Introduction
What if your job performance was ranked against your colleagues, and only the top performers were rewarded? This is the core of stack ranking, a performance management method that has sparked intense debate in the corporate world.
Initially popularized by companies like General Electric and Microsoft, stack ranking sorts employees into performance tiers, rewarding the top, maintaining the middle, and often eliminating the lowest-ranked. While some argue it drives excellence, others claim it breeds toxicity.
Is stack ranking an effective way to boost performance, or does it harm workplace culture? Let’s dive in.
What Is Stack Ranking?
Stack Ranking Meaning
Stack ranking is a performance evaluation system where employees are ranked relative to their peers. Rather than assessing performance in isolation, managers compare employees and assign them into categories based on performance.
Stack Ranking Example
A common stack ranking system might look like this:
- Top 20% – High performers who receive raises, promotions, or bonuses.
- Middle 70% – Average performers who maintain their positions but receive little additional reward.
- Bottom 10% – Low performers who may face performance improvement plans or even termination.
This method was famously embraced by Jack Welch at General Electric and later adopted (and eventually abandoned) by tech giants like Microsoft.
How Does Stack Ranking Work?
Stack ranking follows a forced distribution model, meaning only a set percentage of employees can be in each tier. Companies implementing this method usually follow these steps:
- Managers evaluate employee performance based on predefined criteria.
- Employees are compared against each other rather than an absolute performance standard.
- A ranking is assigned, with a fixed percentage placed in high, middle, and low categories.
- Rewards and consequences are distributed accordingly, from promotions to terminations.
While structured, this system often pressures managers to label some employees as underperformers, even if the entire team is strong.
Pros and Cons of Stack Ranking
Advantages
✅ Encourages high performance – Employees are motivated to excel, knowing top rankings lead to rewards.
✅ Helps identify top talent – Companies can clearly see who contributes the most value.
✅ Creates structured performance evaluation – Simplifies decision-making regarding promotions and terminations.
Disadvantages
❌ Creates a competitive, cutthroat culture – Employees may focus more on outperforming peers than collaborating.
❌ Lowers morale – Knowing that a set percentage must always be ranked at the bottom discourages employees.
❌ Leads to high turnover – Top performers may seek healthier work environments, while lower-ranked employees are forced out.
Why Is Stack Ranking Controversial?
Although designed to reward excellence, stack ranking has faced heavy criticism:
- Toxic workplace culture: Microsoft abandoned it after employees reported backstabbing and decreased morale (Fast Company).
- Arbitrary and unfair: Some argue it punishes good employees if a quota requires low rankings.
- Outdated approach: Many companies are moving toward continuous performance management instead.
Alternatives to Stack Ranking
Instead of ranking employees against each other, modern organizations are adopting more collaborative performance management strategies:
360-Degree Feedback
Rather than a single manager ranking employees, 360-degree feedback collects input from peers, subordinates, and leaders to provide a well-rounded assessment.
OKRs (Objectives and Key Results)
Companies like Google use OKRs to set clear goals and measure success without direct comparison between employees.
Regular Performance Reviews
A structured performance review process ensures employees receive feedback without a rigid ranking system. Learn more about effective performance reviews here.
Final Thoughts
Stack ranking is a divisive performance management system. While it can drive results in highly competitive environments, it also risks creating a toxic workplace culture.
As HR trends evolve, many organizations are replacing stack ranking with more flexible and employee-friendly evaluation methods.
Should companies still use stack ranking, or is it time to leave it behind? The answer depends on workplace culture and long-term performance goals.
By understanding stack ranking’s impact, HR leaders can make informed decisions about how to evaluate employees fairly and effectively. Want to improve your company’s performance management? Explore better alternatives today.
