Why Companies Can't Quit Jack Welch's Much-Hated Employee-Ranking System(bloomberg.com)
bloomberg.com
Why Companies Can't Quit Jack Welch's Much-Hated Employee-Ranking System
https://www.bloomberg.com/news/articles/2023-01-27/activision-blizzard-s-jack-welch-style-employee-ranking-system-sees-push-back
20 comments
> If you have to stack rank employees, then that's at least a valid piece of data, a relative comparison.
It's hard to project the multivariate impact of any employee onto an ordered line. I don't consider the result "a valid piece of data".
Imagine stack ranking a soccer team and then removing one of the players. You need to score goals and the goalkeeper doesn't score any goals, so...
It's hard to project the multivariate impact of any employee onto an ordered line. I don't consider the result "a valid piece of data".
Imagine stack ranking a soccer team and then removing one of the players. You need to score goals and the goalkeeper doesn't score any goals, so...
I think you do have to have an idea of which soccer player is more valuable than another though, because when salary negotiations come you may have to pick which one you can keep.
And you certainly have to know which is your best goalkeeper out of your goalkeepers, for example, because that's the guy who you want starting
Hopefully you have coaches who know a little more about the game then to negatively evaluate a goalkeeper for not scoring goals
And you certainly have to know which is your best goalkeeper out of your goalkeepers, for example, because that's the guy who you want starting
Hopefully you have coaches who know a little more about the game then to negatively evaluate a goalkeeper for not scoring goals
This whole analogy is quite bad.
Goalkeeper performance isn't linear across all traits. GK1 might start because they're the better overall shot stopper, but they're awful in PKs. You don't play them in a knockout match against a team with no offense that you know is parking the bus to force a penalty shootout because you'd be a shit manager to waste a sub on that.
Or GK1A might be the better shot stopper, but GK1B might be the better distributor. GK1A might have better chemistry with the backline, but GK1B reads midfield runs better and has a bigger leg, so can get you an assist in transition against a slower, higher-playing opponent. GK1A might come up clutch with acrobatic saves that make the highlight reels, but GK1B reads the game better enough that the whole team becomes less prone to giving up high-quality chances with them in net.
Maybe GK1A fits your team's style better, so you keep them. But that's not an objective measure. You can't get there with stack ranking without manipulating the stack, at which point it's a rigged scheme, not a method.
And even if you say "well what about GK3, the one who clearly isn't as good at any of those things as GK1A or GK1B? Can't we cut them?" I mean, sure you can. And then when GK1A's hip gives out during pre-match warmups, and GK1B takes a boot to the face during a set piece, I hope you know which backup field player has the best hands. Good luck!
Or when you let GK3 walk on their contract because even though as their manager you saw their potential as a junior player, and then they go to your crosstown rivals and realize their potential — against your team, in a knockout round of a cup, where your GKs still performed well — what good did the stack ranking do you? Sometimes the player who isn't the best today is going to be the best given a chance in a year, but not if you have to jettison them to meet an arbitrary quota before they develop.
In reality, teams do have to pick a starter. And in reality, sometimes a player isn't a good fit and walks or is asked not to return. But not all or many managers pick starters purely on a linear, objective measure, because despite everything you can assign a statistical value to, the sum of a person's performance is measurable neither linearly nor objectively. Doubly so within a team context.
And this was the entire point of the analogy criticizing stack ranking anyway:
> Hopefully you have coaches who know a little more about the game then to negatively evaluate a goalkeeper for not scoring goals
Using stack ranking is intentionally asking a manager of a team that's objectively all performing well on all measurable metrics, to then find another arbitrary metric and identify one who isn't performing well on it. Because one has to be. There's no option to say "GK3 is contributing well, developing quickly, and could start for us next season". No, they're GK3. You already ranked them, they're at the bottom of the rank, they already were and didn't move up in time, so they're fired. On to the forwards.
And unlike football, you can't even get a transfer fee for landing the odd one out at a potential competitor.
Goalkeeper performance isn't linear across all traits. GK1 might start because they're the better overall shot stopper, but they're awful in PKs. You don't play them in a knockout match against a team with no offense that you know is parking the bus to force a penalty shootout because you'd be a shit manager to waste a sub on that.
