According to a Bloomberg Businessweek article, Yahoo has moved from one HR controversy to another this year. A number of months ago, the company’s CEO announced that working from home would be banned and now a new assessment procedure has been introduced to require managers to grade employees on a performance curve and dismiss those who have the lowest ratings.
There seems to be confusion over whether the initiative is to become formal policy within Yahoo, with the CEO saying that it’s not compulsory and staff casting doubt on this. Ranking of employee performance is a practice that was more popular in the 1980s but was largely abandoned in favour of other performance measures. The article reports that around 5% of high performing businesses used this kind of ranking system in 2011.
It may be that, being a tech company, Yahoo’s preference is for hard data on its employee performance. However, forced rankings can have an adverse effect on staff morale and end up damaging innovation. If employees are worried about their rankings, what incentive is there for them to take risks and produce new ideas? And how does an adversarial ranking system encourage teamwork and collaboration?
The system is also particularly harsh during periods of recession as reduced numbers force managers to categorise previous high performers as average, thanks to the rigid distribution mechanism of the performance curve. This produces a further deflationary effect on morale during what is always a difficult situation for employees.
Systems such as these appear to be meaningful because of the volume of numbers it produces and an approach like this can be useful. However, as the article argues, it is essential that the decisions made by managers in making the assessments are not based on prejudices and misjudgements.
You can read the full article here: Yahoo’s Latest HR Disaster: Ranking Workers on a Curve.
