7 ms·

"Stack ranking means that if you have a group of 20 people, during each performance review cycle the group manager is expected to rank them from 1 to 20, and th

"Stack ranking means that if you have a group of 20 people, during each performance review cycle the group manager is expected to rank them from 1 to 20, and the company distributes bonuses and promotions accordingly. That just seems completely asinine." Worse, there is often an associated ideal distribution ("the curve") with fixed ratios for "exceeds expectations", "below expectations" and so on and managers are under pressure to conform. If you have an all superstar team, a certain number must still be in the bottom most bucket, and the bottommost 5-10 % is often let go or put on a watchlist (I am not saying this is how Google does it). Over a few years this gets very political as you can imagine. The (bad) middle managers love this part of their jobs.

kenjackson 16y ago
It does seem asinine. Although frankly I can't think of many ways that seem much better. Do you always just give everyone on your team the exact same bonus?
- tptacek 16y ago
  That's one option. Not giving bonuses at all is another option. Tying incentive comp to business events (recruitment, customer acquisition, an A/B test and minor feature change that produces a 1% uplift, etc) is another option. Anything has to be better than going out of your way to stratify an otherwise well-functioning team.
  - kenjackson 16y ago
    I just have a hard time believing incentives don't work. For example, if I lost all of my stock options today and was told I'd never get another raise or bonus, except CoL, I'd quit on the spot. In fact I'd argue, if there were no financial incentives, most HNers wouldn't do startups. I know everyone likes to say they do it to change the world and the passion of something or other. But in reality I've yet to see many founders take a $50k salary only (but keeping voting power) despite the profits of the company.
    - tptacek 16y ago
      Incentives work great. Incentives aren't the problem. The basket of formal performance-driven compensation programs colloquially referred to as "incentive pay" are the problem. Incentive pay includes: * Formal periodic performance reviews * Scheduled bonuses based on "job performance" * Ranking of employees (this is the old GE performance management paradigm; "up or out!")
    - rhizome 16y ago
      Losing all of your stock options or having something else taken away is not a negative case for incentives, it's an example of a disincentive, which also has an effect. They aren't the same thing, and you can tell because you don't know how well you'd be working if you never had the options in the first place (and hadn't been denied them or otherwise been treated unfairly). One of the reasons you don't see many founders take a $50k/yr salary is that very few of them are truly confident of success. I once heard an aphorism, "don't trust a founder who won't put their own money into the company." It's a little pointed and unrealistic, but you get the idea. In an industry driven by a mythology of becoming the next big thing (parallels to the equally one-in-a-million mindset in the music industry), no founder can afford, professionally and with regard to reputation, to treat themselves as anything but a foregone success, and that attitude requires "competitive compensation." This means they want to be paid as much as other unsure founders. The "low-salary superboss" is a product of already-successful companies.
      - kenjackson 16y ago
        Well I think I'd also turn down most jobs that said, "We'll pay $150k/year with no further financial incentives ever". Unless my goal was simply to to do as little work as humanly possible, yet still collect a check, I'd be hardpressed to work there. And if I did, despite non-financial that exist in the world, I really don't think you could get me to work more than 40 hours per week.
        JabavuAdams 16y ago
        Are you really saying that you wouldn't work more than 40 hrs per week for < $150k. It's the money that makes you put in extra hours? The thing is that there's a huge number of talented people out there who will put in extra hours because the work is interesting, or they feel that if they don't, they're letting the team down. In fact, the really really talented developers seem to care less about money (after a nice base-line), and more about the work / team. Or, other obsessive (and useful) qualities make them unable to say no to work, etc. So, who would a company prefer to hire? Obviously, the qualified person who would work for free, because it's their passion. Interestingly, $150k/yr is a lot more than I've ever made, but that's neither here nor there.
- mfukar 16y ago
  In certain companies, bonuses are dependent on three factors: company success, team success, and individual success, based on targets agreed upon at a certain point in time. To me, that seems a lot more fair than implicitly believing all members of a team are of equal levels of skill, productivity, etc.
  - tptacek 16y ago
    It is obviously true that people should be compensated for company, team, and individual success. It does not follow that the way to do that is a rigid, formal cycle of performance reviews and ranking.
    - mfukar 16y ago
      No, of course not. I did not mean to imply that.
  - DuncanIdaho 16y ago
