Microsoft just announced a number of changes in personnel policies designed to improve sagging morale. Good for them. It’s the result of a year of work by a longtime colleague of mine and now SVP of HR, Lisa Brummel. According to the reports, she spent a year listening to people and came up with a range of changes designed to stem the tide of people leaving.
Most news reports have focused on things like putting towels back in the locker rooms and giving senior people more stock, which are all well and good. But one point that was overlooked and seems intriguing is the changes they made to the scoring of performance reviews, a personal hot button of mine.
For decades Microsoft has done performance reviews with a rating system that was graded on a 10 point scale, from 0-5 on 0.5 point increments (in a rather silly attempt to avoid the look of a “beauty contest”). The ratings generally went like this:
- 5.0 – You walked on water, then turned the water into a nice Merlot. Almost impossible to reach, given to maybe one person a year, I saw perhaps 5 in my career there. Used to mean you would get a surprise 1-1 visit from BillG in your office.
- 4.5 – Outstanding work, really above and beyond the call. Used to mean something like 100 hour weeks, and with amazing results. Hard to get more than one of these without a promotion. Very small percentage of people: < 1%.
- 4.0 – Great work, excellent results, clearly leading the pack. Something like 10-15% of the people would get this score.
- 3.5 – Solid work, well done, everything is fine. Most people (e.g. 70+%) would get this score.
- 3.0 – You have a number of things to work on, some of them are threatening to your livelihood. You must improve or you are at risk. This was managed by HR to be about 10% of the team. There was always pressure for managers to give someone a 3.0, although the 10% was never rock-solid. But come on, SOMEONE on that team isn’t doing everything perfectly. If you got a string of 3.0s you are in trouble.
- 2.5 – This is the first step before the exit. If you get a 2.5 and don’t get fired, it means you got the message. If you get a 2.5, you had better either have an exit plan, or be working your butt off to save your job.
- 2.0 – Security is waiting outside my door to take your badge and help you pack.
- 0 – 1.5 were unused.
This system worked fine for years (e.g. the last 25 years), but was always a source of complaints. Some people didn’t like the subjective nature of reviews –- come on, performance reviews are subjective, that’s why you do them. Some people didn’t like being rated like cuts of beef (oh, get over it, you’re rated every day by your salary, by your peers…). But the biggest point of pain seemed to be the requirement for people to give a reasonable percentage of people a 3.0 or lower.
This can be seen as a Jack Welch’ian “toss out the bottom 10%” but in fact it just stemmed grade inflation. And reasonably speaking the world is not Lake Woebegone where everyone is above average. Some people in every group need to improve. So Microsoft required groups of more than just a few to have something like 10% rated 3.0 or below. This is just reasonable.
Now, in this new system they have gone away from numbers and gone to words. As I understand it, there are now three categories: “Exceptional”, “Strong”, and “Needs Improvement”. Seems to me that is the same as 4.0, 3.5, and 3.0 — but nobody asked me.
More importantly, however, this has made a good system worse. Not at the bottom of the scale, where it simply replaced a number with a name — they still need to worry about grade inflation, and there will still be groups that get told “oh, come on, you have to have at least some ‘needs improvements’.” No, my concern is where it should be: at the top.
Rewarding good performance is at least as important as correcting poor performance. And now Microsoft has lumped all good performers together in a lump. No longer will the true stars stand out from the really hard workers. No longer will people who achieve “Exceptional” (aka “better than average”) have motivation to strive for more.
And why did they change this? Because people at the bottom were offended. Ouch. Seems like a big mistake to me. I’m a huge believer that the best performers aren’t just better than average, they are 10 times better than average. You need to worry more about those people than anyone else. This seems like a move in the wrong direction.