This article was updated from its original version after a spokesperson from Amazon reached out to tell Ladders, “We do not, nor have we ever, stack ranked our employees. This is not a practice that Amazon uses.”
Recently leaked documents, allegedly from Amazon, reveal a rigged performance review system that expects a certain percentage of employees to be ranked at the very bottom, hurting their chances for advancement and setting them up for failure at the e-commerce giant. This would not be the only company that forces managers to rank employees poorly to fill review quotas and performance boxes.
A group of Amazon employees spoke with Business Insider and revealed evidence of a “stack ranking” performance review system, in which “employees are evaluated on a curve and a certain percentage must rank at the bottom — which could hurt both an employee’s compensation and their future at the company,” Insider wrote.
This review system could force employees who do their jobs at an “acceptable” level down to the bottom of the list in an effort to satisfy predetermined performance review expectations.
“I was made to put someone in the bottom tier even though they were doing a good job,” one Amazon manager told Insider.
How companies force managers to put employees down
Amazon is hardly the only company with a history of enforcing a “meritocratic” performance review system with expectations that are preset.
In 2013, Microsoft ended its own stack ranking performance review process, according to the Society for Human Resource Management (SHRM). The program had required Microsoft managers to rank employees against one another on a scale of 1 to 5. Managers were expected to rank a certain percentage of employees as “underperformers” regardless of their true level of performance.
Two years later, General Electric nixed what many called their “rank and yank” performance review policy that Stanford Business Professor Bob Sutton described as “creating a bigger distribution between the haves and the have-nots in their workforce.”
According to Sutton, GE would fire about 10% of its workforce based on this policy.
“We looked at every peer-reviewed study we could find, and in every one, when there was a bigger difference between the pay of the people at the bottom and the top there was worse performance.”
Former GE CEO David Calhoun defended his company’s use of stack rankings, arguing the ranking system enforces clear and direct standards and criteria for advancement within the company. The ranking system avoids more ambiguous performance reviews and replaces it with a system that supports and encourages honest and open communication, Calhoun said.
Opponents of the review process claim that it pits employees against one another in an unhealthy way. At Amazon, employees are placed into one of three buckets: top tier, highly valued, and least effective. Documents reveal that Amazon expected about 20% of its staff to be top tier, 75% to be highly valued, and 5% least effective.
Biases infiltrate performance reviews
One of the biggest problems with a meritocratic performance review process is biases, wrote Harvard Business Review. Our employee assessments are imperfect, and this is especially true when managers are expected to answer broad questions about their staff.
For instance, questions like “Describe the ways the employee’s performance met your expectations” or “What are their significant accomplishments?” are both very open-ended and ambiguous, fill-in-the-blank performance criteria.
These questions “offer a blank space or open box that managers can fill with assessments, advice, and criticisms as they see fit,” HBR wrote.
Open box questions also leave the door open to biases. “As many studies have shown, without structure, people are more likely to rely on gender, race, and other stereotypes when making decisions – instead of thoughtfully constructing assessments using agreed-upon processes and criteria that are consistently applied across all employees.”
One of the biggest social media empires enforces a similar review process.
More than a dozen former Facebook employees expressed concern over Facebook’s “cult-like” corporate culture and performance review process. They said Facebook’s culture discouraged dissenting voices and used a performance review process that required employees to get reviews from about five of their peers — twice a year.
“This peer review system pressures employees to forge friendships with colleagues at every possible opportunity, whether it be going to lunch together each day or hanging out after work.”
Feedback from your peers cannot be challenged and is often anonymous. “You have invisible charges against you, and that figures mightily into your review,” one former employee said. Your friendships and strategic partnerships, not necessarily work performance alone, often lead to promotions and positive performance reviews.
A Facebook manager described the performance review process as a popularity contest. “You can cherry-pick the people who like you — maybe throw in one bad apple to equalize it.”
Ineffective performance reviews are a common problem
Many companies are aware of the problem. Only 2% of organizations believe their performance review process is exceptional. Studies have shown that employees much prefer more frequent (and less formal) performance feedback to a more structured performance review. In fact, a Deloitte report found that most performance reviews fail to boost productivity.
“Today’s widespread ranking- and ratings-based performance management is damaging employee engagement, alienating high performers, and costing managers valuable time,” according to Deloitte.
Developing a healthy performance review process is not an easy nut to crack, and this is especially true in larger organizations. Some have nixed the review process altogether while other companies have dialed back the review’s competitive nature.
Here is a peek at what the “new normal” and performance review will look like this year.