    I work in a company like that - and the system sucks - especially now in downturn. Here's why: 1. Some managers (of sub-par mind you) teams scored whole their team as "excelent" - as to compensate for lack of company success. Then when the MGMT figured that out - they implemented ratio - thus again hitting the team with many excelent overachievers, etc... 2. Myself personally am often transfered from f-ed up project to a f-ed up project (since I have the ability to mostly turn them around or help to mitigate the damage) thus ensuring that I will never be compensated for the level of effort necessary to turn around a f-up. This system just makes me sick - because I want to compete but I don't want for my collegues to suffer because of it - currently it just encourages teamicide. So this kind of scheme appears to demotivate over-achievers more than it motivates under-achievers.
codypo 16y ago
Not only is it very political, but it forces some baffling decision making. Assume I have a team of 10 in which 5 are wonderful contributors, and that, due to stack ranking practices, only the top 1/3 of my team gets consideration for big bonuses and promotions. Here, I'm incentivized to immediately hire 5 warm bodies, thus ballooning my team to 15, so that the top 1/3 get the recognition they deserve. It's actually rational to do that if I'm concerned that those 5 excellent performers will leave without that recognition. The incentives that appear due to stack ranking are really, really bizarre.
- InclinedPlane 16y ago
  Hiring is difficult and time consuming, what you really want is a re-org (which are all too frequent at big software dev. corporations).
ora600 16y ago
I left my job at BigCo because I was part of a 8 person team where the manager was supposed to create a normal distribution out of scores from 1-5. I was one of two employees recognized for doing an excellent job, but my manager could rate just one of us as "excellent". During a performance review, my manager talked for an hour about how much I'm contributing and what an amazing job I do. Then he ranked me as average. I was extremely disappointed because I wanted the awesome job I do to get more official recognition. I started searching for a new job almost immediately and left shortly after. So yes, review systems considered harmful.
- illumin8 16y ago
  This is actually how almost every large company works. Scale is 1 to 5, average is a 3, 2 is exceeds expectations, "Nobody ever gets a 1." The problem is that the grading is done on a curve, so that for every 2 given out, someone else must get a 4. If you get a 4, you are considered below expectations, and must be put on a "personal improvement plan," or managed out of the team. Because of this pressure, nobody wants to give out anything other than a 3. So they resort to stupid tricks like giving out "high 3s" or "low 3s" instead of 2s or 4s. The desire to model employee performance with data and manage out the bottom 10% has a crushing effect on the morale of any small technically focused team.
  - bmj 16y ago
    Even smaller companies can work this way. During last year's review, my manager (who is also a lead developer--heck, even the VP of engineering writes code on a weekly basis) told me that he wanted to score me higher, but some people frowned on such things because "people really can't be that good." It doesn't bother me much because our department is fairly sane in how they deal with reviews, and management in general.
    - archangel_one 16y ago
      Agree. I work for a small company who occasionally like to act like a big company; we have a similar system which used to be hooked up to bonuses, but they eventually removed those. The explanation was pretty obtuse, but reading between the lines there were some employees getting bonuses even though they should objectively have been 4s or 5s on that scale - because of course everyone got 2 or 3 regardless.
orp 16y ago
When I was a team leader, I was asked to rate my team members on a curve. Management stressed that this was important, and that we all had to conform. I told my boss I had no intention of destroying my team, and handed out ratings and reviews as they were deserved. Never heard this particular line from Management again.
shrikant 16y ago
I was in a place that decided to give out bonuses to my team (consisting of 3 members and a leader) in the following way: 1. Allocate fixed amount to give out per team 2. Have team leader's manager determine how that pie would be shared between team leader and us 3 team members. 3. NOT have 360° feedback 4. Incorporate team leader feedback on team's performance into this decision I'm not sure what type of HR schmuck thought up that scheme. About a month after 'self evaluation', we were called into 1-1 meetings with the TL, who told us each separately how disappointing our performance had been, and the usual spiel about 'taking initiative' and 'stepping up' and 'moving to the next level'. Shortly after that we found out the three of us had received 0% each of the pie allotted to our team as a bonus. And the team leader had waltzed away with ALL of it. That's right: an allegedly disappointing team who'd failed to achieve any of its goals was compensated for by a super-human team leader who had somehow magically overcome all our shortcomings to over-achieve so much, that even the organisation-wide "curve" was left by the wayside to reward such awesomeness.
- awakeasleep 16y ago
  It sounds like your manager actually suffered a bout of insanity or was a thief.
  - jonhendry 16y ago
    I'm guessing thief. It's where the incentives lead.
- loewenskind 16y ago
  This kind of nonsense is why I became a consultant. I get my bonus every day now and I don't have to do any go through the "performance review theater" anymore. If they really have a problem with me then don't renew my contract. It's simple and honest, just how I like it.