Or GK1A might be the better shot stopper, but GK1B might be the better distributor. GK1A might have better chemistry with the backline, but GK1B reads midfield runs better and has a bigger leg, so can get you an assist in transition against a slower, higher-playing opponent. GK1A might come up clutch with acrobatic saves that make the highlight reels, but GK1B reads the game better enough that the whole team becomes less prone to giving up high-quality chances with them in net.
Maybe GK1A fits your team's style better, so you keep them. But that's not an objective measure. You can't get there with stack ranking without manipulating the stack, at which point it's a rigged scheme, not a method.
And even if you say "well what about GK3, the one who clearly isn't as good at any of those things as GK1A or GK1B? Can't we cut them?" I mean, sure you can. And then when GK1A's hip gives out during pre-match warmups, and GK1B takes a boot to the face during a set piece, I hope you know which backup field player has the best hands. Good luck!
Or when you let GK3 walk on their contract because even though as their manager you saw their potential as a junior player, and then they go to your crosstown rivals and realize their potential — against your team, in a knockout round of a cup, where your GKs still performed well — what good did the stack ranking do you? Sometimes the player who isn't the best today is going to be the best given a chance in a year, but not if you have to jettison them to meet an arbitrary quota before they develop.
In reality, teams do have to pick a starter. And in reality, sometimes a player isn't a good fit and walks or is asked not to return. But not all or many managers pick starters purely on a linear, objective measure, because despite everything you can assign a statistical value to, the sum of a person's performance is measurable neither linearly nor objectively. Doubly so within a team context.
And this was the entire point of the analogy criticizing stack ranking anyway:
> Hopefully you have coaches who know a little more about the game then to negatively evaluate a goalkeeper for not scoring goals
Using stack ranking is intentionally asking a manager of a team that's objectively all performing well on all measurable metrics, to then find another arbitrary metric and identify one who isn't performing well on it. Because one has to be. There's no option to say "GK3 is contributing well, developing quickly, and could start for us next season". No, they're GK3. You already ranked them, they're at the bottom of the rank, they already were and didn't move up in time, so they're fired. On to the forwards.
And unlike football, you can't even get a transfer fee for landing the odd one out at a potential competitor.
Companies large enough to stack rank are more like leagues. It’s trivial to identify with reasonable confidence who the bottom players are in a league.
Yes. But the bottom 5% of players in a league is not equal to the combined set of the bottom 5% of players from each team.
Right, so is the conclusion that effective stank ranking requires sufficiently large org sizes to be effective? I don’t think I would support stack ranking even then - org context matters too much.
The question, I think, is if I replaced these bottom 5% with average performers that I could hire, what is the delta in outcome? Some positions are setup and only able to produce bottom end performances (think baseball pitchers in Colorado, where offense was originally inflated by 20+% due to elevation affecting how the ball flies)
Having the stats of an average pitcher, when throwing half your games in COL, puts a guy in the top 10% of the league. Put a good pitcher in a bad spot and you’ll see someone perform “poorly”.
The question, I think, is if I replaced these bottom 5% with average performers that I could hire, what is the delta in outcome? Some positions are setup and only able to produce bottom end performances (think baseball pitchers in Colorado, where offense was originally inflated by 20+% due to elevation affecting how the ball flies)
Having the stats of an average pitcher, when throwing half your games in COL, puts a guy in the top 10% of the league. Put a good pitcher in a bad spot and you’ll see someone perform “poorly”.
> You need to score goals and the goalkeeper doesn't score any goals, so...
You need to score more goals than the opponents score, so...
You need to score more goals than the opponents score, so...
Obviously, there will always be underperforming employees who need to be let go, after reasonable efforts are made to accommodate and level up.
And serious economic conditions require layoffs when company survival is at stake.
But, I think there is also a poorly recognized tension between two ideals. The first is where nobody who is performing well is ever let go. The second is where every employee a firm has, are the ones they would hire today, for today's needs.
