Last week there was a lot of news about forced or stacked reviews in the news. This type of performance review requires that managers rate their team on a bell curve and then send the low performers packing. Just as Microsoft released a statement to say they were discarding the practice, Yahoo’s CEO announced they planned to begin using the “rank-and-yank” system. This topic has received quite a bit of press, and not so positive at that.
What was once popularized practice in the 1980s isn't so popular anymore. According to Bloomberg BusinessWeek, only five percent of high performing companies were using the forced rating system in 2011, which is down from 20 percent two years prior. So why is the ranking system such a poor approach to performance reviews and why have companies strayed from this method of performance reviews?
The forced ranking system is not good for business. While it may have been useful in the 80s, it doesn’t work on today’s workforce for a number of reasons:
- It encourages employees to pit against each other. If employees know that their work is literally being graded and they will lose their job because of their performance, they will do everything in their power to keep their position. This method encourages employees to back stab their peers. This will breed an environment rich in cruelty and poor innovation. Several Microsoft employees said “the system resulted in capricious rankings, power struggles among managers, and unhealthy competition among colleagues” (www.tlnt.com).
- The stacked ranking isn't based on objective data. Basically, managers have the decision making power and their biases can get in the way of fairly evaluating an employee. It is a completely arbitrary system that is focused more on putting people down instead of building them up. So employees better hope they are on the boss’s good side.
- In the case of Microsoft, the Wall Street Journal said that “the biggest bonuses were doled out to workers who learned to game the system in their favor when employee review time rolled out.” Employees were working the system! At Microsoft, bonuses were based on performance reviews, so why wouldn't employees try to play their manager? If they play their cards right, then they would still have their job and a check in their hand.
So for all of these reasons listed above, it’s a good thing Microsoft ditched that practice. It just doesn’t help productivity or workplace morale whatsoever. The Executive Vice President of Human Resources at Microsoft sent out an email announcing the end of stacked reviews and highlighted aspects of the new approach. The new method will encourage teamwork and collaboration and employee growth. The goal of the new practice will be to “learn in the moment, grow and drive great results.” The Executive VP also said “This will let us focus on what matters - having a deeper understanding of the impact we’ve made and our opportunities to grow and improve.”
Not unlike this approach, 360 degree performance reviews can be much more valuable to an employee and a company than a stacked review. The 360 review is best used as a developmental tool rather than a rating system. Just as Executive VP of HR at Microsoft wants the new system to encourage teamwork and collaboration, 360 degree reviews do the same. With this type of performance review, an employee gets feedback from their managers, their peers, their subordinates and from clients. Employees get to see the whole picture of their work and how it impacts the company goals.
360 reviews can be very helpful to an employee and the company. First, it provides well rounded feedback. Not only is an employee evaluated by their supervisor, but their peers and subordinates also give their input. This aids in team development because it promotes collaboration among employees since they are working towards a common goal in the organization.
Second, this type of review encourages personal growth. Employees have the opportunity to take criticisms received in the assessment and turn that into opportunities for growth. They can better themselves as an employee while strengthening their career.
Third, 360 reviews foster an environment that doesn't have employees competing for their jobs. Through respect and appreciation for their colleagues, employees’ attitudes are positive about improving practices, not negative because they are fighting for resources.
Last, this process gets rid of the possibility of managers playing favorites. Because there is feedback from multiple avenues, employees won’t feel discriminated against or discouraged like in stacked reviews where only one person delivers rankings.
TEDS, Inc. provides a performance management system as part of their talent management suite. This module gives companies and employees the opportunity to make themselves better through goal setting, development plans, coaching notes, monitoring feedback, and 360 reviews. In order to foster an environment rich on feedback and top performers, request a demo today on how TEDS can help your organization achieve its goals with a successful workforce.