Use Success Factors to Rate Direct Reports

Microsoft announced recently they are abandoning their controversial “stack ranking” system for evaluating employees.  For years, Microsoft managers have been required to grade employees against one another and rank them on a scale of one to five.  Under this approach, some employees must receive an unfavorable review based on how they compared to their peers, regardless of the quality of their work or their accomplishments.  This created great angst for both managers and employees and is the primary factor for Microsoft’s poor morale.

Jack Welch similarly mandated a 20-70-10 differentiation process at GE.  Each GE department head was required to identify 20% of their superstars, 70% producers, and the 10% low performers needing to be terminated.  Even in an organization as large as GE, this approach was rejected by both managers and employees.

There is nothing wrong with differentiating your team – your superstars should be treated differently than your questionable contributors – but forced ranking is not the best approach.  The best differentiation models identify specific rigid criteria required to be identified as a superstar, producer, or questionable.  It doesn’t matter what percent of your team are superstars as long as they achieve the established challenging success factors (both achievement metrics and cultural/behavioral performance).  Similarly, those team members failing to meet their success factors and falling into the questionable category should be working on an exit plan, regardless what percent of the team this represents.

Empower your leaders to differentiate based on predetermined success factors instead of a forced ranking, and you’ll have a successful team.

Explore posts in the same categories: Leadership, Performance Acceleration

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