Do Stacked Rankings Hurt or Help?

Poor Amazon has had a rough summer. First, its first-ever Prime Day was a source of amusement on social media. Did you check out the entertaining tweets at #primedayfail? They were trying to keep their heads high, saying it was successful—but who are we kidding? Any PR nightmare that has your customers mocking you wasn’t a success. And then, just when the chatter around Prime Day seemed to silence, The New York Times released a huge feature story about how unhappy many of Amazon’s employees are—most of them cry at their desks?!?—and their stacked-ranking system is not helping matters.

In fact, their stacked rankings are taking quite a beating. For those who aren’t familiar with the practice, they work something like this: During performance review time, managers (and often, employees) rank employees by who is most important to least. The bottom 10 percent are usually put under “probation” or let go immediately. Of course, each company does it a little differently.

When you look at performance reviews as a way to help companies, you can see why some companies have adopted and continue to use stacked rankings in their performance reviews. After all, it seems to place everyone in order of importance, which seems pretty cut-and-dry for managers when making decisions on how to handle employees.

At BambooHR, we recently completed a study on performance reviews and found that 61 percent of those who currently use performance reviews use stacked rankings. Thirty-five percent think the system is unfair, inaccurate, or flawed in some way. That’s over one-third of the workforce!

As you may have guessed, managers see stacked rankings more positively than any other group. Fifty-three percent of managers consider them a good way to see which employees are performing better than others. And well, when you have to rate employees from best to worst, then I suppose it helps managers know who to cut. But what about what’s best for the employees?

Employees who view stacked rankings negatively prefer direct communication (like informal conversations and career-path-oriented one-on-ones) and feel more motivated when their ideas are heard and used. Those who see stacked rankings positively tend to think that indirect communication (like giving raises, recognition, and discussing company values) are the more effective ways to inspire and motivate.

Surprisingly, younger employees (those under 30) view stacked rankings much more positively than their more seasoned counterparts. In fact, employees become progressively less positive about the system as they age. This may be because young, ambitious, recently graduated employees thrive in a competitive environment where they can show they’re the best employee. Not exactly great for teamwork or employee morale, however.

While 47 percent of HR perceive stacked rankings positively, they have the most criticisms of the system. Perhaps HR has seen over time that rankings have negatively affected employees in the workplace, rather than help them. HR thinks stacked rankings have the following weaknesses:

· They create a culture of competition, not collaboration.
· They create office politics.
· They’re not always an accurate reflection of an employee’s performance.

A stacked-ranking system doesn’t allow for the idea that perhaps all your employees are engaged and doing great work. Surely it’s possible to have a great team with no one needing to be cut every six months!

At BambooHR, we think performance reviews should support a company’s culture and should reflect how managers treat employees and coworkers treat each other. When performance reviews are geared toward improving performance and helping employees, everyone can find value in them. Make sure the method of performance management you choose reflects the kind of company you are or want to be. Instead of cutting people down or out, let’s make it about motivating and inspiring our people to grow.

Amazon is a company that has great aspirations and needs innovative employees who are motivated to keep pushing the limits. Could their stacked-rankings systems be holding them back?