Yahoo CEO Marisssa Mayer has again hit on HR controversy with a new policy that forces managers to rank their employees on a bell curve, with those at the end heading for the chop. The story was reported by website AllThingsD.com, who said that Yahoo employees were increasingly venting their frustration at the policy on internal message boards.
According to the Institute of Corporate Productivity (i4cp), quoted in BusinessWeek, the number of companies using these types of forced ranking systems is down significantly on previous years. Just over 5% of high-performing companies used a forced ranking system in 2011, down from close to 20% two years’ earlier.
i4cp's Cliff Stevenson told BusinessWeek that when employees worry about being ranked at the bottom of the pile, they take fewer risks, which stifles innovation. This should be a particular worry for Yahoo who have steadily been losing market share. The company went through several periods of layoffs, starting in 2008.
The latest HR controversy from the search giant echoes Mayer’s first gaffe back in February, when she essentially banned flexible working across Yahoo. Jackie Rees, Yahoo’s HR head, sent the following memo to staff:
"To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices.
"Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.
"For the rest of us who occasionally have to stay home for the cable guy, please use your best judgment in the spirit of collaboration. Being a Yahoo isn’t just about your day-to-day job, it is about the interactions and experiences that are only possible in our offices."
The decision was criticised against widely-held views on the benefits of flexible working and an end to the dominance of 9-to-5 working, as well as the disadvantages the new policy would give to carers and working parents.
With the latest research suggesting employees respond better to positive messages and very gentle feedback, it’s unsurprising Yahoo’s latest move to ramp up competition in the workplace will not be well-received.
4 Responses
Forced Ranking – HR Blunder?
Marissa Mayer is obviously shaking things up at Yahoo! A strong leader doesn't act in a vacuum. Having buy-in at the top of the organization must exist. Assuming (this is a big assumption) Yahoo! did a great job of hiring the right people for the right job, the question that all of this triggers for me is "Has middle and upper management either lost or never had the skills and training to manage performance to ensure superior employee engagement?" What kind of training have supervisors and managers been given to better understand and engage employees? We can argue that forced ranking is detrimental to creating innovation but I doubt that can be proven. However, until middle management is better able to manage performance and engage the full potential of employees, any CEO is likely to use the forced ranking strategy to trim the lowest valued resources from the organization. Most organizations now use a "bottom 5% per year" trimming strategy regardless of whether a forced ranking is part of the process or not.
Using a hiring strategy with best in class selection processes and talent assessments along with a management development program that ensures people managers are experts at engaging employees eliminates the need for more drastic alternatives such as forced ranking or annual trimming strategies. Which strategies cost less would be a very interesting analysis. I'm betting forced ranking or "annual trimming" exercises, while they seem efficient and have more of a "fixed cost" price tag (that CFOs like) are actually very costly compared to the alternative of hiring smarter and developing managers to be experts at employee engagement.
Forced Ranking
Unfortunately, there are too many CEO's who have not yet seen the destructive results of a forced ranking approach to taking people out. The practices of any organization speaks volumes to how the CEO thinks about people – and people are not stupid. The reason most companies have moved off of this approach is because it engenders fear, lack of risk-taking, and does not improve performance. There are better ways to address the dead wood.
I wonder if Marissa is using forced ranking with her family members?
Forced Ranking
I once worked at a leading forced ranking company. At this firm, forced ranking was part of a comprehensive review system in which dead wood was identified and corrected. At this firm, one of the indicia of dead wood was people who took fewer risks.
Forced ranking is like most management practices. The key to a successful forced ranking system is doing it right.
Journalism
Judgemental journalism like "blunder" and "gaffe" is unacceptable in a professional publication. I personally do not like forced ranking on the GE model.but there are many very successful companies that have adopted it.
I have no connection or even knowledge of Marissa Meyer but I do know she is not stupid, and to condemn her for adopting a long established approach to performance is puerile
Andrew Mayo