Stack Ranking – it doesn’t have to be evil

There is plenty of coverage in social media now on the infamous concept of stack ranking . And honestly it took me by surprise . I thought I will post couple of thoughts here . Poorly implemented stack ranking is just horrible and should be avoided at all costs. But my position is that some level of stack ranking is unavoidable when an organization reaches a certain size. And there are ways to do it better than the miserable ways I read about in blogs etc .

A profit making company has only a certain amount of resources to spend on compensation . I have worked for managers who had socialist tendencies of distributing available money more or less equally . This did no apparent good for team performance . The excellent performers felt cheated outright and many left the team . The poor performers interpreted it in a way that made them feel they are doing just fine .
In short , it was lose lose for my manager .

Stack ranking surely fosters competition amongst peers – the question is whether it is healthy or unhealthy .

If every manager has to stack rank – invariably only bad things can happen. No team has a perfect bell distribution and good people will lose out . And no A player will want to work with another A player ever again.

However if the pool of people is larger – this way of ranking might actually work ok . I have seen it work well first hand . Example – if the VP of west coast sales has a fantastic year and all his sales people exceeded quota , he won’t have any under performer that cycle . But VP of Central region might have some under performers . If the country manager tried to normalize the performance at country level – stack ranking would make more sense than each VP needing to do this with smaller teams .

Let’s not kid ourself – every company at a certain number of employees will have some poor performers that will weigh down everyone else . They need to be replaced periodically with new employees to keep the company healthy .

The result of stack ranking need not always be getting fired either . In many cases, a transfer to another manager or another role could change a poor performer to deliver better .

Annual performance exercises are useless – they are after the fact and there is nothing much the employee can do to change the decision . But if the performance management is a continuous process – it can easily work better . And that means line managers partnering actively with HR and not just checking boxes.

In my opinion, the good vs bad performer is not where the issue comes up. It is the average performers that pose the challenge . I had a manager who once told me about it this way – outrageously compensate the best ones , give enough to the average ones to make them try harder next time and give exit options to repeated poor performance people. I don’t think that strategy is bad – it is all about executing to the spirit and not the letter of the strategy .

As always – these are just my personal thoughts , not to be confused with my present or past employer policies .