kenjackson 16y ago

It does seem asinine. Although frankly I can't think of many ways that seem much better. Do you always just give everyone on your team the exact same bonus?

tptacek 16y ago
That's one option. Not giving bonuses at all is another option. Tying incentive comp to business events (recruitment, customer acquisition, an A/B test and minor feature change that produces a 1% uplift, etc) is another option. Anything has to be better than going out of your way to stratify an otherwise well-functioning team.
- kenjackson 16y ago
  I just have a hard time believing incentives don't work. For example, if I lost all of my stock options today and was told I'd never get another raise or bonus, except CoL, I'd quit on the spot. In fact I'd argue, if there were no financial incentives, most HNers wouldn't do startups. I know everyone likes to say they do it to change the world and the passion of something or other. But in reality I've yet to see many founders take a $50k salary only (but keeping voting power) despite the profits of the company.
  - tptacek 16y ago
    Incentives work great. Incentives aren't the problem. The basket of formal performance-driven compensation programs colloquially referred to as "incentive pay" are the problem. Incentive pay includes: * Formal periodic performance reviews * Scheduled bonuses based on "job performance" * Ranking of employees (this is the old GE performance management paradigm; "up or out!")
  - rhizome 16y ago
    Losing all of your stock options or having something else taken away is not a negative case for incentives, it's an example of a disincentive, which also has an effect. They aren't the same thing, and you can tell because you don't know how well you'd be working if you never had the options in the first place (and hadn't been denied them or otherwise been treated unfairly). One of the reasons you don't see many founders take a $50k/yr salary is that very few of them are truly confident of success. I once heard an aphorism, "don't trust a founder who won't put their own money into the company." It's a little pointed and unrealistic, but you get the idea. In an industry driven by a mythology of becoming the next big thing (parallels to the equally one-in-a-million mindset in the music industry), no founder can afford, professionally and with regard to reputation, to treat themselves as anything but a foregone success, and that attitude requires "competitive compensation." This means they want to be paid as much as other unsure founders. The "low-salary superboss" is a product of already-successful companies.
    - kenjackson 16y ago
      Well I think I'd also turn down most jobs that said, "We'll pay $150k/year with no further financial incentives ever". Unless my goal was simply to to do as little work as humanly possible, yet still collect a check, I'd be hardpressed to work there. And if I did, despite non-financial that exist in the world, I really don't think you could get me to work more than 40 hours per week.
      - JabavuAdams 16y ago
        Are you really saying that you wouldn't work more than 40 hrs per week for < $150k. It's the money that makes you put in extra hours? The thing is that there's a huge number of talented people out there who will put in extra hours because the work is interesting, or they feel that if they don't, they're letting the team down. In fact, the really really talented developers seem to care less about money (after a nice base-line), and more about the work / team. Or, other obsessive (and useful) qualities make them unable to say no to work, etc. So, who would a company prefer to hire? Obviously, the qualified person who would work for free, because it's their passion. Interestingly, $150k/yr is a lot more than I've ever made, but that's neither here nor there.
mfukar 16y ago
In certain companies, bonuses are dependent on three factors: company success, team success, and individual success, based on targets agreed upon at a certain point in time. To me, that seems a lot more fair than implicitly believing all members of a team are of equal levels of skill, productivity, etc.
- tptacek 16y ago
  It is obviously true that people should be compensated for company, team, and individual success. It does not follow that the way to do that is a rigid, formal cycle of performance reviews and ranking.
  - mfukar 16y ago
    No, of course not. I did not mean to imply that.
- DuncanIdaho 16y ago
  I work in a company like that - and the system sucks - especially now in downturn. Here's why: 1. Some managers (of sub-par mind you) teams scored whole their team as "excelent" - as to compensate for lack of company success. Then when the MGMT figured that out - they implemented ratio - thus again hitting the team with many excelent overachievers, etc... 2. Myself personally am often transfered from f-ed up project to a f-ed up project (since I have the ability to mostly turn them around or help to mitigate the damage) thus ensuring that I will never be compensated for the level of effort necessary to turn around a f-up. This system just makes me sick - because I want to compete but I don't want for my collegues to suffer because of it - currently it just encourages teamicide. So this kind of scheme appears to demotivate over-achievers more than it motivates under-achievers.

