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Why did Yahoo adopt Microsoft's mean-spirited HR policy?
...the one Microsoft just ditched
 
Marissa Mayer's attempt to carve Yahoo into a team of A players comes at a cost.
Marissa Mayer's attempt to carve Yahoo into a team of A players comes at a cost. (Mario Tama/Getty Images)

Employees at Yahoo are starting to raise a ruckus over Marissa Mayer's "Quarterly Performance Review," a program that reportedly forces managers to rank their staff on a "modified bell curve," reports Kara Swisher at All Things D. On internal message boards, employees are complaining that the practice led to the recent firings of more than 600 workers.

If forced bell-curve reviews sound familiar, that's because Steve Ballmer at Microsoft famously employed a similar system called "stack ranking" that many have criticized as one of the root causes for the company's decade of sliding profits and shrinking market share. Coincidentally, on Tuesday morning, Microsoft announced an immediate end it its stack ranking program, and said it would start placing more "emphasis on teamwork and collaboration," as well as "employee growth and development."

Stack ranking, which some firms euphemistically call "talent management," came to life in the '80s when GE's Jack Welch used it to regularly shave off his least productive workers. Though details vary from company to company, Microsoft's version was fairly typical. It required all employees to rank their bosses and peers from one to four (four being tops). Then, at the end of the year, executives used the scores to reward or punish employees. Those with the best received larger bonuses, and those with the worst effectively got the boot.

In 2012, Vanity Fair spelled out the reason the program attracted so much disdain in its blockbuster article, "Microsoft's Lost Decade." Kurt Eichenwald wrote:

Supposing Microsoft had managed to hire technology’s top players into a single unit before they made their names elsewhere — Steve Jobs of Apple, Mark Zuckerberg of Facebook, Larry Page of Google, Larry Ellison of Oracle, and Jeff Bezos of Amazon — regardless of performance, under one of the iterations of stack ranking, two of them would have to be rated as below average, with one deemed disastrous.

For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings. And the reviews had real-world consequences: Those at the top received bonuses and promotions; those at the bottom usually received no cash or were shown the door. [Vanity Fair]

Swisher says Mayer's system is a bit different. Only managers are asked to assign ranks, and they're told to mark 10 percent of employees as "Greatly Exceeds," 25 percent as "Exceeds," 50 percent as "Achieves," 10 percent as "Occasionally Misses" and five percent as "Misses."

Swisher also reported that Mayer in a recent meeting denied the accusations, saying the ranking was not "forced," nor was it a "strict bell curve." Managers, she said, had wiggle room in how they calibrated their scores. But employees disputed this claim on message boards.

So why is Mayer employing such a famously unpopular strategy? At Slashdot, Nick Kolakowski says, "Mayer clearly feels the need to transform Yahoo into a lean, mean machine capable of competing against Google and other aggressive Silicon Valley competitors. But in her drive to craft a team of A players, she may have sown the seeds of internal dissent."

Some fear this could send Yahoo down the same path Microsoft took. At Forbes, Peter Cohan calls it Mayer's second "epic" HR fail, the first being putting the kibosh on Yahoo's work at home policy. He writes:

It seems to me that Mayer is more comfortable dealing with the details of product design and acquiring startups than she is with managing people. To be sure, most agree that Yahoo has had a problem with productivity — suggesting it has too many people, many of whom are not working at peak efficiency or effectiveness...

The counterargument is that Yahoo’s stock price has risen 110 percent since Mayer became CEO in July 2012. What improvements in Yahoo’s ability to compete or financial performance justify that increase? And won’t Yahoo’s dodgy human resources policies cause its best talent to jump ship — further jeopardizing its future? [Forbes]

 
Carmel Lobello is the business editor at TheWeek.com. Previously, she was an editor at DeathandTaxesMag.com.

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