From 1981 to 2001, G.E. CEO Jack Welch popularized what was then seen as a “candid” and “entrepreneurial” management approach: Rank every employee, then fire the bottom 10%.
The practice known as “rank and yank,” “the vitality curve,” or “stack ranking,” was eventually abandoned by G.E. because internal HR leaders found the practice failed to capture future potential, hurt morale, and did not boost performance.
Researchers have found that rating-based performance reviews “often fail to change how people work, and dissatisfaction with the appraisal process has been associated with general job dissatisfaction, lower organization commitment, and increased intentions to quit.”
But today, companies from Amazon to Meta are reviving the practice, and reportedly use stack ranking to compare and evaluate talent. And as layoffs continue throughout the tech sector, experts say the practice is increasing in popularity. Here’s why stack ranking is making a comeback.
Ranking’s resurgence
Experts tell Fast Company that the practice of ranking employees has recently increased. HR software company Corvisio estimates that about 30% of Fortune 500 companies stack rank employees.
“More and more companies are using review systems to rank their employees,” says John Arendes, CEO of HR training platform Traliant. “If it’s done right, it can help employees who are ranking lower make improvements to their performance. [But] to make stack rankings work, there need to be objective performance measurements.”
Jessica Kriegel, chief scientist at Culture Partners, says she has seen a significant increase in the number of, and extent to which, organizations use and value quantitative assessments of employees.
“I’ve seen stack ranking increasing in popularity in tech in particular,” she says. “I spent 10 years at Oracle. And not only did they begin and continue to increase their own personal use of stack ranking, but they sold stack ranking software that got more and more popular, and which they sold outside of tech, as well.”
One reason stack ranking is becoming more common, says John Frehse, senior managing director at Ankura Consulting and board member of the Workforce Institute, is that new technology has made it possible for organizations to collect more data on workers.
“Stack ranking is a byproduct of digital transformation,” he says. “But it’s not necessarily useful nor accurate.”
Employee morale and productivity
Understanding how employees are performing is key to efficiently running any organization. However, the practice of comparing and pitting workers against one another often hurts employee morale, collaboration, and productivity, says Alexander Colvin, dean of the School of Industrial and Labor Relations at Cornell University.
Stack ranking has “become a fairly common practice and it’s one that creates a pretty harsh workplace environment. People feel constantly under the gun,” says Colvin. “You may produce some sort of individual effort increases out of fear, but I question that as a workplace culture solution because you end up losing the benefits of cooperation amongst employees and willingness to go the extra mile for the organization, which can ultimately provide better motivation than simply fear.”
Professors at Wharton Business School have found that fear motivates workers less than hope, and that fear can ultimately lead to a toxic work environment.
This was the case at Microsoft during the turn of the century. After years of requiring managers to stack rank employees, Microsoft workers cited the practice as the “most destructive” process at the company. “It leads to employees focusing on competing with each other rather than competing with other companies,” one employee told Vanity Fair in 2012. Microsoft axed the organization’s stack ranking system in 2013.
Creating this kind of “us vs. them” mentality is not a healthy nor sustainable leadership approach, says Frehse. “Jack Welch was wrong,” he says. “This is a guy that we thought was incredible as a leader but, really, he led based on fear.”
Why stack ranking is back
Despite such appeals, there are many reasons why organizations may be reviving stack ranking. Kriegel suggests the practice is on the rise because technology has empowered organizations to collect and compare data on employees more quietly. “In the lives of workers, [stack ranking] is often invisible, because what happens is it’s behind closed doors. Leaders are not communicating with workers that stack ranking has occurred or where they fall in that stack ranking.”
She also suggests that leaders may be following the “radically honest” (and perhaps harsh) leadership techniques of executives such as Elon Musk. Since taking over Twitter, Musk has communicated pessimistically about the organization’s performance, unceremoniously fired large swaths of employees, used fear to coerce workers back into the office, and effectively tanked employee morale. Indeed, others have also pointed out similarities between Welch and Musk as well.
“The way that Elon Musk decided who got laid off was he sent a note out, along the lines of ‘Tell me who your crappy people are.’ That is considered stack ranking, and it is ultimately not the right way to go about leading a team,” says Kriegel.
To be sure, understanding employee engagement, satisfaction, and success, while providing professional guidance and coaching when needed, can be executed with sensitivity, nuance, and efficacy. However, rating workers against one another appears to have fewer benefits.
Ultimately, Frehse argues that companies are investing in stack ranking because they want to justify firing workers. “Stack ranking allows us to lay people off and still feel like they’re a ‘good company,’” he says. “In a world where it’s critical to be seen . . . as a ‘good company,’ leaders are perpetually looking for excuses to make difficult business decisions without consequences.”
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