First, she introduced the concept of goals to employees. In effect, a target distribution meant Mayer wanted managers to put a certain percentage of the employees they managed in each of the five buckets. Then Mayer rolled out new policies wherein employee eligibility for bonuses, promotions, and transfers within the company would be based on their average score for the past three quarters. Employees with low enough scores would be asked to leave the company.
And, without going through any morale-draining layoffs, Mayer was able to move low-performing employees out of the company. In August , Vanity Fair published a story by Kurt Eichenwald about the downfall of Microsoft over the prior decade.
Employees ranked poorly would see their lives materially turn for the worse as they lost out on raises, promotions, and bonuses. As if writing an indictment, Eichenwald listed out the negative consequences of the well-intended system. Because employees were not judged on their own work, but on how well they did relative to their peers, they would actively seek to undermine each other. As employee ratings got passed up the management ladder, individual scores sometimes had to be adjusted at the department level so that the right amount of employees were in each bucket.
This led to favor-trading between managers. Stack ranking had come into fashion after GE CEO Jack Welch used a similar system, called rank-and-yank, to turn around that company in the s and s. On Dec. So you end up either in exceeds, meets, strongly exceeds, things like that. Mayer would stick to this semantic line of defense for the next year. These senior managers had then passed down the ratios to the managers below them.
And so on. Fine grained or not, there were serious consequences for employees who got stuck in the wrong bucket. To get significantly ahead in life as a Yahoo employee, you needed to make sure your grade was better than that of 65 percent of your team colleagues. Under the new system, the only way to get a promotion or a raise at Yahoo was to have an average score of three for the past four quarters. No raise for you. Good luck next time. Lots of Yahoo employees at all levels understood that the company needed to be tighter with its compensation.
Anyone who did a little research would find out that Yahoo engineers got higher salaries than counterparts at rival tech companies. Also, Yahoo kept acquiring small, failed startups as a way of quickly hiring whole teams into the company. It was hard to get talented people to work in the same group. Workers would prioritize tasks that got them closer to their personal goals over doing anything else.
This made sense. The worst part was, every quarter, managers would guide their teams toward collective goals, and then, even if all of those goals were met, they had to single out a few people and tell them they had missed expectations. But HR would kick the packet back and tell the manager to get their calibrations right. In calibration meetings, managers would gather with their bosses and review all the employees under their watch.
What went down at these meetings was not what Mayer had intended. What happened instead was that managers would sit there and look at an employee that needed to fit into a particular bucket and try to think up reasons why they fit there.
Sometimes the reason would be a political one. Sometimes the reason would be more superficial. That employee ate lunch with the right people or could hold a conversation with the boss in the hallway? This one shuffled around and kept to himself? Occasionally misses. Mayer herself attended calibration meetings where these kinds of arbitrary judgments happened.
There, they would go over the names and ratings of L3 and L4 executives. There would be a bunch of people sitting around a table holding spreadsheets of names and ratings. If the name of an L3 that was unfamiliar to Mayer came up, the rating would usually stick.
At one such meeting on October 26, , the name Vivek Sharma came up. At that point, Sharma was working with Mayer on a major redesign of Yahoo Mail, a project code-named Quattro. In January , Sharma left Yahoo for a senior position at Disney. Then, in October , Mayer agreed to let employees ask questions anonymously.
Finally given the chance to vent without fear of repercussions, employees submitted hundreds of angry questions. I was forced to give an employee an occasionally misses, [and] was very uncomfortable with it. How do we justify? If everyone on the team exceeds expectations, the manager is not allowed to rate each member as such. When I asked if there is a way I can increase [the] salary of my current employees, there was no proper answer from management or HR.
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