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Microsoft, For Whom The Bell Curve Tolls

Are you watching the Olympics?

NBC's questionable coverage is filled with personal stories interrupted by commercials short, random bursts of athletic activity in which world-class, American-only athletes are pulling together for the greater glory of the team. It's pretty much the exact opposite of stack ranking systems at work. Let's talk about Microsoft!

A new Vanity Fair article details Microsoft's "lost decade," referring to the last ten years in which the tech giant has missed product release deadlines, has poo-pooed emerging trends (oh, the iPhone won't go anywhere...), and has watched its new product releases fall flatter than a model in platform shoes at Paris Fashion Week. Zune, anyone?

The Vanity Fair article reveals a rather startling tidbit: sales of Apple's iPhone now exceed Microsoft's total valuation. Wow. Really? How can that be? Well, if you believe the article, CEO Steve Ballmer is a business guy who says stupid things and doesn't "get" technology; there's tension between old and new employees over pay scales and trendy ideas; the average employee's focus is on office politics instead of on product development; and Microsoft's bi-annual stack ranking process is eating the company alive from the inside. From the article:

At the center of the cultural problems was a management system called "stack ranking." 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.

"If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review," said a former software developer. "It leads to employees focusing on competing with each other rather than competing with other companies."

Supposing Microsoft had managed to hire technology's top players into a single unit before they made their names elsewhere—Steve Jobs of Apple, Mark Zuckerberg of Facebook, Larry Page of Google, Larry Ellison of Oracle, and Jeff Bezos of Amazon—regardless of performance, under one of the iterations of stack ranking, two of them would have to be rated as below average, with one deemed disastrous.

Wow, this "stack ranking" stuff sounds worse than the judging system used for Olympic women's gymnastics! Pitting employees against each other and forcing them to put the "I" in "team"...who in their right minds ever thought this would be a good idea? Jack Welch and Forbes, for starters. But stack ranking ignores a basic element of human psychology: employees, just like mice in a maze, will find creative work-arounds to beat a company's metrics so they can get to the cheese. After awhile, a company's culture can start to feel like an episode of Survivor, where someone will be going home at the end of the episode and it might not be the person who should be going home. In the meantime, let's build a few fleeting coalitions, do some calculated backstabbing, and see who can play the game the best.

Companies get what they measure, and sometimes what they get is not good.

So I'm not particularly surprised to read an article claiming that the focus at Microsoft these days is on office politics and undermining each other at every turn instead of on working together as a united front to compete against other companies. If your job goes on the block every six months and you have to watch a talented member of your team win the bag of sand, then how could you think about anything else besides building your own job security?

I can see using a stack ranking evaluation once every five years to lose the lowest performers. A longer time frame would allow employees to focus on creating great products and to think about the competition that sits outside of the company's walls instead of in the next cubicle. Will Microsoft tweak its stack ranking system to spur innovation? Is Microsoft's Surface tablet a few years too late? Will Michael Phelps win an Olympic gold medal? Will NBC's Olympic commentators ever stop talking? We'll have to wait and see. Anyway, it's a fascinating article.

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