Stack Ranking: Why Every HR Must Know About It?

Stack ranking is a performance management method that ranks employees against each other using a forced distribution model. Similar to grading on a curve in school, except the bottom 10% might lose their jobs. 

Here’s how the stack ranking mechanics typically work: the top 20% of workers are deemed high performers, 70% receive adequate ratings, and the bottom 10% are characterized as underperformers who potentially should be fired. 

The concept was pioneered by Jack Welch at General Electric in the 1980s. He called it the “vitality curve.” Employees had their own names for it, though they weren’t as polite. 

How Stack Ranking Mechanics Actually Function 

The process appears straightforward: 

• Step 1: Set clear performance criteria for evaluation 

• Step 2: Managers assess each team member throughout the review period 

• Step 3: Employees are ranked against their peers, not against individual goals 

• Step 4: Rankings are forced into predetermined percentages (usually 20-70-10) 

• Step 5: Rewards and consequences follow: promotions for the top, performance improvement plans for the bottom 

The problem? Even if your entire team performs exceptionally well, someone still must fall into that bottom 10%. Your strongest performers might be ranked as underperformers simply because everyone else is equally strong. 

Why Stack Ranking Was Created as a Performance Management Method 

Jack Welch believed stack ranking would identify and cultivate a high-performance workforce at General Electric. The goal was to differentiate top talent from underperformers systematically. The theory suggested that by consistently removing the bottom 10%, companies would build increasingly stronger teams over time. 

However, the real-world application revealed significant flaws in this performance management method. Rather than building stronger teams, it often destroyed the collaborative foundation that high-performing teams need. 

Companies that adopted stack ranking include General Electric, Microsoft, Amazon, Yahoo, and Enron. Notice that most of these examples use past tense. According to the Institute for Corporate Productivity, 42% of companies surveyed reported using forced ranking in 2009. That decreased significantly to 14% in 2011. 

Microsoft became the poster child for why stack ranking fails. Every current and former Microsoft employee cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. The company finally scrapped it in 2013 during what became known as Microsoft’s “Lost Decade.” 

Amazon also used this HR strategy for years, creating what insiders described as a bruising internal culture focused on self-preservation rather than collaboration. Even GE, the company that invented stack ranking, eventually abandoned it. When your own creator gives up on you, that tells you something.

Let’s say you’re still considering stack ranking despite these warnings. Here are the implementation considerations you’d need to address: 

• Consistency challenges: How do you compare a software engineer against a marketing manager? You can’t. Different departments have wildly different success metrics, making stack ranking mechanics inherently flawed across organizations. 

• Evaluation frequency dilemmas: Annual rankings encourage short-term thinking. Quarterly rankings create constant anxiety. There’s no sweet spot because the system itself creates problems. 

• Tool selection issues: You’ll need specialized performance management systems to track rankings, which means investing in tools to implement a method most companies have already abandoned. 

• Training requirements: Managers need extensive training to execute forced rankings “fairly,” which is contradictory given the system’s fundamental design. 

• Departmental application problems: Engineering teams might have universally strong performers, while sales teams might have clearer performance differentials. Forcing both into the same distribution creates arbitrary outcomes. 

The data shows declining adoption for good reason. By 2013, usage had dropped to approximately 12%, and that number has continued decreasing as organizations recognize the problems inherent in this approach. 

Once seen as a way to reward top talent, stack ranking quickly proved toxic. Instead of driving performance, it fueled competition, fear, and disengagement; undermining collaboration and eroding workplace culture. 

The Cultural & Organizational Impact Nobody Wants 

Stack ranking doesn’t just affect performance reviews. It changes everything about how people work. 

• Creates destructive competition: When only 20% can be “winners,” collaboration becomes career suicide. Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings. 

• Destroys teamwork: Why would you help a colleague succeed when it might lower your ranking? The system incentivizes selfish behavior over team success. 

• Kills innovation: Employees avoid risky, innovative projects because failure affects their rank. Safe, incremental work becomes the norm. Risk-taking, which drives breakthrough innovation, becomes too dangerous. 

• Breeds constant anxiety: Living with perpetual pressure to outperform colleagues creates a mentally exhausting work environment. A stacked ranking appraisal system prioritizes performance at all costs over healthy work habits and work-life balance, creating teams who are high-performing but severely burned out. 

• Encourages information hoarding: When helping colleagues could hurt your ranking, knowledge sharing stops. People withhold information that could benefit the team because sharing it might improve someone else’s ranking at their expense. 

The Criticisms & Risks That Destroyed Careers and Companies 

The problems go deeper than hurt feelings. Stack ranking has genuine, measurable consequences: 

• Skyrocketing turnover costs: According to Gallup, replacing a single employee can cost as much as one-half to twice their annual salary, depending on their role and seniority level. The Society for Human Resource Management (SHRM) estimates hiring a new employee cost as much as $4,700 when you consider factors like advertising, interviewing, and onboarding. Stack ranking guarantees higher turnover by systematically demotivating employees. 

