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NextGen Magazine


Tech Companies Revive Stack Ranking, Even Though It Has Been Shown to Be Ineffective

S.J. Steinhardt
Published Date:
Feb 16, 2023

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Ranking employees and firing a percentage of those at the bottom—also known as “stack ranking,” “rank and yank,” or “the vitality curve”—does not work, research has demonstrated, but tech companies are using it, Fast Company reported.

The basic concept, popularized by General Electric CEO Jack Welch in the 1980s and 1990s, was to rank every employee, then fire the bottom 10 percent. GE’s human resources function eventually abandoned the practice, which was ineffective in determining future potential, maintaining morale and increasing performance.

Rating-based performance reviews “often fail to change how people work, and dissatisfaction with the appraisal process has been associated with general job dissatisfaction, lower organization commitment, and increased intentions to quit,” a 2012 research report found.

Yet, the concept is experiencing a resurgence, particularly among tech companies such as Oracle, Amazon and Meta. Stack ranking is now used by 30 percent of Fortune 500 companies, HR software company Corvisio estimated.

The reasons for this vary.

“If it’s done right, it can help employees who are ranking lower make improvements to their performance,” John Arendes, CEO of HR training platform Traliant, told Fast Company. But, he added, “to make stack rankings work, there need to be objective performance measurements.”

New technology enables organizations to collect more data on workers, John Frehse, senior managing director at Ankura Consulting and board member of the Workforce Institute, told Fast Company. Calling stack ranking a "byproduct of digital transformation,” he cautioned that “it’s not necessarily useful nor accurate.”

The practice of comparing and pitting workers against one another often hurts employee morale, collaboration, and productivity, said Alexander Colvin, dean of the School of Industrial and Labor Relations at Cornell University, told Fast Company.

Jessica Kriegel, chief scientist at Culture Partners, who has seen an increased use of quantitative assessments of employees, said that one reason stack ranking is on the rise now is because technology allows for the collection and comparison of employee data without their noticing. “In the lives of workers, [stack ranking] is often invisible, because what happens is it’s behind closed doors," she said. "Leaders are not communicating with workers that stack ranking has occurred or where they fall in that stack ranking.”

She also suggested that some company leaders may be emulating executives such as Elon Musk, whose harsh rhetoric and methods since taking over Twitter have damaged employee morale. Indeed, a 2022 New York Times article made some comparisons between Musk and Welch.

“The way that Elon Musk decided who got laid off was, he sent a note out, along the lines of ‘Tell me who your crappy people are.’ That is considered stack ranking, and it is ultimately not the right way to go about leading a team,” Kreigel told Fast Company.

“Jack Welch was wrong,” said Frehse. “This is a guy that we thought was incredible as a leader, but, really, he led based on fear.”