Reviewing employees is a practice that nearly every business participates in. Of the many ways to conduct reviews, Yahoo’s employee performance ranking system has come under fire, and a lawsuit has been filed in a Federal District Court in San Jose, CA by an ex-employee named Gregory Anderson. Other companies have used similar ranking systems, including General Electric, IDM, and Cisco Systems, but have fallen out of favor.
At Yahoo, the ranking system featured a quarterly performance review of every employee, in which they are ranked on a scale of 1-5. This system has been one of CEO Marissa Mayer’s signature policy. Since Mayer took over in 2012, Yahoo has terminated/laid off hundreds of their employees, mostly using this policy. In California, it is illegal to lay off 50+ employees within 30 days at a single location without 60+ days of advance notice. The lawsuit claims that Yahoo didn’t provide the required notices, but over 1,000 workers were laid off or terminated using the ranking scale policy. The penalty for breaking this law can be a fine of up to $500 per employee, as well as back pay for each day of advance notice that the company did not provide.
IBM used a similar performance scale, although they are phasing out the policy in the near future. The stack ranking was unpopular with employees and didn’t take into account their personal goals that they set with supervisors. Instead they were compared with other employees by their employers.
GE also used a similar system, notoriously nicknamed “rank and yank,” where employees annual performance review ranked them against other employees and the bottom 10% of employees underperforming were terminated.
Will the shift of major corporations moving away from the ranking policies continue to take place? Will Yahoo be liable in their lawsuit? Let us know what you think.