• Unconscious bias amplification: When managers must slot people into predetermined boxes, personal biases influence who lands where. This system doesn’t eliminate subjectivity. It institutionalizes it and gives it a mathematical veneer of objectivity. 

• Arbitrary rankings: The forced distribution assumes every team naturally contains underperformers. But what if you’ve hired well? What if everyone is legitimately strong? Someone still gets labeled as “low performance,” regardless of their actual contributions. 

• Loss of institutional knowledge: When you systematically eliminate the “bottom 10%” annually, you lose experienced employees who understand your systems, culture, and history. This knowledge doesn’t transfer easily to new hires. 

• Perverse hiring incentives: Some managers admitted to intentionally hiring underperformers to make their top talent look better by comparison. The system encourages managers to deliberately hire people destined to fail, just to protect their existing team members from the bottom 10% designation. 

• Discrimination lawsuits: Organizations have faced legal challenges based on the discriminatory impact of forced ranking systems, particularly when the bottom 10% disproportionately affects protected groups. 

Here’s the honest answer: stack ranking might work in extremely rare scenarios involving systemic underperformance that needs immediate addressing. Even then, it should be a short-term intervention, not your permanent HR strategy. 

The numbers don’t support this performance management method. Companies aren’t abandoning stack ranking because it works too well. They’re abandoning it because it consistently produces negative outcomes: higher turnover, reduced innovation, toxic cultures, and decreased collaboration. 

If you’re considering stack ranking because leadership wants to “create accountability” or “identify weak performers,” there are far better alternatives that don’t destroy your entire culture in the process. 

Modern HR strategy has evolved past the Darwinian “survival of the fittest” approach. Here’s what works: 

• Continuous Performance Management: Replace annual rankings with ongoing feedback loops. Regular check-ins keep employees informed and engaged without the anxiety of forced rankings. This approach allows for real-time course correction rather than year-end surprises. 

• 360-Degree Feedback: Instead of one manager’s opinion determining someone’s fate, gather input from peers, direct reports, and leadership for a complete picture. This method reduces individual bias and provides more comprehensive performance insights. 

• OKRs (Objectives and Key Results): Google uses this framework, which focuses on goal achievement rather than peer comparison. Employees compete against objectives, not against each other. This approach aligns individual performance with organizational goals without creating internal competition. 

• Agile Performance Management: Adaptive, iterative assessments that adjust to changing business needs without forcing people into predetermined boxes. This method recognizes that business priorities shift and performance evaluation should shift accordingly. 

• Competency-Based Evaluation: Assess employees against defined competencies for their roles rather than against their colleagues. This creates clear expectations and removes the arbitrary nature of forced distribution. 

• Project-Based Reviews: Evaluate performance based on specific project outcomes and contributions. This method works particularly well in knowledge-based industries where team collaboration drives results. 

These performance management methods share one critical advantage over stack ranking: they encourage collaboration, not competition. They measure people against goals and standards, not against their colleagues’ success. They build cultures where helping others succeed is encouraged, not penalized. 

Stack ranking failed because it treated people like numbers on a curve instead of individuals with unique strengths. From Microsoft’s Lost Decade to Amazon’s bruising culture, this outdated performance management method consistently produces toxic workplaces, higher turnover, and stifled innovation. 

Team GPS revolutionizes performance management tool with real-time feedback, data-driven insights, and culturally aligned HR strategies that promote teamwork over competition.  

Learn proven alternatives to stack ranking that improve employee engagement, reduce turnover, and build collaborative cultures. Discover fair, effective evaluation systems from HR leaders who’ve successfully transitioned away from forced ranking. 

Book a free Team GPS demo and transform your HR strategy from competitive to collaborative. Your employees, culture, and bottom line will benefit. 

Q1: What is stack ranking in HR? 

Stack ranking is a performance evaluation system that ranks employees against each other using a bell curve distribution, forcing them into categories of high performers (20%), average performers (70%), and low performers (10%), regardless of actual performance levels. 

Q2: Why did Microsoft abandon stack ranking? 

Microsoft eliminated stack ranking in 2013 because employees universally identified it as the most destructive process inside the company, creating toxic competition, hindering innovation, and driving away talented employees during Microsoft’s “Lost Decade.” 

Q3: Is stack ranking still used today? 

Very few companies use traditional stack ranking today; usage has declined from 42% in 2009 to approximately 14% in 2011, and continues to decrease as organizations adopt collaborative performance management methods. 

Q4: What are the main disadvantages of stack ranking? 

Stack ranking creates toxic competition, introduces unconscious bias, demotivates average performers, produces arbitrary rankings even in high-performing teams, significantly increases employee turnover costs, and stifles innovation and collaboration. 

Q5: What is the bell curve in stack ranking? 

The bell curve forces employees into predetermined percentages regardless of actual performance: typically 20% as high performers, 70% as average, and 10% as low performers who may face termination or performance improvement plans.