Are ‘Rank and Yank’ Performance Reviews Making a Comeback?

It’s the dream of many bosses: a workplace where decisions about promotion and firing are based solely, and objectively, on an employee’s performance. And recently, a bunch of big technology firms have turned to a performance-management system once derisively dubbed “Rank and Yank” to help them achieve that goal.

Stack ranking, as the system is usually called, was once widely—and controversially—used to evaluate employees. The system uses a set of specific metrics to do so, offering bonuses and other rewards to those at the top, while potentially demoting or firing those at the bottom. Despite the fact that stack ranking fell out of favor some years ago, some Big Tech firms have begun using it to try to increase productivity. The result has been the firing of thousands whom the system has designated as underperformers.

In their defense, the firms say that new technology innovations over the last 40 years have greatly improved the ranking system. But critics aren’t so sure, and they worry about stack ranking making a broader comeback in corporate America. “Tech is on the leading edge of exploring new analytics, but the key is whether they can tie all this to better outcomes,” says Sid Cooke, a senior client partner and member of Korn Ferry’s CEO Succession and Coaching practices.

As recently as the 2000s, about 42% of large US companies (according to some estimates) used a version of stack ranking. The practice was best exemplified at General Electric under the leadership of CEO Jack Welch. Under Welch, GE bucketed employees into three groups: a small group of top performers (representing 10% to 15% of the workforce), a large middle group (around 75% to 80%), and the bottom-performing 10%. Each year, the company fired the employees who fell into the last bucket.

But stack ranking fell out of favor when critics pointed out that managers are almost never purely objective in ranking their employees. For instance, research has shown that in many performance systems, women get far more negative feedback than men do. What’s more, so-called “objective” criteria can often have critical nuances—such as when one salesperson makes more sales simply because they work with larger accounts than their colleagues do. Comparing people in operations, finance, or other functions gets even trickier, Cooke says. In some parts of the world, particularly Europe, where there are strict unfair dismissal laws, the system would likely encounter legal obstacles. “Work councils would never agree to it,” says Roger Philby, head of consulting for Korn Ferry in the UK and Ireland.

But stack ranking’s biggest issue might be its potential negative impact on corporate cultures. Its critics note that the system can disincentivize collaboration: By assisting a colleague to do better, you could be helping them to get a promotion at your expense, or worse, putting your job at risk. In such an environment, “why would I go out of my way to help my colleague succeed?” says Arvinder Dhesi, a Korn Ferry senior client partner specializing in organization strategy. Even when the stack-ranking system works, a company can run out of underperformers to fire after a few years. In some cases, managers can be forced to rank good contributors as bad—or face the ire of bosses. GE itself phased out stack ranking in the early 21^st century.

By using more data, tech companies hope to get around some of the system’s past problems. Many things are easier to measure now than they were in the 1980s, which could cut down on the subjectivity that can seep into any ranking system. Also, rather than rely strictly on a “all bottom performers get fired” approach, organizations can offer low-performing workers resources to improve. “Do you use a stacked rank for development? Then that’s a positive,” Cooke says.

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