Stack ranking is known to many HR professionals as the ultimate dog-eat-dog performance management strategy. Popularized by Jack Welch of General Electric (GE) in the 1980s, this forced ranking system uses bell curves to rate employees and determine who’s not pulling their weight.
The process was effective…at first. But this former go-to framework has fallen from grace. GE has since done away with their rank and yank process, and other early adopters like Microsoft have followed suit.
As leaders turn away from fear-based performance management, we’re taking a look back at the evolution of stack ranking and reviewing a few healthier alternatives you can use instead.
What is stack ranking in performance management?
Stack ranking, or forced distribution, places employees on a bell curve. The handful at the top exceed expectations, the majority in the middle meet expectations, and those at the bottom fail to meet expectations.
In most stack ranking systems, only a fixed number of employees can be ranked top-performing. Many workplace experts agree that while the system is designed to boost productivity, in reality, it incentivizes cutthroat competition over teamwork.
Is stack ranking good or bad?
In short, stack ranking isn’t great for team morale. Here’s how Alexander Colvin, dean of the School of Industrial and Labor Relations at Cornell University, explains it in an interview with Fast Company:
“You may produce some sort of individual effort increases out of fear, but I question that as a workplace culture solution because you end up losing the benefits of cooperation amongst employees and willingness to go the extra mile for the organization, which can ultimately provide better motivation than simply fear.”
So why do some organizations still use the rank and yank model, and what’s the case against it?
5 examples of companies that have tried stack ranking
Performance management isn’t one size fits all. For decades, companies have experimented with different structures to find out what works and what doesn’t.
The following five companies have all tried a stack ranking system, to varying degrees of success. Let’s take a look.
Microsoft
During the “lost decade,” Microsoft stagnated while rivals like Apple and Google thrived. At this time, Microsoft famously used stack ranking under Steve Ballmer.
Employees were ranked against each other, with some forced out due to low performance, even if the entire team performed well. To get to the bottom of these failures, journalist Kurt Eichenwald talked to former and current Microsoft executives. He found one clear throughline:
“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,” Kurt told Vanity Fair.
The goal was innovation, but in the end, the stack ranking system led to a hyper-competitive and divisive work culture. “It leads to employees focusing on competing with each other rather than competing with other companies,” one employee noted.
Why it ended: In 2013, Microsoft scrapped the “destructive” system, but some sources still believe its latest talent management play isn’t too far from stack ranking.
Enron
Remember Enron? 😬 Triggered by big losses and allegations of accounting fraud, the company’s demise in 2001 cost 25,000 people their jobs and decimated billions in retirement savings.
Enron also famously used stack ranking to build a culture of aggressive internal competition, which many believe contributed to unethical behavior and the company’s eventual collapse.
''You either got with the system or you were out the door,'' a former Enron executive assistant told the New York Times. While she admits that “Enron bred arrogance,” she admits this pressure created a high-achieving work environment:
“You could feel the excitement at 6 a.m…You walk in the door and got energized, all those creative juices flowing. You worked with the best, the most brilliant. It was a great, great company,” she notes.
Until it wasn’t.
What was once America’s fifth-largest corporation unraveled in a matter of months. The fallout rippled far beyond the boardroom – destroying careers, retirement dreams, and public trust in corporate America.
Why it ended: The company collapsed in the then-biggest bankruptcy filing in American history.
Amazon
Amazon used stack ranking for years. But when news outlets caught wind of Amazon’s bruising internal culture in the mid 2010s, people started questioning if they were valuing profit over employee wellbeing.
In the heat of the culture controversy, the co-authors of bestselling leadership book Primed to Perform shared their point of view:
“Even more destructive [than emotional pressure] are stack ranking and Amazon’s approach to performance reviews,” co-authors Lindsay McGregor and Neel Doshi argue. “Both are forms of economic pressure that cause employees to fixate on avoiding punishment or earning a reward. Together, these forces stall collaboration, innovation, and other adaptive behaviors by shifting focus from the work towards self-preservation. A divided mind equals divided impact.”
Why it (kind of) ended: According to the Seattle Times, Amazon reportedly stopped stack ranking employees in 2016, but there has been controversy around recent leaked performance review documents and elements of the evaluation system reportedly still linger.
Facebook still keeps the competitive fire burning by using a version of stack ranking to assess individual performance. While it’s not as cutthroat as the systems used at some other companies, it still sparks a healthy rivalry with employees striving to outdo each other – but Facebook also tries to soften the blow with a strong feedback culture to keep employees motivated.
Though Facebook’s employees are spread across the globe, everyone has access to internal software that encourages real-time collaboration. From ad hoc feedback to a designated “thanks” section, a variety of communication channels for delivering feedback and recognition makes employees feel appreciated – not antagonized.
"It's a process that is designed to recognize, acknowledge, and show appreciation for people who have done really great work," Meta’s head of human resources Lori Goler told Insider. "And it's designed to ensure that you are getting feedback from all of the people that you work with most regularly."
Why it endures: As the #1 social media platform, Facebook faces stiff competition at the top. Stack ranking helps keep the company competitive. And with an equal emphasis on feedback, they can maintain a positive and productive team culture.
X
When Elon Musk acquired the app formerly known as Twitter in 2022, one of his first orders of business was force-ranking. Company VPs were tasked with making lists of every employee in their departments, then ranking them as hire or fire. The lists were then sent to Musk and his transition team members.
Months later, Musk claimed he cut nearly 80% of the platform’s staff, drawing high-profile comparisons to the OG rank-and-yanker Jack 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,” Jessica Kriegel, chief scientist at Culture Partners, told Fast Company.
According to Kriegel, the rise of technology has enabled organizations to collect and compare employee data behind closed doors. This has resulted in “invisible” stack ranking, where leaders are not informing employees that they are being ranked, or where they fall in the schema.
Why it’s back: After Musk’s Twitter takeover, he attempted to utilize force-ranking to fire the majority of staff. The result? X’s monthly users fell 15% and ad revenue slumped by 54%.
A better alternative to rank and yank
Effective performance management should motivate employees – not scare them straight.
As a leader, it’s your job to make sure your employees have the tools and feedback they need to reach their full potential. By setting clear success criteria and rewarding workers for hitting their targets, you can create the kind of workplace where everyone wins.
Instead of recruiting the best of the best only to use a performance management system that grinds them down, lift your employees up with a human approach to performance evaluation.
FAQs about stack ranking
What is the stack ranking method?
Stack ranking is a performance management system where employees are ranked against one another. Typically placed on a bell curve, employees are categorized as top performers, average performers, or underperformers, with the latter group often facing layoffs.
What is meant by “rank and yank”?
Rank and yank is another term for stack ranking that emphasizes the threat of removal for low-performing employees. Some experts argue that this form of stack ranking is a way for leaders to lay people off without consequence.
What is the 1 to 5 priority scale?
A priority scale uses some of the same key metrics as stack ranking, but is applied to projects rather than people. It ranks projects by importance and urgency. Tasks with a 1 rating are high-priority and need immediate attention, while tasks rated 5 are less urgent and important.
What other performance appraisal methods can be used instead of stack ranking?
By pairing annual 360 performance reviews with weekly employee check-ins, you can source actionable feedback and identify opportunities for employee development to increase productivity.
