Microsoft is replacing its controversial employee review system of a fixed curve with a new system that lets managers hand out raises and bonuses as they see fit, within their budget limits.
The company's “stack ranking” process had long had the effect of giving a lower standing and compensation to some employees even in cases where their managers might have felt they deserved more.
Lisa Brummel, the company’s head of human resources, said in an interview with GeekWire that the prior system was designed for an era when Microsoft was focused on employees as individual performers within a vertical corporate structure. The One Microsoft reorganization, which reshapes the company’s divisions around functional disciplines rather than products, is meant to make Microsoft more collaborative across teams — with major releases and updates coming at a faster pace.
“A forced distribution wasn’t getting at the teamwork principles that we really want to get at related to One Microsoft,” Brummel said.
Stack ranking does have some supporters, but it also has been blamed for fostering dysfunction at Microsoft and reducing morale among employees. At an internal presentation Tuesday morning, managers clapped when Brummel announced that the employee review process would be overhauled, and by the end of the presentation they gave a standing ovation.
Brummel said the changes are “a nod to our manager base,” trusting them with the autonomy to make these decisions.
This is just the latest in a massive series of changes at Microsoft this year, including the companywide reorganization, CEO Steve Ballmer’s planned exit, and the pending acquisition of the Nokia smartphone business.
These changes come at a time of fierce competition for technical talent across the industry, as Microsoft competes with startups and large tech companies to recruit and retain top employees.
Here's the full text of Brummel’s email to employees.