Firms accumulate employees, but as the firms needs change, a slow, subtle but widespread gap opens up between these two ideals.
Hiring is not easy, but at least it is intentional.
Retention is the opposite of intentional. It is very much default.
I may be wrong, but I think mass layoffs, and harsh ranking systems, are often the blunt ways that this tension gets released. In lieu of a more explicit direct fix.
--
What would a better system be? Start by characterizing the problem.
Employees that drive change are most valuable. Next valuable are employees that proactively adapt to changes, with their own initiative. Then employees that adapt well under direction.
Finally, good employees who are not so proactively adaptable may start out looking as valuable (to the company) as the others, but if they just remain good employees, their value relative to the cost and management complexity savings of an absence followed by a new hire, is seeping away.
So the first step is for a firm to explicitly communicate that proactively leveraging change by EVERY individual employee, including the CEO, is the foundation of any long term job security.
The second step, is to recognize that competence and retention are not tied together, and to give employees who are no longer today's best fit very generous packages to reflect they were successful employees. So successful employees leave on positive terms they knew they could count on.
The details in between? I am not qualified to design the rest of this system!
And serious economic conditions require layoffs when company survival is at stake.
But, I think there is also a poorly recognized tension between two ideals. The first is where nobody who is performing well is ever let go. The second is where every employee a firm has, are the ones they would hire today, for today's needs.
Firms accumulate employees, but as the firms needs change, a slow, subtle but widespread gap opens up between these two ideals.
Hiring is not easy, but at least it is intentional.
Retention is the opposite of intentional. It is very much default.
I may be wrong, but I think mass layoffs, and harsh ranking systems, are often the blunt ways that this tension gets released. In lieu of a more explicit direct fix.
--
What would a better system be? Start by characterizing the problem.
Employees that drive change are most valuable. Next valuable are employees that proactively adapt to changes, with their own initiative. Then employees that adapt well under direction.
Finally, good employees who are not so proactively adaptable may start out looking as valuable (to the company) as the others, but if they just remain good employees, their value relative to the cost and management complexity savings of an absence followed by a new hire, is seeping away.
So the first step is for a firm to explicitly communicate that proactively leveraging change by EVERY individual employee, including the CEO, is the foundation of any long term job security.
The second step, is to recognize that competence and retention are not tied together, and to give employees who are no longer today's best fit very generous packages to reflect they were successful employees. So successful employees leave on positive terms they knew they could count on.
The details in between? I am not qualified to design the rest of this system!
The article doesn’t answer the question which would have been fascinating.
Article tldr; it’s happening, it started in the 80s, it persists, it’s real bad, it doesn’t do what companies think they want, oh well.
Then why? Because there’s another reason unstated here? Because it’s the lowest effort one that lets them set up a machine and claim the equation did it? Because they’re cruel and that’s the point?
That’s what I’d love to know, and it’s not here.
Article tldr; it’s happening, it started in the 80s, it persists, it’s real bad, it doesn’t do what companies think they want, oh well.
Then why? Because there’s another reason unstated here? Because it’s the lowest effort one that lets them set up a machine and claim the equation did it? Because they’re cruel and that’s the point?
That’s what I’d love to know, and it’s not here.
My experience is that a vast majority of managers would prefer to not face the fact that some of their employees are underperforming.
There are a variety of psychological or procedural "tricks" to get managers to be more discerning in evaluating that. Forced curve stack ranking is just one of them (procedural).
Another (psychological) is to ask managers to rate their employees and separately, to answer the question "Knowing everything that you know now, would you hire this person again?" There is a fair percentage of "this person is meeting expectations/highly valued/<whatever the middle ranking is>" combined with "yeah, in retrospect, we made a mistake by hiring them."
If you have absolutely no controls over the curve, many managers of modestly performing teams will earnestly report that their team is a mix of 25% superstars and 75% stars.
I don't know what the best answer is here, and the best answer certainly varies by company and might even vary by department within a company.
There are a variety of psychological or procedural "tricks" to get managers to be more discerning in evaluating that. Forced curve stack ranking is just one of them (procedural).
