Microsoft recently announced that they are changing their review model. Several outlets have passed this on and added anecdotes about how "many current and ex employees say the stack rank is the single most destructive process to the company" and that "maybe doing away with the stack rank will finally get Microsoft out of its lost decade".
Let's start with the basics. Microsoft has had over 500,000 employees, past and present. It's trivial to find a handful of them to align with any viewpoint. In other words, any speculation about the effects of the stack rank are easy to 'support'. I haven't looked hard, but I've yet to hear about a counterpoint (though stories about 'company does things right' tend not make anyone's must-read list).
Now another basic: the new policies say nothing about getting rid of the stack ranking, they just remove the forced curve. These are separate things. Without a stack rank, there's no ability to create differentiated compensation. Take it for what it's worth, but when I worked at IBM the lack of differentiated compensation was the single most destructive aspect of the job. The good people get fed up and leave for greener pastures, or get sick of trying harder when there's no motivation and become burnouts.
There's a slightly annoying conflation of "stack rank" with "forced curve", and somehow we decided that both of these are terrible things, cause in-fighting and back stabbing, and take up everyone's mental faculties with trying to get ahead. Lost in this is that this only really applies if within the small group I work with, my success can only come at the cost of someone else's failure. In reality, the populations that the ranks are done over are big enough that we can both succeed more by helping each other. I'd never even talk to the guys we're both trying to surpass, therefore I have no ability to sabotage them.
Evaluation is a totally standard part of all perf-based endeavors. For example, we get grades in school. We are evaluated, given a rating. Those ratings more-or-less conform to an ordering of students, or a stack rank, if you will. Sure, there can be some ties here and there, but whatever. The better the evaluation, the better the reward. The big difference between school and work is that school doesn't have a fixed budget: the teacher can give everyone an A if they want. At work, there's a fixed budget. If I give someone an A, someone else has to get an F. Or 2 people get Ds. Etc. This would be the forced curve, which some teachers employ...and even in those classes, students study together instead of trying to undermine each other.
The interesting aspect of a forced curve is that it eliminates the ability for a manager to inflate reviews on an absolute scale (or go easy on their low performers) because they know their own people. Furthermore, how can we have any semblance of consistency across a company of 90,000 people. The forced curve combined with a stack rank is an external function that at least in some ways aligns evaluations across the whole company. It can also apply a large-scale statistical model over the company that sheds light on what percent of the workforce is doing at least a satisfactory job and what percent could likely be replaced by a new hire. In the soon-to-be-past system, my review would indicate clearly roughly what percent of people with my same title were better than me. And, that's valuable. Most of us do a fine job, and the best way to know we can improve is to know that, in fact, some non-trivial percent of people were deemed better.
People worry about the degenerate cases of the entirely all-star team or the entirely bad team where people get artificially low or high reviews. These are theoretically possible, and certainly some people end up on the wrong side of a curve boundary. However, in practice these degenerate scenarios don't exist and the monetary impact of being on one side or the other of a review boundary isn't monumental. Without getting into the details, the differentiation is big enough to be worth working for, but not so big that it's life-changing.
Without tangible incentives, workers will learn what their minimum passable effort is.
I believe that differentiation compensation is a must.
To assign differentiated compensation, there must be an ordering of employee performances that is in correspondence with the assigned rewards.
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