
Goldman Sachs Dumps Numerical-Ranking System for Employees - edtrudeau
http://www.wsj.com/articles/goldman-sachs-dumps-employee-ranking-system-1464272443
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bpchaps
Paywall :(

I haaate these numerical ranking systems. Bank of America had one when I
worked there. Managers would have meetings with each other to match their
workers with ranks. Really, really long meetings. So long that my boss
apologized to me after the meeting to discuss my ranking.. because heleft
before my name came up and there was no followup meeting. I ended up being
ranked towards the bottom, I didn't get a raise, and the bonus was meh.

When I left, they told me that my performance was great and that they wanted
to give me a substantial raise, since apparently, my pay was far below what it
should be. They then had to replace my weekend shift with four others for a
while. Most of the team was gone a bit later.

~~~
danek
The sad thing is that the managers participating in these sorts of activities
are unable to connect cause & effect. For example, if you rank individual
employees then you destroy teamwork and incentivise all sorts of behavior
that's bad for the company. It hurts morale, lowers productivity, increases
employee turnover, increases hiring costs, lowers product quality, etc. It's a
vicious cycle. And for someone who thinks it's a good idea to rank employees,
these effects will simply confirm their beliefs that they need to rank
employees.

Why does this happen? In the best case, it's a misguided attempt at career
development. Or it's a way to figure out who to give more money and who to
fire. Usually there is an element of fear: "I'm afraid my employees will not
work hard unless there is the threat of a bad performance review".

To be fair, ranking employees does _sound_ like a good idea if you don't know
anything about humans. Most management activities are really just things that
_sound like a good idea_ (but fall apart under scrutiny). To be more fair, bad
management is the norm, so no one has good mentors and role models. "If
everyone else does this, then it can't be wrong." It's another vicious cycle.

~~~
abraae
Without ranking of some form, how do you identify the best people and reward
them accordingly?

~~~
visarga
You can apply selection when you form a new team for a new project. Then you
select the best people for that project. Ranking scores are unidimensional,
absolute evaluations of people. They can be abused by adding penalties based
on frivolous criteria.

In China, Ali Baba and others have created a ranking for regular population,
called the "social credit". If you make friends with someone who has a low
rank score, your own score will be penalized (they want to control who people
make friends with and socially isolate people by descoring them). Also, if you
watch too many American movies instead of Chinese. These scoring systems (and
even Google's Page Rank) pervert the normal behavior of people.

~~~
UVB-76
On the latter point, I think this will become more prevalent in the future,
and has really interesting applications in displacing trust as a dependency in
interpersonal interactions.

Once we have more accurate profiles on individuals, and the profiles are
shared more widely, you could make much more informed decisions about who you
want to share public spaces, interact, work, live, or even enter into
relationships with.

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leroy_masochist
This is good news. I used to work at Goldman IBD, and the rankings system was
really dumb.

The problem was that you had to rate people on a 1-9 scale. As you might
imagine, this rating was done via a web survey where you clicked a radio
button under a corresponding integer, and under the numbers were verbal cues.
The one under 9 was something like "One of the very best people I have ever
worked with".

When you get your review, they give you your score for each assessed area,
along with the mean score for your position/group (e.g., "associates in IBD").

I distinctly remember that most of the mean scores were between 8 and 9. One
was as high as 8.7.

Clearly you had a lot of grade inflation that made the data points of dubious
value. Whatever system they chose to replace it is probably better.

DISCLAIMER: I can't get over the paywall and some of the above points might be
in the article.

~~~
kybernetikos
The way the system would get described to me by the people I know who used to
work at Goldman was that the tech guys would all treat the system seriously
and attempt to rate people while the traders would all rate everyone at 9 for
everything, unless they hated someone or someone had done disasterously in
that area, in which case they would be ranked at 7. The programmers would
always be looking for excuses to get a trader to rate them.

It was always told as a parable about how bad at real life game theory the
academic, logical, game theoretic minded programmers were vs the traders.

~~~
LionessLover
It doesn't say how good anyone is at game theory. It might be a proxy for how
social they are. The outcome is based on how "selfish" people are, or how much
retribution they expect in future iterations. I don't see how this could
possibly be used to make a deduction about the understanding of game theory
(or practice).

~~~
tP5n
but this is _exactly_ what game theory is about, the parent probably hinted at
a failed unterstanding of the theory as shown by your comment ;)

what i mean is, people may think they understand the concept of game theory
but are often unable to link that to its practical consequences, as in this
case.

~~~
kybernetikos
I really enjoyed "Jane Austen, Game Theorist" which argues that Jane Austen
_systematically_ examined Game Theory years before it emerged.

The author also argues that Jane Austen has analysed in more depth game
theoretic 'cluelessness' than has been done since, and interestingly, many of
her 'clueless' characters show signs of being unusually interested in numbers,
maths, card games, etc.

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cheriot
The problem isn't rating scales, it's the assumption that employee ratings
need to conform to a bell curve and that the bottom of the bell curve needs to
go. If the outcome of your hiring and firing processes is not random, this
should not be the case.

I once had a teammate get an apology from our manager because he had been
required to give a poor rating to someone.

~~~
roel_v
Even if your hiring system is perfect, you'd still have a bell shaped
performance curve. But since people understand that their hiring isn't
perfect, they look for ways to keep improving. I wonder how many of those here
who get their panties in a bunch over rating on a curve have actually had to
manage, and make a profit from, largish groups of people.

~~~
cheriot
"The normal distribution is useful because of the central limit theorem. In
its most general form, under some conditions (which include finite variance),
it states that averages of random variables independently drawn from
independent distributions converge in distribution to the normal, that is,
become normally distributed when the number of random variables is
sufficiently large."

