggressive performance management culture, but this doesn't become visible as long as the company is doing well. When things are good, everyone is getting an extra lump of cash, even if it has nothing to do with their individual performance. But when the market changes, top performers flee because they realize they can make a lot more money someplace else, and that they'll never hit their goals until the company gets rid of the stragglers at the bottom and stops settling for mediocrity among everyone else.
- The article lists as a deadly sin: "Evaluation by performance, merit rating, or annual review of performance"
But then the question remains: how do you make sure your best employees don't get poached by other companies who are willing to acknowledge the fact that they are superior, and pay them accordingly?
- Another point listed as a deadly sin: "Mobility of management"
I can agree with that, only if we also agree on the fact that management is just an administrative position, like at Fog's Creek or Jane Street. In other words, salaries and positions in the hierarchy are decoupled. If not, then the system you mention doesn't solve the problem of: "how are we going to promote people?"
I admit that I didn't read the entire Deming article, so please correct me if I'm missing something.
The key is in the culture: enable people to take pride in their work. It turns out from 10,000 feet, what most people want isn't, in fact, simple monetary recognition, that this is a by-product of the dysfunctional reward-seeking individualistic culture, looking for any way to find self-worth and recognition in a system devoid of true value. Any port in a storm.
What people really want is autonomy, mastery, and purpose from their work, and a culture that enables them to love what they do while being fairly compensated and challenged. Deming's ideas are meant to enable this type of business, and entirely remove the type of childish game playing over simplistic rewards you're talking about.
You go from a simplistic carrot-and-stick reward-seeking and punishment-avoiding mentality (and all the complex structures of negative reinforcement and behavior avoidance built around it) to a functional culture, devoid of fear, enabling people to do work that they can feel proud of.
If you have people who really are superior, they'll want to be challenged, to work with other great people, and to be fairly compensated. If you have sub-par people, work on raising them to another level: Point 13, "Institute a vigorous program of education and self-improvement."
Furthermore, your top performers are your outliers: the tiny sliver on the end of your bell curve. You need to start by realizing that statistically, improving your entire culture is going to improve your company more than desperately keeping hold of your top 2 rockstars using methods that are demotivating everybody else. It turns out, the things you do to improve your systems and culture are the same things that top performers want. They'll leave if they're not feeling fulfilled—if bonuses and money is all they want, screw 'em, they're culture thieves anyway. But what they probably really want is work that is real.
Easier said than done, but Deming gives an excellent prescription for how to do it, and it's fully backed up.
The key is to realize that you cannot do these things in isolation. That was his last point: "Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job." You can't just remove part of your existing system because of one suggestion: you need to replace it with another, better one.
PS: Here's another writeup I did on this subject recently, delving into much more detail: https://news.ycombinator.com/item?id=6704645
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 employees, you're doing something wrong. The incentive in that case is for each individual to do as little as possible because why exert yourself if you're just going to get as much as the next guy anyway, and the result is everyone loses. This is a classic "tragedy of the commons" scenario, where the incentive is to be a cheater.
So the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one. That's what you need to do, and that's how you properly set up the incentives. The problem is that in a company of thousands of employees, creating a ranking system that works perfectly is pretty darn hard, especially since metrics are usually ambiguous and subjective. So you're not going to get it right 100% of the time.
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 a demotivated base (people not being motivated by either end of the bell curve). Your measurements become focus targets (as with standardized testing in schools) instead of your actual product. You lose cohesion, destroy culture, create a network of jealousy, secrecy, and fear. You lose employee loyalty, cause resentment, and lose productivity and effectiveness. Quality is adversely affected.
You're not going to get it right 100% of the time because you're not going to get it right ever. You're generating a dysfunctional culture, only held in place despite itself.
The answer is to remove it all; enable true pride in work, fair compensation, leadership, continual improvement, education and self-improvement. This works better. Not just in theory, but in practice. When you remove all the unpredictable negative consequences of the carrot-and-stick system, you enable an order of magnitude better company.
Read it again, try to understand it better. There's a disconnect, and you're the perfect example of what's fighting this exponential improvement.
I am pretty sure Toyota gives collective bonuses or not, and they are kicking the shit out of American auto, but I don't really have the background in this to cite data on either side. Maybe someone on HN does?
I don't know whether this is common in other industries, but at top American law firms, salary raises and bonuses are lockstep. That means everyone gets paid based strictly on seniority. At many firms, this even carries through the partnership ranks.
There are benefits and disadvantages to such a system. The benefit is that it reduces competition between workers, and reduces unproductive credit-seeking. When you rank people against each other, the focus ultimately shifts to optimizing to the ranking metric, which is inevitably different than actually optimizing job performance. Such systems favor people who are good at taking credit, not people who get the best results. Lockstep systems also increase cooperation: nobody avoids helping someone else or avoids working on a stronger team for fear of the zero-sum nature of rankings.
