Grading workers on a curve: a dumb idea that simply won't die

She's smiling, but Marissa Mayer wants to take your money and give it to another high-performing worker. (Courtesy Yahoo.com)

It's stunning that just as Microsoft is emerging from a decades-long mistake in how it manages employees, Yahoo is voluntarily diving into the same rat hole. When, oh when, will U.S. corporations stop using 18th Century techniques for managing workers? And when with HR departments stop getting fooled into paying big bucks for management software that proves nothing and only makes employees hate employers? KPIs are a problem when it comes to evaluating employee performance. Fortunately, OKRs could replace KPIs, which would be better for workers and employers.

Anyway, to review, refrains of "Ding, Dong, the witch is dead" could be heard all around Puget Sound recently as Microsoft ditched its "stack ranking" employee system. MSFT workers, since forever, were graded on a curve within their group. That meant in order to reward a good employee, you had to find someone to punish, so whereas the good employee would continue to show better effort and commitment, the discretionary effort of the "scolded" employee would only ever dwindle.

I remember when it was my turn to be punished. I was called into my boss' office, given the bad news told to simply ignore my low review score. It was my turn, he said. My boss did the rational thing and simply spread the pain around. In fact, he said. I was overdue...he'd skipped me the last time around because I was such a good performer. But someone else in the group really deserved a decent raise, so, I need a poor review. I didn't care about the meaningless score, and junior Marxist that I am, I always understood that the few shekels doled out at review time were meant to set employees against each other. Still, it cost me money.

Microsoft assumed workers who hated each other would compete fiercely and that would improve innovation. Yes, that's as dumb as it sounds.

So now that it's springtime in Redmond, and a lot of bad habits are being eliminated, Microsoft has decided that it's a good idea for teams of people to work together instead of against each other.

Meanwhile, the brilliant minds at Yahoo -- clearly a world leader in innovation recently -- have quietly decided to imitate Microsoft. The Old Microsoft. And by imitate, it sounds like we mean Yahoo is destined to suffer from a dark Middle Ages period where it’s lumbering company surviving on the fumes of its decades-old good ideas, and wastes a lot of money chasing after its lost youth.

Yahoo has recently implemented its own grading-on-a-curve system. Stories around the Web reveal Yahoo workers complaining about my Microsoft experience -- they've been poorly graded in order to balance out rewards given to high performing employees.

Silicon Valley companies love data, naturally. It's easy to sell their HR departments on swanky software that assigns numbers to people. Everyone, you see, is in love with Moneyball right now. And companies are desperately searching for their equivalent of high on-base percentage workers who are undervalued by the marketplace and can offer bargain returns. Plus, it's fun to play with spreadsheets.

Let's get this out of the way: grading on a curve doesn't work. Bloomberg's Joshua Brustein dispensed with that myth quickly last week: "The Institute of Corporate Productivity says the number of companies using either a forced ranking system or some softer facsimile is down significantly from previous years. Companies performing well were less likely to be using forced ranking systems than those that weren’t. Just over 5 percent of high-performing companies used a forced ranking system in 2011, down from almost 20 percent two years earlier."

It's also mean-spirited, at its core. It makes small groups of people fight over a limited resource, which exposes the lie publicly traded firms sell their shareholders all the time: in capitalism, good companies can simply keep growing, keep expanding their pies through innovation and efficiency.

Plus, ask yourself this question: how exactly does grading on a curve exist in upper management? We all know the end for execs like Yahoo's Marissa Mayer is a multi-million dollar parachute. Curves, you see, are OK to use against others.

Meanwhile, so much management software is snake oil. I was once forced to use a system that basically spell-checked for political correctness. When I wrote up my annual justification for myself, I naturally mentioned my Red Tape Chronicles column many times. Each time the software saw the word "Red" it suggested I change it to "Native American." I shudder to think about how much that software cost my company, and ate into my bonus.

Once you get past counting the widgets that people make every day, there really isn't an effective way to turn workers into spreadsheet data cells. In our book The Plateau Effect, Hugh Thompson and I expose this data idolatry for what it is: a failed strategy that only values things that can be counted. Data idolatry, for example, ignores the "mystery ingredient," long recognized as an essential part of a company's success. Why does this team work well? Maybe it's because Cheryl, who seems low-skilled, actually does an extraordinarily good job making people feel at home when at the office. Fire her, and suddenly people don't like coming to work. Just because it can't be measured, doesn't mean it's not important.

Fear is at best a temporary motivator; it usually motivates people to find other work. Creating an environment that poisons relationships and rewards back-stabbing is the work of a maniacal leader. Workers would do well to recognize this set-up-to-fail arrangement and simply not buy in.

There are plenty of modern management strategies that go beyond grading on a curve. Here's one. Bob Whipple of Leadergrow points out the fallacy of trying to motivate anyone. Free pizza and an occasional fake pat on the back don't work. A raise based on faux criteria simply makes workers conspire to hack the system and meet the faux criteria. Motivation comes from within. Giving people the freedom to do what they do best, so they invest their whole selves in what they do, is the only way to create an atmosphere that's not hostile to true motivation. And innovation.

It can't be created with a software program, or a fancy acronym, and it certainly can't be done by robbing one workers' pay to reward another.