Stack ranking is equivalent to having a finite bonus pool, or having Gold, Silver and Bronze in the Olympics. Yeah the 4th place finisher is an amazing athlete, but there are only three medals.
Suppose you are a manager who manages 5 employees. If you have $100K to give out as bonuses, you could just divide it up equally. Over time employees would come to expect to get their bonus and it would cease to be a motivator.
While stack ranking imposes a bit of an assumption about the distribution of effort/merit on a team, it's also intended to foster spirited competition for the top spots, much like the medal system used in the olympics.
If you are managing a meritocracy and the rules of the game are known, nobody will begrudge someone else getting a bigger bonus. Many workers idealize working on a team where they are not the strongest, so that they can learn from others.
The point is that it's not just about rewarding people, its about rewarding people for the kind of significant contributions to the team that make a business difference. If managers are letting it get political and it turns into a BS metric, then that's evidence of a larger management problem than a problem with the particular distribution of bonuses entailed by the program.
One could argue that any bonus that is uncertain has the potential to alienate the employee if it is not earned. The converse would be to give all employees motivational bonuses, or, in other words, not to give bonuses but to rename some of the guaranteed compensation "bonus" when it's actually just salary.
If a corporate culture is so backward that the genius in the next cube getting a bonus is viewed as a bad thing, then it's probably time to think about how/why bonuses (or the equivalent) are given in a smaller business where the bonus comes in the form of options being worth something, etc.
1)
The reason the oplympics works is that you can rank people accurately down to within miliseconds. And peoples success doesn't depend on others help.
2)
If the bonus pool is fixed, you can give everybody the same one year if that makes sense given the input and one year you can give something to one guy and more to the rest. You can't do that with a fixed band system. That is its key flaw.
I was not arguing that a team based bonus is not also a good idea.
In my experience three qualities that are very unevenly distributed are motivation, initiative, and talent. Depending on the business some combination of these represents the ideal employee.
Well if the manager can't define a system that everyone buys into for measuring results, there is a problem. Ultimately it's going to be a judgement call to some extent.
The bands are just there to force the manager to avoid adding noise to the signal. If she has to follow the rule and allocate bonuses w/in the bands, she doesn't have to be the bad guy.
1) The reason the Olympics works is that you can rank people accurately down to within miliseconds
Aside from things like diving, ice dancing and synchronized swimming, though supporting your statement those activities are absolutely loaded with controversy because the subjective nature -- as opposed to the objective reality of a stopwatch -- leads to endless differences of opinion.
Ranking makes sense if you have objective measures. In this industry there are staggeringly few, especially for large internal teams working on parts of a whole. Everyone has agendas and imperfect knowledge, everyone has bias and self-serving judgments.
>>Stack ranking is equivalent to having a finite bonus pool, or having Gold, Silver and Bronze in the Olympics. Yeah the 4th place finisher is an amazing athlete, but there are only three medals.
Aha! That explains why this at most works for individuals and not for teams.
And all the best doing big things without successful teams.
Suppose you are a manager who manages 5 employees. If you have $100K to give out as bonuses, you could just divide it up equally. Over time employees would come to expect to get their bonus and it would cease to be a motivator.
While stack ranking imposes a bit of an assumption about the distribution of effort/merit on a team, it's also intended to foster spirited competition for the top spots, much like the medal system used in the olympics.
If you are managing a meritocracy and the rules of the game are known, nobody will begrudge someone else getting a bigger bonus. Many workers idealize working on a team where they are not the strongest, so that they can learn from others.
The point is that it's not just about rewarding people, its about rewarding people for the kind of significant contributions to the team that make a business difference. If managers are letting it get political and it turns into a BS metric, then that's evidence of a larger management problem than a problem with the particular distribution of bonuses entailed by the program.
One could argue that any bonus that is uncertain has the potential to alienate the employee if it is not earned. The converse would be to give all employees motivational bonuses, or, in other words, not to give bonuses but to rename some of the guaranteed compensation "bonus" when it's actually just salary.
If a corporate culture is so backward that the genius in the next cube getting a bonus is viewed as a bad thing, then it's probably time to think about how/why bonuses (or the equivalent) are given in a smaller business where the bonus comes in the form of options being worth something, etc.