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Seeking less destructive ways to rank employees

At Microsoft, the bottom-ranked performers need to start looking for another job.
At Microsoft, the bottom-ranked performers need to start looking for another job.Elaine Thompson / AP

When it comes to evaluating how well employees are performing, “rank and yank” is going the way of the fax machine, the private office and the plain vanilla cellphone.

Microsoft came under fire recently after a Vanity Fair article exposed the software giant’s practice of stack ranking -- rank ordering employees during twice yearly performance reviews and then forcing out the bottom performers of every work unit. Employees interviewed in the article called it a “destructive process” that turned coworkers into competitors and drove countless people out.

As companies seek to create collaborative work environments to innovate faster than the other guy, especially in the hypercompetitive tech business, more are eschewing stack ranking and other “rank and yank” systems. In their place, they’re opting for evaluations that help employees maximize their strengths and get them to work with -- and not against -- one another.

“If you think about innovation, the excitement at so many tech companies mobilizing people around a really creative breakthrough idea, that’s impossible if the bottom 10 percent are getting fired,” says Brad Smart, an industrial psychologist, author and creator of the “topgrading” hiring system used by tech companies such as Red Door Interactive and Mint.com.

What’s more, stack ranking isn’t an effective way to review performance when employees want to hear how they’re doing more than once or twice a year, says Brad Warga, a senior vice president at software start-up Gild, and former recruiting vice president at Salesforce.com. “The current way, where you go and sit down, and you have no idea what’s going to happen, the process is broken. People want feedback. They want it more than once a year, they want it from clients, their peers and the community,” Warga says.

Instead of stack ranking, here’s how some companies successfully gauge how employees stack up:

Let square pegs switch jobs

At Facebook, which has grown to 3,500 employees in eight years, if someone isn’t doing well in one position they’re encouraged to make a lateral move to a post that better matches their skills, says Slater Tow, a company spokesman. “We’re very flexible about changing roles in the company. I’ve done it before,” Tow says. “We hire really good people, we hire them for the long term, but we certainly do not cut people out for being in the bottom 5 percent.”

Give underperformers a second chance

Instead of forcing “C” level players out the door for failing to live up to expectations, give them a professional development plan to follow, and then check in after 90 or 180 days to see how they’re faring. “Our approach has always been to coach people to move them into a high-performance category. That’s good for the organization’s culture,” Smart says.

Help managers manage better

After internal research revealed that managers at Google had a greater impact on employees’ performance than anything else, the tech giant embarked on a mission to determine what made for good supervisors and how they could get all managers to that level, according to a New York Times article. In Project Oxygen, company number crunchers collected 10,000 observations about managers across 100 variables, did follow-up interviews, then used the findings in management retraining programs. In 2010, the first year the training was offered, 75 percent of the company’s worst-performing managers showed a statistically significant improvement in manager quality, a Google exec told the Times.

Ditch formal performance reviews

ETS-Lindgren, a Cedar Park, Texas, electromagnetic and acoustic energy components maker, asks managers to meet with direct reports at least once a month. That way if someone’s messing up, they’ll know about it soon enough to let managers can take steps to rectify the situation. The company, which has 850 employees in 12 locations worldwide, will dump formal annual reviews after 2012. They’ve already started using Rypple, a software program from Salesforce.com, which lets managers keep coaching notes they can refer to during review sessions. Eventually, the company wants managers to meet with direct reports every week, even if it’s only for 15 minutes. “It’s a much better use of time and more meaningful to the employee,” says Heathre Moler, the ETS-Lindgren's global director of human resources.

Use a more rigorous candidate screening process

If companies don’t do their due diligence during the hiring process, including conducting intensive interviews and reference checks, they can get new hires who aren’t up to the demands of the job, Smart says. Under those circumstances, it’s no surprise some of them fail, he says. To that end, some tech companies have stopped using resumes and interviews to hire software developers and instead rely on unconventional means to check out their coding skills. Those methods include sponsoring software coding contests and hanging out on websites such as GitHub and Bitbucket, open-source software websites that software developers use to share code.

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