The downside is that strict lockstep systems keep you from giving superstars extra compensation. This can be a liability if you don't have a uniformly high quality of employee, because superstars will leave for companies that offer individualized compensation. That being said, the advantages of individualized compensation decrease as it becomes more difficult to achieve true measures of individual performance. Nobody complains about individualized performance ratings on Wall Street, because it's easy to compute how much money a trader made for the firm or the value of the deals an investment banker worked on. The relevant metrics are objective and hard to game. It's much more difficult to evaluate a programmer's contribution to a development team.
The most troubling thing to me about stack ranking is not ranking per se, but the fact that stack ranking is applied by HR departments. This issue has come up before in the context of hiring, and what I said then is the same thing I'll say here: HR should not be involved in hiring, or firing! It's perfectly okay to identify weak performers and fire them, but it should be an organic process that happens based on the decisions of technical leadership. HR folks are administrative people. They're there to fill out W-2 forms and keep you from getting sued by disgruntled employees. They do not have domain expertise and do not know what makes for an effective technical employee.
This is an area where tech companies need to take a page from Wall Street rather than traditional Big Corps. At an investment bank, a banker decides who to hire and who to fire, not some HR person who has no understanding of banking. To make this system tractable, firing decisions are made at a low level, early and often. That prevents getting into a situation where the organization builds up a glut of weak performers that need to be fired in some comprehensive and systematic culling.
Competition at law firms is fierce. They are rife with unproductive credit seeking, because the real incentive isn't a bonus, it's promotion to equity partner, and there are only a small number of spots open at the top.
But you nail the real issue with stacked ranking: HR departments should help design and manage a performance management system, but the feedback and decisions need to be handled by managers who know the business and have direct involvement in their employees' work. I think you're over-estimating how effective this is at investment banks, where you tend to have transparent performance metrics, but awful managers. But there a lot of major companies tend to get it right.
This is really only true for the associates any more, and it's a source of a lot of frustration. Mostly, I hear complaints about how either senior associates or junior partners are "carrying" the senior partners in some cases because their billing rate and total hours billed is grossly disproportionate to their income. Also, while salary might be locked based on which year an associate is in, there are all kinds of games played with which year associates get slotted into, especially if they move laterally between firms.
I don't agree that lock-step systems increase cooperation; if anything, they turn competition into a winner-takes-all game because they're generally associated with a strong "up-or-out" culture where you either get promoted or culled over time. That's not likely to encourage cooperation between peers.
I wholeheartedly agree. Apart from niche examples, like measuring sale people on sales, there is no good reliable way to measure employees based on performance/outputs. IO Psychologists have been looking at this for years and even mathematicians (like Leonard Mlodinow in The Drunkard's Walk) agree.
The unofficial pre-sorting when X < MIN_POP_SIZE is what most individual workers notice (managers play favorites, careers are differential functions anyway), and HR has prepared the logical response (MIN_POP_SIZE is larger than your team) for managers to say when an employee asks.
It's clear that the primary effect of stack ranking is to induce churn in the org at the expense of loyalty and morale. The people making the decisions are smart, so I presume the effect is part of the strategy. My theory? Software development isn't as skilled as we like to think it is, and it's often cheaper to hire a young kid and pay a "high" entry-level salary with vested bonuses than invest in long-term employees. Think about all the unvested money that the company saves by pushing employees out before 4 and 5 year maturity cycles. Plus, actual senior engineers (not the title!) tend to say "no" more often to clueless middle management and create unnecessary headaches.
For example, Acme, Inc ranks on a 1-5 scale, and all things being equal, a manager will get (direct reports)x3 points to allocate for his performance reviews.
But Acme has a good quarter due to a strong engineering effort, so the CEO decides that Bob, VP of Eng, gets a 4, and he gets to allocate (direct reports)x4 points among his directors, who each get to allocate (their score)x(their direct reports), and so on.
I think there needs to be some adjustment to the equations, because it doesn't make sense that everyone under a superstar also should be rated a 5. But I like the general idea of having groups be accountable as a group, and having that propagate downwards into the organization.
... Nah, still sounds like a stupid idea. Any ranking system where an individual's outcome depends on their number of colleagues is bafflingly broken. This process can't build a cathedral or a bazaar, just a bureaucracy.
From the perspective of the company, it's not as clear how this approach is broken. Assumably promotions, hirings, and firings should be based on the current needs of the company, not what's fair to the employees or some ideological vision. I'm pretty sure attempting to apply any one method for evaluating so many different employees in so many different roles will fail in some manner.
My wife works in a big manufacturing company (which is just slightly related to IT). She started to work in a just-opened position for some department. As the position is new, they are not sure about her obligations.
After one year, she had a end-of-year review, where her immediate boss rates her performance. Because she completed everything she was asked to (which was not a lot... given that they still are defining the role), her boss gave mainly 9s or 10s (out of 10) for her rating.
Well... apparently, nobody in that company is supposed to get 9s or 10s, as that would mean that their work is perfect, and their motto is that everyone can improve. So my wife's boss was scolded by her boss, and had to decrease my wife's ratings.
The worst thing is that my wife is the only person in her actual position, so she is not competing against anyone.
...
> Facebook has seven performance assessments as well as a guideline for what % of employees should be at each level, however it is explicitly not a forced curve, particularly for small teams.
