Stack Ranking

A Foolish Idea

There is a firmly held belief amongst managers and H.R. professionals that the way to get people to perform better is to pay them for it. It “stands to reason” that employees are “coin-operated”, and it is a primary tenant of our management practices. If you want people to work harder, you must pay them more.

The best way to motivate your staff is with a carrot and a stick, and the best way to dangle the carrot (and wave the stick) is to rank people based on their performance and then pay (or discipline) them accordingly. The approach is so common it even has its own management jargon — stack ranking.

Flawed Logic

Whilst the logic may be obvious, it is flawed. No, let me be a little stronger; stack ranking is a foolish idea in so many ways:

Systems

• Most of your team’s performance is driven by the system they work within and has little to do with the individual. Think about the time it takes you to drive your children to school in the morning. Sometimes, the traffic is light, and you arrive there in plenty of time, yet at others, it is gridlock. The time it takes you to negotiate the school run has next to nothing to do with how fast you can drive. Would Lewis Hamilton or Michael Schumacher get there any sooner?
• We confuse variation in the system for variation between people. If I asked a team of ten people to flip a coin one hundred times and then rewarded the person who flipped the most heads, would it have been luck or skill that got them their bonus, and how would their coworkers feel?

Teams

• Business is a team sport. Success comes from cooperation. The aim is to get your employees to work together. Yet if you rank your staff and pay them accordingly, you will create competition. Why would anybody share the “best way”, go that bit further for a customer, or help their coworker if it hits them in the wallet?
• Everybody is different. People bring different skills, abilities, insights and perspectives to a job. Those differences spark ideas, solve problems and drive improvement. How can you build a diverse team if you rank everybody using the same criteria?

People

• Extrinsic rewards reduce performance for anything other than piecework. If that sounds counterintuitive, watch Dan Pink’s TED talk to learn why.
• When the stakes are high people cheat. Teachers cheat, doctors cheat, police officers cheat, and salesmen cheat. Admit it, even you have cheated. Stack ranking gives your staff a reason to cheat, and cheating destroys performance.
• Carrots and bonuses are a slippery slope. Once you start paying bonuses, you can’t stop. If you decide to take them away, it will damage your staff’s motivation.
• Rankings become a self-fulfilling prophecy. If you tell somebody they are a poor performer, they will become a poor performer. This is why it is unwise to tell your children they are stupid or ugly. I may not be the world’s best parent, but I am sensible enough not to have a favourite child.

The Acid Test

But let us assume all of the above is wrong. Would performance improve if your organisation doubled, tripled, or quadrupled the bonus it pays? Try it and find out.

A Simple Alternative

What should you do instead? If you have a fantastic employee, promote them, and if you have a waster, sack them. For the rest, pay them fairly and equitably.

Only a fool would think stack ranking is a wise way to manage their people.

If you enjoyed this post, try Managed by Morons

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Photo by Robert Zunikoff on Unsplash