Performance review is another way of saying “morale killer”

by Leland Teschler, Executive Editor

I once worked at a company where the human resources department had run amuck and perfected a performance review process pretty much guaranteed to be discouraging. Every six months, we were ostensibly graded on a one-to-four scale on each of a laundry list of goals. But this grading scale was only in theory. For some reason, no one could earn the highest score. Managers who gave one of their reports a “four” got the evaluation bounced back for a redo, often accompanied by a back-handed reprimand.

Thus, no matter what you managed to accomplish, you could never be “outstanding.” To make matters slightly worse, the goal-evaluation process was such that even strong performers could end up, on paper, looking like bumbling fools. The reason: The computerized evaluations demanded numerous goals in numerous categories. So managers were forced to come up with inconsequential objectives just to make the evaluation look complete in the eyes of HR. Even superbly performing employees couldn’t meet them all. So there were always lots of unimportant things left uncompleted. The theory among employees was that managers used the uncompleted tasks as an excuse to keep salaries down.

The upshot of the evaluation process was that top management came across as two-faced: During company meetings, we were all part of a great team. During individual evaluations, we were all idiots.

I once thought my brush with this evaluation nightmare was just bad luck. But there is a lot of evidence that counterproductive employee evaluations are the norm in U.S. business rather than the exception. For a classic example, consider the evaluation process in place at Microsoft prior to 2012. Called stack ranking, it forced managers to declare a certain percentage of their reports as being poor performers, no matter how well they were actually performing.

As related by author Kurt Eichenwald in Vanity Fair magazine, “Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside Microsoft, something that drove out untold numbers of employees.” Stack ranking, he said, gave engineers incentives not to work with other engineers who were outstanding for fear of ending up on the bottom of the ranking scale.

Microsoft engineers also told Eichenwald that the politics around stack ranking slowed company decision making dramatically. “People planned their days and their years around the review, rather than around products. You really had to focus on the six-month performance, rather than on doing what was right for the company,” one engineer told him.

Indications are that Microsoft was embarrassed by Eichenwald’s portrayal of its review process. Though it never said why, the company scrapped its stack ranking scheme shortly after publication of the article.

And there is ample evidence that nobody likes performance reviews. Consider the findings of Texas A&M researchers. They hypothesized that people who thought their abilities developed mainly through effort and experience would take negative feedback better than others who mainly tried to avoid negative judgments.

Nah. In studies the researchers ran, nobody liked negative feedback.

Those researchers could have saved themselves some effort if they had simply referred to the works of quality guru W. Edwards Deming. As far back as the early 1950s, Deming was teaching Japanese manufacturers to evaluate groups rather than individuals. In so many words, he claimed that individual performance reviews create chaos rather than order.

A lot of companies every day prove that Deming was right.


  1. Stacked ranking is also tailor made for age discrimination. Tag all the old timers as under-performers and deny them raises or bonuses. They are near retirement and not going anywhere but out the door soon and the quicker the better.

  2. My sentiments exactly. Peter Drucker is another management scholar who agrees with Deming. Too bad American management appears to have gone down the wrong road. I wonder if they have stacked ranking elsewhere in the civilized world.

  3. Good topic. Now that I’m in management, though, I question what is the solution to providing constructive feedback to employees?

    When I was at Northrop, I had a performance review that convinced me it was time to leave. First, my supervisor had no idea what I did. For the most part, that’s fine. But for the review, he had to go around and talk to people. That could go both ways depending on what sort of characters you work with. I happened to work with a couple of back-stabbing buffoons.

    On top of that, I got dinged on my eval because he wanted to know why “I wasn’t staying late like the other engineers.”

    It was simple, my “expletive” worked the first time. Theirs didn’t. I never missed any deadlines, and sorry that I just make it look easy. And second it was illegal unless they paid overtime as we worked on government contracts. And they were NOT paying overtime. We were ordered to never put down more than 8 hours on a time card, so I simply figured that was all I was supposed to work.

    So I got dinged for having successful designs. And the punch line was that they had a program where they put signage all over saying, “Do it right the first time.”

    I had just designed and prototyped a piece of deployable satellite equipment that the government wanted on a billion dollar mission. This was to deploy a synthetic radar array that was ultimately to be about 100 yards. You can see it here:

    They had given our competitors $5 million and five years to develop a technology that fell flat on its face. They came to us and we did it in one year and one million dollars. It was an epic effort and I ended up with the same performance review as the guy that couldn’t get his small project to work and then took three or four months off on paternity leave.

    Not a good way to retain talent.

    Then, years later, I was working for Lindsay Corp. Similar to what you said, we could get the maximum score, but only so many people could get it each year (quota) because it influenced our raises.

    One day, corporate sent our recruiter to our division for some training. She made the statement that “Lindsay only hires “A players””. What’s that? “That’s the best of the best”.

    I said, no that’s not true. She looked surprised. I explained that we were only allowed to have X% of A players according to the review process. The regional manager chuckled.

    I’d love to hear more on the “right” way to do reviews, because I have no clue. I just know the wrong way.

  4. Excellent article! Through nearly 40 years in the workforce as a ship’s officer, Naval Reserve officer, and various management positions in sales, marketing, administration, and product management, and as an hourly worker in the years I have been raising my kids, I have found performance reviews to be worse than useless on both sides of the desk. Word comes down from the top not to give outstanding reviews so employees won’t expect a pay increase. Inexperienced or poorly trained managers sometimes believe a well-earned excellent review will make a great employee think they have no room for improvement.

    Reviews are often emotionally charged and politically motivated. Managers need to be brave an fair and communicate with their staff often so that performance reviews are not necessary.

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