Monday, April 15, 2024

Ending Forced Ranking: Why Steve Ballmer is My Hero

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 When I first moved into technology, my passion was people and my goal was to eventually run the ROLM corporation’s unique Great Place to Work department. Shortly I joined the company that group was disbanded and my career goals and outcome had to change. But I’ve always had a passion for making companies a better place to work. 

Even though I rarely act on that passion I have made a significant effort to kill the Jack Welch concept of Forced Ranking for employee measurement.   I firmly believe it goes to the core of why big companies stall out and can’t execute at a given size. It pits employees against each other and cripples the very collaboration that made the firm into an initial success. I actually think it goes to the core of why US world competitiveness has declined since it was implemented

Once in place it is like cancer, difficult if not impossible to get rid of and slowly killing the company. That is why when Microsoft announced it was killing the program its departing CEO Steve Ballmer became my hero. Someone has to go first and it is sad this came at the end of his run as CEO and not at the beginning.  

Institutionalizing Management

I remember the first time I was introduced to a forced ranking structure. I was new to my department and I’d been working much of the year without direction, not a particularly wise place to be, and I got a bad review. 

When I questioned it I was told that since I was new that obviously I had to be ranked low because I didn’t yet have the tenure in the department to be ranked higher. I had what amounted to a major hissy fit and the ranking was changed, but this is the kind of behavior that forced ranking creates.

Managers stop managing and start playing the numbers. 

One practice is to make sure you hire two or three underperformers on purpose so you can protect your good people when to comes to cutting the bottom percentage at year end.   Another is to rank by the amount of screaming the employee does: those that don’t complain get ranked low; those that have a fit like I did get ranked high (yes I kind of benefited from that one myself that year).  

But the smart people either do one of two things. They game the system (one second line manager told me the trick was to never make commitments, that way no one could ever rank you down), or to leave for greener pastures. That is partially why firms like Microsoft with this practice basically became places where people who work for Amazon and Google got trained. Once employees realize that there are places you can go that compensate you on what you did, not on how politically connected you are, how loudly you complain, or how expert you are at gaming the system, the smart ones tend to leave.

It Ain’t Smart

Let’s say you were an incredible manager, your teams always did well, you attracted the best people, and you directed them expertly. They were all A+ players.  You’d still have to rank them  on bell curve and if you couldn’t – ­because they were effectively all A+ players – you’d be forced out of the company by recurring negative reviews yourself. Any policy that penalizes great managers and great teams is so stupid the word is inadequate to describe it.  

Let’s say you want two people to work together. They know that a team effort is not only harder to pull off but is riskier than an individual effort when it comes to ranking. Their teammate is competing with them for the next raise and promotion. Ranking works directly against team success because shared credit is treading water. But if you do well and the other person doesn’t (assuming you are in the same review pool) and that results in a more certain reward, you are more likely to work against the team than for it. 

Leaving Microsoft Better Than He Found It

There are a lot of ways to measure the success or failure of a CEO like Steve Ballmer. I choose to measure him not by how he ran the company but how he is now working his butt off to leave it better off than he found it.  While others will have different priorities, for me making Microsoft into a better place to work and collaborate goes to the top of my list. And with this change Steve Ballmer did that.  

Given how deeply hated Forced Ranking tends to be in the companies that use it, I imagine there are more than a few Microsoft employees who are looking at Steve very differently this week as a result of this change. I just wish he’d done this a decade ago as I expect the last decade would have gone far better for the company if he had. 

But it is always better late than never and I do think that with this one change the Microsoft employees will think he is leaving the firm, from their perspective, better than he found it. I also think this helps lay the foundation not only for a better Microsoft to work for, but one that is far more successful as well.   And that is why Steve Ballmer is my hero this week. 


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