Stack Ranking is All Around You

Jack Welch, one of the most famous CEOs of his time, introduced Stack Ranking, where employees were all ranked every year. The bottom ranked employees were not part of the company the next year.

I was never in a company that utilized stack ranking - from what I heard of stack ranking, I am grateful I was never part of the process on either side.

On the other hand, when you take a larger perspective, stack ranking is all around us - it’s just at a higher level, namely, at the company level.

The market rank companies - those that rank at the top usually promote people. Those at the bottom have to fire people.

That’s stack ranking!

In a top company, you fight to stand out because of your ambition.

In a bottom company, you’re fighting to stand out to survive.

Since stack ranking is happening at a macro level, why does it get a bad rap on a company level?

Taking stack ranking into a top company feels weird - how can an executive explain they need to rank and fire the bottom people, especially when everything is going great?

It’s like throwing people off a perfectly working boat for no good reason.

On the other hand, if the boat is sinking, throwing people off is acceptable.

So, who knows? Stack ranking is perfectly acceptable behavior at the industry level where ranking companies is acceptable, somehow, applying this in the company level not acceptable.