Uber learned how destructive such a culture can be the hard way. Finally, it leads to the emergence of “brilliant jerks,” who don’t recognize or care that running a successful business is more than just hitting quarterly targets. The fear of losing one’s job makes people unlikely to speak their mind, leading to a closed environment, in which innovation suffers. Instead of teamwork, it tacitly rewards backstabbing. Stack ranking is harmful because it creates an environment which encourages unproductive behavior. Shame and fear cause the negative behavior we associate with companies, such as office politics, cliques, and poor communication. There’s ample proof that these lead to disengagement and lower productivity in organizations. Shame is also detrimental to the mental and physical health of those feeling it, leading to negative tendencies, such as aggressiveness, lack of empathy, and risky behavior. It creates a feeling for employees that failure is part of who they are and that there’s nothing they can do nothing about it. Shame-unlike guilt, which can be productive-is malignant. While fear can be a positive force, when employees feel anxious about losing their job or speaking up, they quickly end up feeling dissatisfied and unproductive. Subjective performance assessment makes stack ranking hard to understand, and introduces fear and shame to the workplace. Cecchi-Dimeglio argues that this is the case because performance reviews are inherently subjective, thus opening the doors for gender bias. Her research on individual performance reviews shows that women are 1.4 times more likely to receive critical subjective feedback-as opposed to positive or critical objective feedback. Paola Cecchi-Dimeglio, writing in the Harvard Business Review, shows examples from her research on how gender bias corrupts performance reviews at professional services firms. Many studies also show that managers suffer from biases, which do not allow them to measure performance objectively. Most companies, however, rely on managers’ subjective perception of the contribution of their employees. One of the premises stack ranking relies on is that employee performance is measured objectively. The practice is clearly moving towards obsoleteness and there are multiple reasons for that. Why Stack Ranking Doesn’t WorkĪ study by the Institute for Corporate Productivity found that the number of companies using stack ranking has fallen from 49% in 2009 to 14% in 2011. However, for small innovative teams that are racing against time to put out a product-such as the typical startup-pitting employees against each other is a bad idea.Ĭreating a cutthroat culture inside your company may seem productive at first, but sooner or later it’s bound to catch up-as Uber is learning. For example, Marissa Mayer used it when she became CEO of Yahoo as an alternative to mass layoffs. Stack ranking can work well for large bureaucratic companies, but only when it’s applied temporarily. Employees’ performance also wasn’t measured adequately, further contributing to the lack of motivation. Stack ranking worked well for GE because at the time Welch introduced it, the company had become too big and comfortable. Welch also popularized the 15/75/10 curve for the top, middle, and bottom employees. This practice was popularized by Jack Welch during his tenure as CEO of General Electric in the 1980s. Stack ranking is a practice in which managers are asked to rank employees on a curve according to their performance with those at the bottom placed on “performance improvement plans” or fired straightaway. Uber, Microsoft, and Yahoo are just a few of the companies that have discovered in recent years how stack ranking can do more harm than good. Instead, it often turns into a nightmare when managers find out that “rank and yank” doesn’t quite produce the fair and smoothly performing workplace they were hoping to achieve. Many companies hope to turn this dream into a reality when they impose stack ranking on their workforce. Creating a meritocratic workplace where decisions about promoting and firing are based solely on employees’ performance is every manager’s dream.
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