Microsoft's New Employee Performance Rating System

After speaking with some folks involved with the recent town hall meeting and reading up on the resulting blogs and articles, I'm kind of surprised at reactions from key bloggers like mini and Scoble. I'll start off by caveating that I have not personally reviewed the new policies, but am making observations based on published materials from the sources I trust listed above.

I understand the happiness over things like bringing the towel program back. I never used them and never noticed them being gone while I was an employee. Still, if I had grown to take something for granted, I'd be happy about getting it back after it was taken.

However, I'm surprised about the happiness over stack ranking and the new comp model. First, my understanding--which may be off base--is that the model is aimed only at improving the benefit to the top performers. From my experience, these weren't people who had morale issues, so I can only believe this model was intended to stem the flow of brain drain.

Regarding the stack ranking, it's definitely not going away. Prior to the change, you roughly had:

1. 4.5-5.0: Rare
2. 4.0: 20%
3. 3.5: 37.5%
4. 3.0: 37.5%
5. 2.5: 5%

Although my experience was relatively limited, I found several things common about these rankings:

1. 4.0+ people are never disappointed and have high enough morale not to complain about morale
2. 3.5 people are almost always disappointed and feel they were barely passed over for 4.0s
3. 3.0 people are disappointed because they feel they're borderline 2.5, except for the handful who received 3.0 due to a recent promotion, group change, asking for permission to interview, etc (they all hate this practice)
4. 2.5 people are not surprised because they already know they should be looking for a new job

People might debate the observations above, and I'll concede the admittedly small sample size I'm working with.

The stack ranking is now:

1. Outstanding: 20%
2. Strong: 70%
3. Limited: 10%

I'm sure that each manager will be still required to stack rank their team, and then pass their proposed stack up the management chain. At some point, the stack will be finalized, and each person will get their result and the comp that is tied to it.

So what's the difference?

When most people land in "Strong", it'll be very easy for management to play up where they landed. In effect, the system has become pass/fail with the occassional "honors" thrown in to motivate the top 20%, along with better cash, stock, etc. Hopefully this will work in their favor by having a much more content majority of non-stars and let the handful that are deemed above the grade to remain in the company.

The one thing that people shouldn't say is that the system has changed because it really hasn't. Some numbers have gone up and others down, but in the end you just get less information about your performance than before from the overburdened management, which is probably better for everyone concerned.

5/21/2006 1:00:13 AM (Pacific Standard Time, UTC-08:00)      Comments [0]