[https://en.m.wikipedia.org/wiki/Normal_distribution](https://en.m.wikipedia.org/wiki/Normal_distribution)

This is why engineers get frustrated with managers that pretend to know math.
Employees are not selected randomly and companies like to apply curves to even
medium and small departments. A normal distribution does not apply.

Keep improving.

------
danjayh
My own megacorp (which is mentioned in the article) when to a warm & fuzzy
review system some months ago, I don't really like it. They used to do stack
ranking behind closed doors (although they vehemently denied it) ... which
only bothered me because they didn't tell us where we fell in the stack. Let
me know where I stand compared to everyone else in my bracket, that's all I
really want.

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peterkshultz
Goldman and other investment banks are having a tough time recruiting top
university graduates--the pull of tech companies is getting too great.

I'd imagine this is a way for Goldman to try and differentiate themselves from
other banking firms in the fight for new hires.

~~~
niij
FWIW: the Goldman recruiters at my school perked up when I said I was in
computer science. They went over the "fun" stuff that their interns got to do
(baseball games, travel, etc) rather than in any of the problems we would be
working on. Seemed off-putting and made me question what kind of work
environment it would be (who wants to develop in a suit?).

I ended cancelling the interview with Goldman and going with another company
in the finance sector that has a long (decades) reputation of being genuinely
great to employees.

~~~
sambe
Which company did you go to?

~~~
niij
Jack Henry and Assoc.

------
JackPoach
Because most ranking and evaluation methods (bar the sales commission) are
complete BS anyway.

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gaius
Interesting to see GE mentioned - they are the root cause of all this stack
ranking nonsense.

------
known
marks != merit

~~~
keyle
Nice way to put it.

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mancerayder
Well, I can't read the article because I've chosen to focus my newspaper
subscriptions on other, better, eh, 'peach-colored' newspapers.. but I worked
in investment banking in IT for a number of years. Pretty much almost 10.

I've been thinking about stack ranking for a long time. In one place I worked,
a large rival of Goldman, you would be ranked (secretly) on a curve, typically
from 1-5. If you were the manager of a group of, say, 6 people, you couldn't
just give everyone a 5 or a 1. You had to even it out, pepper in a few
different numbers in that range. Maybe you had one 4 or one 5, say. This would
go up to your manager, who would, in addition to rating you with your peers,
would take a look at what you rates your employees and 'adjust', ensuring that
the curve is adhered to, maybe moving numbers up or down depending on how they
felt about your employees and also as compared to other groups (since it's a
hierachy, a pyramid where each layer up managers more groupings of people).

This system was applied to the layoff selection (1's are out, some 2's are
downgraded to 1's as the rankings made their way up the chain of command), and
may have applied to bonus system as well (which is more complex). There were
layoffs at least yearly, most years. Goldman is worse because the reputation
was to always cull the bottom 5%, and I heard 10%, of staff yearly and (in
good economic times) get a new fresh set of people not long after that.

Regardless, the takeaways of a system like this is that, regardless of your
INDIVIDUAL performance, what matters is your performance relative to your
peers. There are few issues with this.

The first issue with this is that the ranking system like above, or any
ranking system, makes a lot more sense when you're in a role that has tangibly
quantifiable measurements. For example, sales, or -- especially, in a place
like GS -- bond or equity or other trading. In either one, if I make the
company 1M, and you make it 1.2M, it's clear you added more value.

Well, what about IT staff? Is it lines of code? No, of course not. So there
are these nebulous, subjective measurements pretending to be something more
useful than they are. Performance reviews, the impact/importance of the
projects you completed (which you didn't even get to CHOOSE, in most cases),
and (at the place I worked) items like letters from senior managers about you
that were positive, all counted.

The second issue is that competition doesn't necessarily make the work done
better or more efficiently. The worst part for me was competing with people on
my team. Instead of the team competing with other teams (if we want to
ideologically just adopt the notion that competition makes everything more
efficient and effective [which I think is overstated heavily], at least team
competitions are a little better), we would compete with one another.

There are two ways to compete. I work harder, or better, or perform better
than you. The second way is, we perform the same, or I perform the same, but I
undercut you somehow. What's an example of undercutting? Well, let's say that
on conference calls when it was your turn to speak I'd take knowledge about
your project and use that to show that I know more publicly, or let's say that
you undercut me by taking over my project and that of others, to show the boss
how smart you are, etc. Most managers are so busy themselves that they don't
have time to notice these things, which seem like petty infighting /
childishness in their eyes. I saw the 'project takeover' scenario happen
everywhere I've worked in these competitive environments. I saw one guy take
over a bunch of people's projects, find himself overworked, complained, and
got himself staff to work under him.

Hey, it's not easy to figure out what to do with regards to ranking, or
whether to do it at all. When you're a full-time IT worker or professional in
America, you get a salary, but it kind of doesn't say your hours in your
contract; or if it does and is (rarely) enforced, at the end of the day in a
competitive environment it's not fair if some people have to pull the weight
of others. So there has to be some differentiator. On the other hand, what
I've seen in IT is a downward spiral of misery. There's always someone on the
team who puts in 60 hours a week so he can show how smart he/she is, trying to
get that bonus or promotion above you.

And it's entirely possible that the above is more pronounced in the large,
Northeastern American city (and industry) I live and work in.

------
blazespin
stack ranking works in certain situations, doesn't work in others. If you pay
way above average and don't have that many employees (ie, your needs relative
to the population are low) you can usually get away with it. So, it works for
the netflixes of the world. Amazon has moved away from it somewhat as they
realizzed that they were running out of engineers to spam to hire.