I think the author completely missed the point of the original criticism they were responding to -- the criticism was very specifically about the specifically required distributions in each category, within each team.
The author of OP, on the other hand, seems to just be making the case that there are reasons to rate some people high and others low, and all the tech giants do it! That's the proverbial straw man.
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The FB system doesn't make the non 2% feel rejected and unhappy - it just makes it very hard to be crowned the superstar which I think most people find perfectly acceptable.
To address the relatively longer period of MS employee retention, Microsoft employees (esp the technical ones) in general work on a set of technologies (C#, NT Kernel, SharePoint,...) for which MS is the place to be. They build up expertise and then if they have to leave to join a comparable company, they need to rebuild in a different set of technologies most likely open source stuff of which there is very little in Microsoft.
Now if you are a Linux kernel hacker / Python guru/... at Google/Amazon the world is your oyster - everything you are good at transfers readily to companies/roles of similar stature outside.
Its almost like Microsoft technologies are a moat around its castle that keeps talent from leaving.
full disclosure I worked at Microsoft for about 7 years before leaving.
This is not unique to MS and MS tech, sadly.
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 manager. Actually being forced to think critically about which of your employees are the top performance, and which aren't (and it's a mathematical fact that they're not going to be the same) is a useful tool to keep such a manager on his toes.
Another effect is simply to encourage a certain rate of churn in all teams, to get some fresh blood flowing through the system.
Stack-ranking directly forces the manager to use his human capacity for critical thinking to evaluate his employees, and in such is a useful distraction from that even more disastrous evaluation method: Objective metrics (hours worked, lines of code committed, bugs closed, sales numbers etc).
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.
Which is a flaw in the people responsible for those managers to train and to bring them along properly.
If we follow that chain to its conclusion...
1. Get a job elsewhere 2. Hide in mediocrity because the effort to achieve a high ranking is greater than the reward by a lot.
In my personal experience with force ranking systems, is that it also drives politics within the organization. As an example:
I once was skipped a promotion because when we went to demo a unit the shipping department did a poor job packing the prototype equipment that I had just spent an entire summer building. Due to the packing job, a single RS-232 pin because slightly unseated causing intermittent behaviors for one of many features. It was still the most successful demo the company had ever given. So success we received a request for pricing the Military 24 hours later, which is unheard of. Despite this the Chief Engineer blasted me for the failure, and our inability to find the issue on site (mind you he was there too). When I brought this up at my review I was indirectly told by my boss that he didn't agree with my rating/rank but it was over his head. After that, I practiced both Items 1 & 2 but discovered that my new company also followed this practice. So it was a rinse and repeat to make sure force ranking is not within my new companies.
You need a documented system. If you don't have a documented system then there will be an undocumented system which is the same problem with less documentation.
Using a system that is enforced from the top down is a perfect way to guarantee you'll only get the kind of below mediocre managers we love to bitch about.
All of these systems are based on the assumption that companies can't trust the people they hire to delegate responsibility to. They're basically methods of maintaining a toxic environment instead of dealing with the root causes.
And it's a self-fulfilling prophecy, because it attracts the wrong people. What good manager you ever worked for would want to function in that kind of a system?
Even if Steve is objectively a poor performer, you know him; you met his wife; you saw pictures of his kids. He's a nice guy.
If you fire him, you either don't get a replacement (bad) or you have to interview 20 people to find a replacement (also bad). It's hard to hire - what if you choose poorly the first time and have to do it yet again? Easier to keep Steve.
Corporate problem: figure out a way to get rid of some of the Steves without making life too difficult for everyone else. Go!
Productivity lost to that can't possibly be worse then the culture of backstabbing that stackrank promotes.
For another point, the article seems to be making a heavy statistical error in assuming that Google's average developer lifespan is 1 year. Taking the average lifespan biases the result heavily towards new hires (Of which there are a lot of).
A more relevant metric would be average time between an engineer joining, and leaving.
Every methodology has draw backs. Peer Review-driven system result in patting each others back always rather than providing honest feedbacks. I have seen places where no one questions a decision to not hurt a peer (Because thats gonna hurt them in review).
Each employee then has to distribute all of his 'credit' to other employees.
Each employee then gives away any credit received according to the same original distribution.
Each employee continues doing so until the credit received and distributed reaches an equilibrium.
Each employee is then ranked by the total amount of 'credit' they've accumulated.
Maybe we should call it 'PeopleRank' ;)
It's useful, but no replacement for performance reviews.
So don't complain when your kid gets expelled from the second grade for pointing his finger like a gun and saying "Bang."
Instead of a complex recruiting maze where you need to have 13 people review new hires (and strive for the lowest common denominator between the group), they need more freedom to hire good people. People will and do game the system anyway. To counter that, managers need authority to terminate bad apples on a whim.
If these large corporations managed themselves like a collection of startups, we might see more innovation and less turnover.
I'd like to help you and dr find you a good match - FB has been a great opportunity for me, but I stumbled a bit so I know how important finding the right thing to work on is. I can also offer you my frank impression of the performance review system here, which I've been through a few times as an IC and as a manager.