Activision Blizzard’s Jack Welch-style employee rating system has been criticized

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Workers have a lot to worry about these days layoffs, return-to-office mandates, annual assessments. But there’s another lurking concern, rooted in the bygone era of Ronald Reagan and oversized blazers: stacked performance charts.

Popularized by former General Electrics CEO Jack Welch in the 1980s, this appraisal process requires managers to rank staff on a bell curve and give low ratings to a certain proportion of them. It’s relevant again after a manager at video game developer Blizzard Entertainment walked out for refusing to give a low rating to an employee he felt didn’t deserve it to fill a quota. Blizzard, a unit of Activision Blizzard, says the process was designed to facilitate honest feedback and improve performance.

The problem is, it also creates toxic workplaces like a 1980s Superfund site. Stacked rankings can pit employees against each other, giving managers like Blizzard’s the impossible task of telling hard-working and valuable employees that they simply aren’t good enough. There have been dozens of research papers on stacked rankings, also called forced rankings. They found that while the process may increase productivity in the short term, it chills collaboration and creates a dysfunctional, stressful, top-down work environment that could cripple the business. The ranks of blue-chip companies that have dropped out of the system include Ford Motor, Capital One Financial, and Microsoft, the same tech giant now looking to acquire Activision Blizzard.

Managers need to focus on building trust, not being driven by fear, said Victor Assad, a workplace consultant, adding that stacked rankings can also lead to extra legal costs for employers.

However, the system persists and is used by e-commerce giant Amazon.com, the second largest private employer in the nation. At Blizzard, known for games like World of Warcraft, managers had to give about 5 percent of their teams’ employees a poor development designation, which would lower their bonus and could prevent them from advancing. Stacked classification systems can also require the lowest-level people on the team to be fired, which Welch, who died in 2020, famously said was the right thing for them since they likely would have been axed later anyway.

The problem is that someone is very likely to be rated as a good performer, but ranked in the bottom 5% or 10% if their peers are outstanding. Similarly, a poorly performing employee might avoid the ax by working in a group of latecomers. That’s according to Dick Grote, a now-retired management consultant who literally wrote the book on forced rankings in 2005 and has advised organizations including Citigroup, PepsiCos Frito-Lay division, and Caterpillar.

The problem here is that Blizzard Entertainment and their performance management system mixes the two approaches, Grote said by email. They are using absolute terms of comparison to make a relative comparison judgment. This approach is what caused Blizzard’s manager to leave. In a Twitter thread detailing his departure, the manager called the quota system toxic. The thread spawned dozens of supportive replies, including one that called stacked ranking both unethical and ineffective.

Grote disagrees, saying Blizzard’s approach was flawed, but could have been corrected. Many top executives defend the practice. Ben Zweig, CEO of workforce intelligence firm Revelio Labs, said relative comparisons like forced rankings prevent the very common pattern of awarding high ratings to nearly all employees.

Data without variance is actually no data at all, he said. There are many reasons why companies benefit from knowing who is doing well and who is not, and these reasons go beyond targeted layoffs or other interventions. Companies can use this data to uncover deeper truths about their workforce.

But with job cuts mounting and HR budgets shrinking, few companies have the time, money, or inclination to seek out those deeper truths. Which leaves us with a more superficial truth: Watch your back, because you could get stacked.

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