Stack Ranking in Talent Management
Stack ranking, or forced distribution, is a talent management strategy that was first executed by General Electric’s CEO, Jack Welch, in the 1980s. This approach involves categorizing employees on a bell curve into three categories: exemplary performers, those meeting expectations, and those in need of improvement. A typical distribution is a 15/70/15% split, but this can vary. This system restricts the number of employees who can be considered high-performing, which Welch viewed as a way to stimulate worker productivity and foster a competitive culture. However, this strategy has also been controversial and has been abandoned by major companies like Microsoft, Amazon, Adobe, and Accenture due to issues like stifled innovation and harmful workplace cultures.
Issues with Stack Ranking
Stack ranking is seen as problematic because it discourages innovation and teamwork, leads to high employee turnover, and fosters a toxic company culture. For example, when Microsoft adopted stack ranking, it was a leading technology company. However, as Apple and Google rose to prominence with their innovative approaches, Microsoft failed to keep pace. Stack ranking was cited as a key factor in this stagnation because it promotes competition among employees rather than fostering a collaborative environment.
Another issue with stack ranking is the high turnover rate it causes. Those who fall into the bottom 10-15% are put on performance improvement plans or terminated. This not only incurs the cost of rehiring and retraining but also leads to the loss of institutional knowledge and company culture. In addition, stack ranking creates a culture of individualism and competition, which can lead to a hostile work environment.
Modern Talent Management Strategies
In light of these issues, many companies are seeking more modern and fair performance management strategies. For instance, Amazon opted to focus on employees’ strengths rather than their weaknesses when they abandoned stack ranking in 2016. This emphasis on coaching and feedback helps employees reach their professional goals and provides the organization with the skilled workforce it needs to succeed.
For more insights into talent management strategies, check out our Complete Guide to Performance Management vs. Talent Management and Performance Management Model: Definition, Elements, and Types. Also, be sure to explore our advice on How to Align Life Sciences Teams After a Merger.
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