Performance reviews are commonplace at big companies, and in theory enable managers to give detailed acknowledgment and constructive criticism. But in reality they do more harm than good because employees focus on impressing their manager rather than on performance per se. Microsoft made this problem worse with a stack ranking system, in which managers graded people on a bell curve, each grade going to a fixed number of employees.

As one employee remembered, “If you were on a team of ten people, you walked in the first day knowing that no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review. . . . It leads to employees focusing on competing with each other rather than competing with other companies.” Another described sabotage, either open and direct or subtly withholding just enough information to keep colleagues from getting ahead in the rankings. Without trust, managers could not influence anyone. READ MORE