Back in the 1980s, stack-ranking employees was seen as a state-of-the-art management practice. CEOs like Jack Welch at GE divided employees into three distinct segments: the top 20% of performers, the middle 70%, and the bottom 10%. Those at the bottom would be forced out to make room for new blood.
The strange thing about stack ranking is that it’s long been shown to be ineffective and, in many cases, to undermine performance. The problem is that stack ranking doesn’t create a meritocracy. It creates a political system. The winners tend to be those most skilled at claiming credit, shifting blame, and building alliances. Yet still, the practice persists.
The truth is that many CEOs thrive on competition. They like to see themselves as winners and want their people to be winners, too. The problem is that losers get a vote. “Humiliation is the nuclear bomb of emotions,” Amanda Ripley writes in High Conflict. It tends to fuel a cycle of conflict, which breeds more humiliation, and things spiral downward from there.
Stalin’s Gift That Just Kept Giving
One of the first things a visitor to Warsaw will notice is the Palace of Culture. When I first arrived in the Poland in 1997, it dominated the skyline. A replica of the Seven Sisters buildings in Moscow, it was forced upon the Polish people by Stalin in 1955 and for decades served as a reminder of Soviet domination.
Its tower had the feel of Sauron, the evil force in J.R.R. Tolkien’s The Lord of the Rings. It was more than just a foreign presence at the heart of the capital city. It had the feel of an all-watching eye, a reminder that Poles’ lives were not fully their own. It was, in other words, an enormous physical artifact representing exactly the type of humiliation that Ripley wrote about.
We remember the Solidarity movement in Poland as a struggle for labor against communism, and economics was certainly part of it. But the larger grievance was encapsulated in the Palace of Culture, the feeling of being completely subjugated by another nation. Poles felt it deeply and never truly accepted Soviet rule.
It was that powerful sense of injury that pushed the Polish people to be passionate about change, much like the forces that propel others now. It is that deep sense of moral injury that creates what the ancient Greeks called thymos, a need for recognition so visceral that it compels one to act.
Today, the Palace of Culture still stands, albeit diminished by the modern skyscrapers bustling with commercial activity that surround and obscure it. Yet that palpable sense of humiliation—and the enduring need for retribution—remains indelibly marked on the nation’s soul.
The same dynamic plays out inside organizations.
How Lou Gerstner Shifted From Humiliation To Collaboration At IBM
When Lou Gerstner took over in 1993, IBM was near bankruptcy. One thing he noticed was how the company’s rituals reinforced internal rivalry. Instead of collaborating, business units often worked to undermine one another—hoarding information and maneuvering for dominance. As he would later write in his memoir, Who Says Elephants Can’t Dance:
“Huge staffs spent countless hours debating and managing transfer pricing terms between IBM units instead of facilitating a seamless transfer of products to customers. Staff units were duplicated at every level of the organization, because no managers trusted cross-unit colleagues to carry out the work. Meetings to decide issues that cut across units were attended by throngs of people because everyone needed to be present to protect his or her turf.”
“At IBM, we had lost sight of our values,” Irving Wladawsky-Berger, one of Gerstner’s chief lieutenants, once told me. “IBM had always valued competitiveness, but we had started to compete with each other internally rather than working together to beat the competition. Lou put a stop to that and even let go of some senior executives who were known for infighting.”
Pushing top executives out the door is never easy. Most are hardworking, ambitious, and smart—which is how they got to be top executives in the first place. Yet sometimes, you have to fire nasty people, even if they outwardly seem like good performers. That’s how you change the culture and build a collaborative workplace.
By transforming a culture of competition—and humiliation—to one of respect and teamwork, Gerstner led one of the greatest turnarounds in corporate history. By the late 1990s, IBM was thriving again and continues to be profitable to this day.
What Happens When You’re Nice To Greenpeace
Founded by environmental activists in the late 1960s, Greenpeace is the type of organization that can send a chill down the spine of CEOs. Known for spectacular protests like scaling Big Ben and Rio de Janeiro’s Christ the Redeemer statue, as well as for partnering with world-famous pop stars, it knows how to bring an issue into the public eye. A conflict with Greenpeace can send a stock price reeling.
Yet in Net Positive, Paul Polman and Andrew Winston explain how engaging with NGOs can be good for business. At Unilever, where Polman was CEO, they made an effort to build relationships with Greenpeace and other environmental groups. “This level of transparency built up a trust bank that gave Unilever the benefit of the doubt if something went wrong,” they wrote.
I noticed something similar working in the new market economies of Eastern Europe in the 1990s and 2000s, where you sometimes had to deal with unsavory characters. People who treated them as unsavory tended not to do well. Yet if you treated them respectfully, as you would any honest business associate, you tended to get a much fairer shake.
And that’s the key to breaking the humiliation cycle. Rather than engaging on the basis of conflict, you start by identifying shared values. Once you establish that basic bond of trust and respect, disagreement can become productive instead of destructive. That’s how you can transform potential conflict into collaboration.
Respecting Thymos
In early 2000, with their company on the brink of failure, Netflix founders Reed Hastings and Marc Randolph flew to Dallas to meet with Blockbuster executives. When I interviewed former Blockbuster CEO John Antioco, he vaguely remembered the incident but insisted he didn’t attend the meeting due to a scheduling conflict and merely stopped by.
Yet the Netflix founders remember events differently. They claim that not only did Antioco meet with them, but that he actually laughed when they proposed that Blockbuster buy Netflix for $50 million. “That night, when I got into bed and closed my eyes, I had this image of all sixty thousand Blockbuster employees erupting in laughter at the ridiculousness of our proposal,” Hastings would later write in his book, No Rules Rules.
As I’ve previously explained, Antioco’s version of the story is more credible, but that’s really beside the point. What’s relevant is that for the Netflix guys, the humiliation felt very real. They were on the ropes, trying to survive, and cooked up a pitch to the industry’s 800-pound gorilla, only to be rebuffed. That, more than ambition, drove them to reinvent their business, make it work, and become an 800-pound gorilla themselves.
That’s why we always need to be careful about competitiveness evolving into a will to dominate. When you humiliate people, you don’t defeat them—you motivate them. And sometimes, you create your most dangerous competitor. If you’re not careful, you can sow the seeds of a humiliation cycle and inadvertently trigger your own demise.
That’s the cycle leaders need to learn to break. You need to design for collaboration by making respect visible and repeatable. The desire for recognition is a basic human need. If you don’t satisfy it constructively, it will emerge destructively.