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Stacked Ranking

The title of this post sounds like the stodgy name of some inhumane, BS, corpo process under which “supervisors” evaluate their children, I mean, induhvidual contributors. But wait! It’s the Valve way.

You don’t know who Valve is? Valve is a company that creates massive, multi-player, online games. According to “economist-in-residence“, Yanis Varoufakis, Valve rakes in $1B in revenue even though they have a measly 300 employees. Also, according to Yanis (and their employee handbook), they are totally flat chested. There’s not a single boob, oops, I mean “boss“, in the entire community. D’oh!

The employee handbook spells out the details of the “Stacked Ranking” process, but in summary, peers rate each other once a year according to these four, equally-weighted metrics:

Skill Level/Technical Ability

Productivity/Output

Group Contribution

Product Contribution

SR

Notice that there’s no long list of patriarchical, corpo-BS ditties like these in the four simple Valve metrics:

  • Takes initiative and is a self-starter
  • Knows how to acquire resources when needed
  • Manages time well
  • Knows how to prioritize tasks
  • Yada, yada, yada

As you might guess, the stack rankings are used for salary adjustment:

…stack ranking is done in order to gain insight into who’s providing the most value at the company and to thereby adjust each person’s compensation to be commensurate with his or her actual value. Valve pays people very well compared to industry norms. Our profitability per employee is higher than that of  Google or Amazon or Microsoft, and we believe strongly that the right thing to do in that case is to put a maximum amount of money back into each employee’s pocket. Valve does not win if you’re paid less than the value you create. Over time, compensation gets adjusted to fit an employee’s internal peer-driven valuation. – The Valve Employee Handbook

Whenever I serendipitously discover jewels in the rough like Valve, SAS Institute, HCL TechnologiesSemco, Zappos.com, etc, I always ask myself why they’re rare exceptions to the herd of standard, cookie-cutter corpricracies that dominate the business world. The best answer I can conjure up is this Ackoff-ism:

The only thing harder than starting something new is stopping something old. – Russ Ackoff

But it’s prolly something more pragmatic than that. Since corpo profits seem to keep rising, there is no burning need to change anything, let alone blow up the org and re-design it from scratch to be both socially and financially successful. That would be like asking the king to willingly give up the keys to his kingdom.

  1. March 27, 2013 at 2:39 am

    An interesting model. I liked the quote “The only thing harder than starting something new is stopping something old.” I think it is true about life in general not just in the business world, you agree?

    • March 27, 2013 at 3:57 am

      Yes, I agree. We are creatures of habit. We don’t like to change our old routines and we hate it even more when “others” attempt to change them to new routines. Repeatability gives us a (false) sense of stability.

  1. July 15, 2013 at 1:01 am

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