Yahoo is ranking employees. When Microsoft did that, it was a disaster.

November 12, 2013

Yahoo CEO Marissa Mayer speaks at the Fortune "Most Powerful Women Summit" last month in Washington. (Photo by Paul Morigi/Getty Images for FORTUNE)

Kara Swisher at AllThingsD reports that Yahoo managers are being compelled to rank employees as part of the company's performance review process. Under the "Quarterly Performance Review" (QPR) system, Swisher says, managers are told to give a certain percentage of staff what are essentially failing grades -- even if they feel the whole team is meeting or exceeding expectations. That demoralizing approach sounds suspiciously like the "stack ranking" system that other reports have claimed contributed to a decade of decline at Microsoft.

The QPR system requires managers to rank 10 percent of employees as "Greatly Exceeds," 25 percent as "Exceeds," 50 percent as "Achieves," 10 percent as "Occasionally Misses" and five percent as "Misses" according to Swisher. Yahoo chief executive Marissa Mayer has reportedly been heavily involved in the rollout of the system over the past year, according to Swisher, which has apparently resulted in some 600 layoffs.

Mayer defended the system in a Q&A with employees last week, Swisher says, saying that it is not a forced ranking or a “strict bell curve” and that there was some wiggle room from the strict calibrations described by sources to AllThingsD. However, anonymous postings to Yahoo's internal message board obtained by the news organization suggest that managers felt they were forced to pass out rankings that they felt were unfair because of the review process.

In a profile of Microsoft last August in Vanity Fair, former and current Microsoft executives blamed the company's decline under outgoing chief executive Steve Ballmer on a management strategy that sounds awfully similar:

Every current and former Microsoft employee I interviewed — every one — cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. The system — also referred to as “the performance model,” “the bell curve,” or just “the employee review” — has, with certain variations over the years, worked like this: every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor.

At Microsoft, the system led to a focus on short-term goals rather than long-term innovation and caused employees to pay more attention to the political, relationship-building aspects of their jobs rather than to actually engineering new products, according to the Vanity Fair article.

Swisher suggests a similar culture may be emerging at Yahoo since the company implemented QPR, saying that employees are worried that the system may reflect “political bias and favoritism” in ways that the executives at the top may not be able to separate from actual workplace performance.

Yahoo did not respond to a request for comment on the review by press time.

 

Andrea Peterson covers technology policy for The Washington Post, with an emphasis on cybersecurity, consumer privacy, transparency, surveillance and open government.
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