In an email to employees, Microsoft management announced the elimination of an employee performance ranking system. (Probably coincidentally, Yahoo just announced the implementation of a similar system.)

Ranking systems force managers to place their employees' performance on a bell curve, comparing each within a department or division. In the strictest systems, employees who are in, for example, the bottom 5%, are terminated. According to The Institute of Corporate Productivity, cited in a BusinessWeek article, these systems are falling out of favor, with only 5% of high-performing companies using the process in 2011.

At best, ranking employees encourages managers to differentiate performance, rewarding top performers and paying attention to underperformers. At worst, ranking may focus too much on data and fails to acknowledge that some departments simply perform better than others. Managers argue that they lose control with such rigid systems.

Here's the beginning of the Microsoft email to employees:

To Global Employees,

I am pleased to announce that we are changing our performance review program to better align with the goals of our One Microsoft strategy. The changes we are making are important and necessary as we work to deliver innovation and value to customers through more connected engagement across the company.

This is a fundamentally new approach to performance and development designed to promote new levels of teamwork and agility for breakthrough business impact. We have taken feedback from thousands of employees over the past few years, we have reviewed numerous external programs and practices, and have sought to determine the best way to make sure our feedback mechanisms support our company goals and objectives.  This change is an important step in continuing to create the best possible environment for our world-class talent to take on the toughest challenges and do world-changing work.

Discussion Starters:

• What's your view of performance ranking sytems? Have you experienced a similar process at work?
• Assess the full Microsoft email. How is it organized? How does it consider the audience? What are the main points? Overall, what works well, and what could be improved?