Another (psychological) is to ask managers to rate their employees and separately, to answer the question "Knowing everything that you know now, would you hire this person again?" There is a fair percentage of "this person is meeting expectations/highly valued/<whatever the middle ranking is>" combined with "yeah, in retrospect, we made a mistake by hiring them."
If you have absolutely no controls over the curve, many managers of modestly performing teams will earnestly report that their team is a mix of 25% superstars and 75% stars.
I don't know what the best answer is here, and the best answer certainly varies by company and might even vary by department within a company.
A lot of that is that weird headcount thing that translates to how important you are as a manager.
- if you have a lot of reports YOU ARE IMPORTANT
- if you have a big budget (because of lots of reports) YOU ARE IMPORTANT
wait, firing someone might take away a req/headcount. I AM NO LONGER AS IMPORTANT
To the point that managers that don't have more than, like, 4 or 5 reports basically should plan and aren't a "I do a workers job plus management", regardless of company, should know they are going to get laid off or fired at some point.
You're right, it is a forced culling. I can see it as being done for a couple years to cull fat, but as a permanent fixture of the business practices? Well then it's your culture, and your culture is backstabbing, machiavellian, ass kissing, undermining, outright sabotaging, juking stats, etc.
- if you have a lot of reports YOU ARE IMPORTANT
- if you have a big budget (because of lots of reports) YOU ARE IMPORTANT
wait, firing someone might take away a req/headcount. I AM NO LONGER AS IMPORTANT
To the point that managers that don't have more than, like, 4 or 5 reports basically should plan and aren't a "I do a workers job plus management", regardless of company, should know they are going to get laid off or fired at some point.
You're right, it is a forced culling. I can see it as being done for a couple years to cull fat, but as a permanent fixture of the business practices? Well then it's your culture, and your culture is backstabbing, machiavellian, ass kissing, undermining, outright sabotaging, juking stats, etc.
Peer review.
After WW II, there was a large rif (reduction in force) in the US military. The Marines decided to use this to their advantage
At each level they did peer reviews, where the results were one of a) retain at current grade, b) retain, but at lower grade, c) do not retain.
This was all done with peer reviews of people at the same level. The result was they retained most of the best people they needed to retain.
I've never seen promotion boards or managerial review produce very good results. In largish orgs, you might as well just hold a lottery.
After WW II, there was a large rif (reduction in force) in the US military. The Marines decided to use this to their advantage
At each level they did peer reviews, where the results were one of a) retain at current grade, b) retain, but at lower grade, c) do not retain.
This was all done with peer reviews of people at the same level. The result was they retained most of the best people they needed to retain.
I've never seen promotion boards or managerial review produce very good results. In largish orgs, you might as well just hold a lottery.
The Apollo astronauts also had to rank each other, with that feeding into who got assigned to missions. (I'm not saying this was or was not a good idea - probably too small a sample size and they were all superstars - only that it was a thing that happened). [Source: https://space.stackexchange.com/a/23149]
It seems straightforward. If a company wants to fire an employee with cause, stack rankings and performance-improvement plans provide them. Otherwise people in orgs that apply it wouldn't call it "rank and yank" when they're being candid or honest about it.
"Fired for cause" is usually reserved to mean "fired for serious misconduct" rather than a routine performance-related reason.
[deleted]
Hmm the problem with stack ranking to me is not that you drop the bottom couple percent of the company. It’s that you attempt to do so within smaller divisions of the company. Like, if you randomly bin everyone into groups of 5 people and drop the worst one, you will frequently end up dropping people who are not in the bottom 20% overall. You may even drop top performers. There’s probably a small percentage of folks that the system would benefit from losing but this kind of scheme can’t easily drop them; even if the metric used to rank people is accurate; which it often is not.
I think this is an interesting take. If you have to stack rank employees, then that's at least a valid piece of data, a relative comparison. We can argue about the value of that relative data and how it's appropriate to use it, but at least it's a fairly honest piece of data.
If you attempt to portray this as an absolute piece of data, either by saying the bottom 5% don't meet expectations, or by applying quotas to absolute ratings (i.e. 5% must not meet expectations), then now you're producing something fundamentally dishonest.