From this article:
Mayer also favored a system of quarterly performance reviews, or Q.P.R.s, that required every Yahoo employee, on every team, be ranked from 1 to 5. The system was meant to encourage hard work and weed out underperformers, but it soon produced the exact opposite. Because only so many 4s and 5s could be allotted, talented people no longer wanted to work together; strategic goals were sacrificed, as employees did not want to change projects and leave themselves open to a lower score.
One of the uglier parts of the process was a series of quarterly “calibration meetings,” in which managers would gather with their bosses and review all the employees under their supervision. In practice, the managers would use these meetings to conjure reasons that certain staff members should get negative reviews. Sometimes the reason would be political or superficial.
If anyone believes Vitality Ranking works, especially with knowledge workers, you’re sadly mistaken. The system breeds paranoia, malaise, and mediocrity:
- Paranoia, in that the employees know the above scenario is inevitable–calibration meetings must occur in which they’re judged against their peers and forced into a distribution. If your organization is rife with dead wood, man-up and fire them. Otherwise, understand that forcing your “healthy” employees into a bell curve is akin to cutting off good tissue after you’ve excised a gangrenous limb.
- Malaise, in that the employees know there’s a sad inevitability to the process. Everyone knows who the “golden boy” is in your rank. Generally, he’s the sycophant, workaholic who’s constantly the smartest guy in the room. He’s the ‘5’ in the above scenario. You also know who the loser is in the group, the “Well, I’m not as bad as ______.” He’s the 1. He’s dead meat. So, ensure you’re not last and you “win,” sort of.
- Mediocrity, in that this system makes you continously gaze INWARD. Managers don’t like it…they spend inordinate amounts of time doing QPR’s, paperwork, and susbstantiation. Employees obsess about it, because they might be on the chopping block, so you start funneling “achievements” to your manager so he has ammunition for the calibration meetings. INWARD looking means You’re not competing. That’s fine for GE (oh wait, no it’s not), but for any company without a substantive monopoly and barrier to entry in their field, it’s the first step towards destruction.
If Mayer instituted this at Yahoo, then the company deserves to go down in flames.
/rant