How workplace competition can backfire

Decision-Making

One well-known example of a dysfunctional workplace competition was GE’s “Rank-and-Yank” system, where the bottom 10% of the organization’s employees were fired on a regular basis. Another was Microsoft’s “Stack Racking” system, where an employee’s expectations for promotion were based on how they were ranked among their peers. A personal friend of mine who worked at GE many years ago stated, “The Rank-and-Yank system there made sure that everyone hired people weaker than themselves so they were never in danger of being yanked. When we interviewed a brilliant candidate, we made sure they never got the job because it would put ourselves in jeopardy or potentially result in a smaller bonus.”

A Vanity Fair article by Kurt Eichenwald cites that “Every current and former Microsoft employee I interviewed - everyone - cited stack ranking as the most destructive process inside of Microsoft.” Peter Cohan from Forbes stated that “[Stack Ranking] directed [Microsoft employees] to prevent their peers from getting outstanding performance reviews and brag about their accomplishments to each member of the management committee that determined their relative ranking.”

As you can see, workplace competition can be extremely destructive to company morale, especially during weak and uncertain economic conditions where people are preoccupied with getting laid off.

Forced ranking is a machine for converting colleagues into adverse incentives. If my place depends on finishing above you, your improvement becomes my problem. I should keep the useful introduction, avoid the ugly case, hire somebody fractionally dimmer and make sure my wins travel faster than yours. None of this requires bad people. It requires people who can read the rules. Management then looks at the wreckage and complains about culture, as if culture were a change in the weather.

Competition works beautifully when rivals can each perform at their best without sabotaging the shared result. Two runners get separate lanes. Two salespeople fighting over account ownership do not. A support leaderboard based on closed tickets practically begs everyone to develop an allergy to complicated customers. The nastiest systems keep the threat permanent. A one-day contest can add energy. A recurring promise that somebody must lose teaches secrecy, caution and political display. The scoreboard gradually becomes the real customer. The revealing character is the rational, frightened participant. Their route to safety runs through the colleague they stop helping, the risk they stop admitting and the brilliant recruit they keep outside. People respond to stakes with impressive ingenuity. If the path to individual safety runs through collective weakness, the candidate who frightens the panel will keep receiving a courteous rejection email. That is the organisation the ranking bought.