Corporate Ranking Systems
What’s everyone’s thoughts on forced ranking systems in the corporate world. How do modern companies do it? What’s the best way?
Well you have to do something, it's just really difficult to measure and compare people. In reality the "talent" distribution is a power law with like 20% of the people doing 80% of the heavy lifting. Or at least that's what a random Forbes article told me. So you would think identifying the top 20 would be easier? At least at a place like Google you actually mostly have target bonuses and RSU, most places you don't get shit and maybe a 4% raise instead of a 3%.
I appreciate exxon's rank system more than I did having performance metrics. It seems like your options are: cutthroat forced ranking system or Performance metrics goals that will 50% be something you can't control (large scale financial indicators) and 50% things that you'll prioritize over all other concerns because you get paid to maximize those metrics.
I personally think having an objective goal easier to go by rather than relying on management to be competent enough to subjectively rank everyone
I can see that point of view but I have to wonder if you've ever worked in a position that had such a system. In my last position at a different company a substantial portion of my compensation was an annual performance bonus. 1/3 of that bonus was based on company wide EBITDA. 1/3 was safety metrics. And the last 1/3 were supposedly performance related things. Now I did good work but nothing I'm going to do in my day to day is going to substantially impact EBITDA company wide. I can do my part on safety but there safety indicator tanked if there was only 1 lost time accident a year so how do I do anything about that? The performance stuff was even worse. It ended up being things that seemed like they should be in my control but weren't. If you were a reservoir engineer at Exxon you could expect your performance metrics to be something like improving NPV by 15% and increasing free cash flow by 10% annually. Also about a third of any performance metrics system would be based on environmental and safety related things. Then maybe something more specific to your particular area. In the end you would wind up with even less control over your future than now. Because it's most likely that you'd just be handed your performance metrics directly by a supervisor, with maybe some oversight by upper management. At least now, there are several layers of managers who have to approve rankings and that can adjust anywhere that doesn't seem right.
There is no good way. Just need to adapt your behavior to the ranking system.
What if that behaviour is what’s causing the toxic culture at the company...
Fair, but still a direct result of the ranking mechanism. I think direct stack ranking by managers causes the worst behavior, but I haven’t seen a ranking mechanism which actually encourages the best behavior for the company by ic’s.