Employee Evaluation Tools Can Become Obsolete – Bottom 10% of Employees Must Go
We have seen proclamations touting such-and-such a new program or research to be the latest and greatest thing that will revolutionize companies. But is proclamations from these promoters fool proof? Invariably time might prove that new revolutionary management programs an albatross around the proverbial neck of business. And these programs can last for years. Even the elixir salesmen of old had a potion to cure everything-literally; obviously, these proved not to be the magic potion. Businesses are not immune to well meaning academics who have promoted the latest and greatest organizational improvements based upon supposed sound research.
I am not saying all innovations in business are bad or worthless. For example, how about the move to quality in production, products and even customer support functions. Remember, about 25 years ago, the mantra was that businesses should be referred to people they interacted with internally (fellow employees) as a “customer”; an approach to bringing quality into workforce relationships. Even fellow employees coming to you for help on their project were your customer and they might even rate you on your helpfulness to their cause.
One management program that came about in the 1970’s was the employee review system formally known as-Vitality Curve, or less affectionately, stack rankings, or rank-and-yank. The basic premise of this employee ranking program, installed at GE (also implemented by other companies) by their CEO Jack Welsh in 1979, was to rank employees against their peers and year after year fire the bottom 10% in the rankings. (The fundamental characteristic of the Vitality Curve ranking system was to get rid of approximately 10% each year.)
“But now, GE is in the middle of a far bigger shift. It’s abandoning formal annual reviews (Vitality Curve) and its legacy performance management system for its 300,000-strong workforce over the next couple of years, instead opting for a far less regimented system of more frequent feedback via an app,” writes Max Nisen-Quartz . The app is proprietary software to GE.
As an aside, GE is not doing well now. On Jan 15, 2019 the stock closed at $8.98 and 1 year ago it was $17.40. In 2018 GE was removed from the Dow Industrials. Obviously, I am not implying management evaluations lead or even had anything to do with GE fortunes today. But, one can ask if management had anything to do with GE fortunes today.
Amazon announced on November 14, 2016 that they were eliminating their version of the Vitality Curve system. As with GE this is a system where annually managers meet to evaluate employees and those at the bottom of the review process are fired. It was/is a system fraught with actual palace intrigue. To add another element of intrigue at Amazon, there was the “Anytime Feedback Tool”. This allows Amazon administrative workers to ad hoc secretly praise or critique their colleagues. “To add insult to potential injury, peer evaluations could be submitted to members of the management team at any time, using the company’s internal directory,” says Madeline Stone and Jillian D’Onfro-Business Insider.
The New York Times published some Amazon employee comments about this review system as: “Many workers called it (the employee ranking system) a river of intrigue and scheming. They described making quiet pacts with colleagues to bury the same person at once, or to praise one another lavishly.”
Let’s move to one last example of this long utilized employee rating system that I think had/has shackled many companies with a seemingly disregard for any long-term consequences.
“There were many reasons for the decline of (a major technology company) under their CEO, including, its lack of focus and its habit of chasing trends rather than creating them. But one that’s not obvious to outsiders was the company’s employee evaluation system, known as “stack ranking.” The system-and its poisonous effects on (the company’s) corporate culture,” reported Will Oremus, Technology Writer for Slate. “At the center of the cultural problems was… stack ranking.” Every current and former employee Will Oremus interviewed-every one-cited stack ranking as the most destructive process inside of the company.”
I worked within a company in which the CEO seemed to worship the Vitality Curve/Stack Ranking model and implemented the “stack ranking” program, even for senior managers. How did it work? Annually, your manager and you would work on parallel paths, soliciting input about your performance from employees in your group, managers who interfaced with you within the company and even customers. These numeric inputs would be added to those of your manager and a final rating would be handed down. Obviously, any conflicts throughout the year would have a bearing on your ratings and HR would dictate who was to be fired immediately to fulfill a 10% culling of the ranks–applying to managers and staff. I was the VP of Sales and experienced the pitfalls of this program.
Why do companies fall for the latest fad in management programs and tools? There are many reasons:
· In some circumstances management is simply looking for an approach that will improve performance and reward employee contributions and value objectively.
· Sometimes there may be surreptitious reasons where decision makers are trying to demonstrate to the board of directors that management is forward thinking.
· Another more sinister reason may simply be an attempt by management to prove to investors that they are on the leading edge of change by adopting the latest new management tool.
Whatever the reason, over the past few decades the stack ranking system has wreaked havoc on some large as well as small companies. It seems to have been a program utilized mostly by technology companies.
The pendulum is now swinging toward, not the center, but in the totally opposite direction. The group who gave us “Stack Ranking/Vitality Curve” have now realized the open office system is best-open office system is my term. The Quartz article points out–Years of research, from both business school professors and neuroscientists, has found that the practice is ineffective at boosting performance, actively alienates employees, is based on a flawed understanding of human motivation, and is often arbitrary and biased. We now have the employee management system–“one for all and all for one”; which I personally like. Intuitively, the new approach seems to fit with human nature. But, testing the waters is an approach before total submersion.
Some good reasons for the stack ranking failures:
· Business does not work around preplanned cycles and trends, so why rate employees on that basis?
· Confrontation is not a productive management style. The old system tended to foster conflict.
· Most employees today-in the age of social media-demand instant feedback and replies.
· There are better results achieved when focused on results.
· Customers and vendors do not like to deal with people working under an umbrella of conflict and manipulation.
· The old system does not attract the most self-motivated and creative employee. Further, employees who have pride in their work have different motivations. Pitting employees and groups of employees against each other is focusing on a destructive process and outcome.
There are management tools and programs that do improve performance and give customers better products and services; these tend to generate more productivity and bottom-line results. Historically there is a real positive example of lasting and proven results from a new management system or program. Specifically, W. Edwards Deming in 1945 brought a new management tool and philosophy to Japan businesses that ultimately propelled them to a leadership position in the arena of world-class-quality evolution. Just look at the quality products they turn out today: automobiles and electronics; there are others. That program worked and was initially rejected when proposed to American business.
When it comes to managing people, theory is a terrible thing to bet all your chips on from the outset. But, technology is forcing companies to implement new emplo