While Microsoft currently ranks #2 on Forbes Most Valuable Brands list, the company’s continued success is far from guaranteed. With stiff competition coming from Google and Apple, Microsoft has to be smart and keep ahead or, at the very least, in sync with current tech trends. Staying relevant in the fast moving tech space requires leaders and followers who are willing to go out on a limb for the sake of innovation, knowing very well that they may fail. Microsoft’s latest leadership policy move, getting rid of the Rank and Yank will certainly help foster this innovative behavior.
The “Rank and Yank” policy was introduced by GE’s Jack Welch as a way of cleaning out the low performers. The forced distribution ranking of employees typically resulted in 10% of the workforce being dismissed every year as a way of cleaning out the so-called “low performers” and replacing them with fresh blood. Critics of this system, including myself, argue that this management policy stifles creativity and pits employees against one another as they fight to stay out of the bottom 10%. For a company whose success is contingent upon innovation, it is amazing that a system like this was allowed to stay around for as long as it did. The internal animosity that is created with this employee ranking system is incredibly destructive, as evidenced by this video from Enron.
Following our class discussion on the importance of diverse followers, it’s clear to me that this type of ranking system has no place in today’s business world. The Rank and Yank system promotes the “Sheep” and the “Yes People” while systematically targeting the “Stars”. If failure on any given project can put me into the bottom 10%, why should I be willing to try anything innovative?
Whether or not Microsoft has continued success, at least the company’s leadership can sleep well at night knowing that they treated employees with respect.