Stack ranking and the Microsoft collapse
This is documented history rather than a laboratory result. The events are well recorded. What they teach is an argument, and the entry makes it openly.
The chief executive Jack Welch made a management system famous at General Electric: rank every employee each year, and fire the bottom ten percent, no matter what. It sounded rigorous, a way of relentlessly upgrading talent. Other companies copied it, Microsoft among them. But by the 2000s, according to reporting by Kurt Eichenwald, the results at Microsoft were poisonous. Because someone always had to be ranked at the bottom, employees stopped helping each other and started competing to not be last. Engineers avoided joining teams with other strong performers, since a team of stars still had to produce a bottom ranker. People hoarded information, sabotaged rivals, and optimised for looking better than their colleagues rather than for building good products. In 2013, Microsoft finally abandoned the system, which Eichenwald's reporting blamed for a lost decade of innovation. A method meant to sharpen the company had taught its best people to fight each other.
When a system rewards people for beating their colleagues, you are paying for internal competition rather than for good work, and you get what you reward. Forced ranking made cooperation irrational at Microsoft: helping a teammate could push you down the list, so people stopped. Any evaluation that grades people against each other rather than against the work creates the same pressure, turning colleagues into rivals. Before you adopt a system that ranks people head to head, ask what behaviour it actually rewards, because if being better than the person next to you is the goal, undermining that person becomes a rational strategy.
Source: Documented corporate history. Reporting by Kurt Eichenwald, Vanity Fair, 2012. Microsoft ended the system in 2013. A different theory of talent, for contrast: Hastings and Meyer, No Rules Rules, 2020.
Hastings and Meyer, 2020
A different theory of talent, built on paying at the top of the market and removing anyone who is merely adequate. It answers the same question stack ranking answers and arrives somewhere else, which is what makes the comparison useful.
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