Marissa Mayer’s Yahoo is a case study in the toxic nature of stack ranking

Marissa Mayer faces a tough technical challenge in turning around Yahoo as a business. But critics say some of her biggest mistakes have been on the management side. A main issue, according to an excerpt from journalist Nicholas Carlson’s upcoming book on her tenure, is her adoption of stacked or forced ranking.

Mayer’s system—called Quarterly Performance Reviews or “QPRs,” and adapted from similar approaches at other tech companies—requires managers to rate their reports on meeting their goals from one (“misses”) to five (“greatly exceeds”), and for at least some percentage of them to be in the bottom buckets, regardless of whether any truly “missed,” according to Carlson’s account. Compensation, and even continued employment can depend on these scores. Mayer has repeatedly rejected this assertion, according to the account. (We reached out to Yahoo for comment and will update this when we get one.)

Carlson describes a company that’s seeing the theoretical and psychological problems with stack ranking in action. It has created increased competition, demotivated workers, hurt teamwork, and led to ratings based on arbitrary opinions instead of real performance differences. And even managers are miserable because they’re forced to give people ratings they don’t believe in.

Dissatisfaction came to a head when Mayer agreed to answer anonymous questions in a public meeting for the company’s employees. Here’s the most popular of the many that complained about the QPR process, as voted by employees:

I was forced to give an employee an occasionally misses, [and] was very uncomfortable with it. Now I have to have a discussion about it when I have my QPR meetings. I feel so uncomfortable because in order to meet the bell curve, I have to tell the employee that they missed when I truly don’t believe it to be the case. I understand we want to weed out mis-hires/people not meeting their goals, but this practice is concerning. I don’t want to lose the person mentally. How do we justify?

And another response that received more than one thousand votes:

Based on my experience, I don’t feel like the process was done correctly nor was I treated fairly. My former manager did not provide feedback or guidance, other than to say that higher-ups decided the numbers and he had no input. Considering how important these ratings are, can we have a legitimate appeals process?”

Both sentiments reflect the core problem with stacked ranking. That human and team performance doesn’t always naturally fit in “buckets” or a curve.

Holding people accountable for their goals and performance is essential. And Yahoo has improved its culture, ability to retain employees, and desirability as an employer under Mayer.

But forcing a distribution ends up making it more arbitrary, rather than more rigorous.

Marissa Mayer’s Yahoo is a case study in the toxic nature of stack ranking