codypo 16y ago

Not only is it very political, but it forces some baffling decision making. Assume I have a team of 10 in which 5 are wonderful contributors, and that, due to stack ranking practices, only the top 1/3 of my team gets consideration for big bonuses and promotions. Here, I'm incentivized to immediately hire 5 warm bodies, thus ballooning my team to 15, so that the top 1/3 get the recognition they deserve. It's actually rational to do that if I'm concerned that those 5 excellent performers will leave without that recognition. The incentives that appear due to stack ranking are really, really bizarre.

InclinedPlane 16y ago
Hiring is difficult and time consuming, what you really want is a re-org (which are all too frequent at big software dev. corporations).

ora600 16y ago

I left my job at BigCo because I was part of a 8 person team where the manager was supposed to create a normal distribution out of scores from 1-5. I was one of two employees recognized for doing an excellent job, but my manager could rate just one of us as "excellent". During a performance review, my manager talked for an hour about how much I'm contributing and what an amazing job I do. Then he ranked me as average. I was extremely disappointed because I wanted the awesome job I do to get more official recognition. I started searching for a new job almost immediately and left shortly after. So yes, review systems considered harmful.

illumin8 16y ago
This is actually how almost every large company works. Scale is 1 to 5, average is a 3, 2 is exceeds expectations, "Nobody ever gets a 1." The problem is that the grading is done on a curve, so that for every 2 given out, someone else must get a 4. If you get a 4, you are considered below expectations, and must be put on a "personal improvement plan," or managed out of the team. Because of this pressure, nobody wants to give out anything other than a 3. So they resort to stupid tricks like giving out "high 3s" or "low 3s" instead of 2s or 4s. The desire to model employee performance with data and manage out the bottom 10% has a crushing effect on the morale of any small technically focused team.
- bmj 16y ago
  Even smaller companies can work this way. During last year's review, my manager (who is also a lead developer--heck, even the VP of engineering writes code on a weekly basis) told me that he wanted to score me higher, but some people frowned on such things because "people really can't be that good." It doesn't bother me much because our department is fairly sane in how they deal with reviews, and management in general.
  - archangel_one 16y ago
    Agree. I work for a small company who occasionally like to act like a big company; we have a similar system which used to be hooked up to bonuses, but they eventually removed those. The explanation was pretty obtuse, but reading between the lines there were some employees getting bonuses even though they should objectively have been 4s or 5s on that scale - because of course everyone got 2 or 3 regardless.

orp 16y ago

When I was a team leader, I was asked to rate my team members on a curve. Management stressed that this was important, and that we all had to conform. I told my boss I had no intention of destroying my team, and handed out ratings and reviews as they were deserved. Never heard this particular line from Management again.

shrikant 16y ago

I was in a place that decided to give out bonuses to my team (consisting of 3 members and a leader) in the following way: 1. Allocate fixed amount to give out per team 2. Have team leader's manager determine how that pie would be shared between team leader and us 3 team members. 3. NOT have 360° feedback 4. Incorporate team leader feedback on team's performance into this decision I'm not sure what type of HR schmuck thought up that scheme. About a month after 'self evaluation', we were called into 1-1 meetings with the TL, who told us each separately how disappointing our performance had been, and the usual spiel about 'taking initiative' and 'stepping up' and 'moving to the next level'. Shortly after that we found out the three of us had received 0% each of the pie allotted to our team as a bonus. And the team leader had waltzed away with ALL of it. That's right: an allegedly disappointing team who'd failed to achieve any of its goals was compensated for by a super-human team leader who had somehow magically overcome all our shortcomings to over-achieve so much, that even the organisation-wide "curve" was left by the wayside to reward such awesomeness.

awakeasleep 16y ago
It sounds like your manager actually suffered a bout of insanity or was a thief.
- jonhendry 16y ago
  I'm guessing thief. It's where the incentives lead.
loewenskind 16y ago
This kind of nonsense is why I became a consultant. I get my bonus every day now and I don't have to do any go through the "performance review theater" anymore. If they really have a problem with me then don't renew my contract. It's simple and honest, just how I like it.