If you have dreams about working for Apple, Microsoft, Amazon or Yahoo, there are many barriers in place to prevent employees from moving up in the organization. Microsoft pioneered a concept called stack ranking, which lumps employees and managers into three distinct categories. These are the superstars, people you want to hang on to, or people that need to shape up, or ship out. Amazon, Yahoo and a myriad of other companies are starting to adapt this mentality into their internal systems.
Kurt Eichenwald commented that “Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. The system—also referred to as “the performance model,” “the bell curve,” or just “the employee review”—has, with certain variations over the years, worked like this: every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor. For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings. And the reviews had real-world consequences: those at the top received bonuses and promotions; those at the bottom usually received no cash or were shown the door.
Kurt went to directly quote an engineer who said “The behavior this engenders, people do everything they can to stay out of the bottom bucket. People responsible for features will openly sabotage other people’s efforts. One of the most valuable things I learned was to give the appearance of being courteous while withholding just enough information from colleagues to ensure they didn’t get ahead of me on the rankings.” Worse, because the reviews came every six months, employees and their supervisors—who were also ranked—focused on their short-term performance, rather than on longer efforts to innovate.
Many industry experts have claimed that this promotional system is toxic, creates an air of distrust and many people have said that this method has contributed to the companies overall decline in the last ten years. This has not stopped other companies from trying to emulate it.
Dreams about working at Facebook? Molly Graham who used to work in Facebook HR said “Then there is a two week period of calibration where managers meet to look at the assessments of everyone on their team and ensure that people are rated correctly relative to their peers. Facebook has seven performance assessments as well as a guideline for what % of employees should be at each level, however it is explicitly not a forced curve, particularly for small teams. The curve exists to ensure that extraordinary performance is rewarded (I believe the distribution is such that only 2% or less of employees are given the highest rating every cycle) and that if hard conversations need to happen, they happen.”
Molly went on to say that “Calibration happens at the team level and at the senior management level , and all of their direct reports look at the numbers for the whole company, lists of the highest performers and lists of the lowest performers. Performance Assessments are final and they are used to determine compensation like raises, bonuses, and additional equity grants. Facebook gives out raises and additional equity once a year but they do promotions and bonuses twice a year. Compensation at Facebook is almost entirely formulaic with multipliers (based on the Performance Assessment) for bonuses, raises, and additional equity grants.
Brad Stone recently released a new book about Amazon and the research he did gave him unparalleled access to hundreds of employees. In his book, he mentioned “In a meeting held usually in September or October, the leaders talk about who’s getting a promotion, and talk about who is doing well and who is doing poorly. Amazon’s managers group employees into three tiers: The top 20%, who are groomed for promotions, the next 70% who are kept happy, and the bottom 10%, who are either let go, or told to get it together.
This system, which was created by Jeff Bezos, is supposed to cut down on politics and in-fighting. Unfortunately, Stone says it has the opposite effect.”Ambitious employees tend to spend months having lunch and coffee with their boss’s peers to ensure a positive outcome once the topic of their proposed promotion is raised in [the meetings],” says Stone.
Stone also notes that promotions are very limited at Amazon, so if you fight for your employee to get a promotion, it means someone else’s employee gets snubbed. And anyone in the room can nuke someone else’s promotion.
Most of the companies outlined above all have curves for employee promotions and knowing who the dead-weight is. It is very difficult to excel and thrive at these companies because there are so many different factors holding you back. These companies may be stable, but they don’t employ the best methodologies to rise up in the ranks.
One company that buckles the trend of stack ranking is Google. A former employee at the big G, said it is all about peer based reviews. “Promotion and work performances is entirely reliant on peer reviews. In other words, to get ahead at Google and to get a positive performance review, you must get positive reviews from your fellow co-workers. Your manager might love you, but if your co-workers don’t like you, you have some work to do. Managers are also required to seek peer review from those they manage. Senior level employees from other fields are also encouraged to seek peer reviews from people in other departments. For example, engineers need reviews from people other than engineers in order to advance. For this reason, a culture of cooperation is endemic at Google. This is great because the percentage of “cowboys” that seems common at other high tech companies is quite low at Google. It also fosters an awareness of the type of contribution made by people outside your department, since everyone reviews people in other fields, and therefore must learn a bit about what others do outside their sphere.”
In the end, it looks like Amazon and Facebook have fairly similar performance review structures as Microsoft much-lambasted system while Google seems to have a performance that seems to trade one set of problems for a different set. The Stack system for promotions is not working and Amazon is ranked second in the US for having the least loyal employees. Worker bees at Microsoft only have a shelf life of four years at the company before they get disillusioned and move on.