HRGuru

Top performers are so valuable to a company in fact, that they can affect whether customers come back, and can serve to extend and improve on the strength of a brand. 

 

Increasingly, research paints a dramatic picture of the value that top performers bring to their employers. Renowned business advisor Marshall Goldsmith, for instance, asked more than 2,000 managers from a variety of companies to quantify the difference in contribution between top performers and below-average performers at the same pay level—a question that respondents most commonly answered with “Over 100 percent” (Goldsmith, 2009). 

 

More pronounced still, Dr. John Sullivan, an HR scholar with San Francisco Sate University, reports that organizations that measure the performance differential between average performers and top performers find that it is often 300% higher for top performers.

 

Despite the compelling nature of these and other research findings, many companies do not bother to identify their top performers, let alone nurture their brightest employees’ intellects and aspirations. 

 

After all—most companies do not have agreement about whom their top performs are. Without a formal appraisal system tied to business objectives, organizations have a narrow chance of engaging and retaining their best workers.

To be clear, measuring and rewarding top performance requires an investment. HR practitioners know that you cannot improve what you cannot measure, and effective measurement and improvement strategies cost time and money. 

 

Across companies, techniques for measuring superlative performance are varied. The most common method of assessing top performers is through an informal “poll approach.”  One division manager may identify a rising star, and ask other managers—even HR—if they share the same perception of the employee. Although common, this method is typically ineffective, and can be fraught with perceptions of politics and favoritism.

 

A more formal, uniform appraisal system captures ratings from performance reviews or competency assessments, inviting a wide range of peers, managers and other colleagues to comment on a particular employee. Performance appraisals or competency assessments where the same top performer is identified across many raters’ scores tend to illuminate who the true top performers are. 

 

While many organizations promote rewarding employees for excellent performance, many do not know how to handle below-average performance. Jack Welch, the individual responsible for taking GE from a $13 billion to a $500 billion company, has long been a controversial figure in HR for his unorthodox performance methods. Welch devised a forced “20-70-10” ranking system where his top-performing employees (20%) were “made to feel loved,” the middle-performing section of employees (70%) were shown how to become part of the top 20%, and the bottom 10% were removed or counseled out of the organization. Said Welch, “Failing to differentiate among employees, and holding on to bottom-tier performers—is actually the cruelest form of management there is.”

 

While such a system may work well for GE, not every company can take the same path. Perhaps most important for an organization is to find an appraisal system that meshes with its culture, ties to its business objectives, and rewards employees differently depending on their performance and contribution. Whether your top performers are your most seasoned, long tenured employees or your forward-thinking younger set, attempting to reward all employees the same is a catastrophic management mistake. 

 

The most simple step an organization can take is to decide that employees’ compensation and/0r benefits will be tied to their performance. In a 2006 survey of 1,100 U.S. employees, Watson Wyatt Worldwide, WorldatWork, and Harris Interactive, found that 71% of top performers listed pay among the top three reasons they would consider leaving their employer. 

 

Similarly, in his article “Retain Your Top Performers,” Marshall Goldsmith cites that companies fail most often because of a “frequent lack of connection between pay and contribution.” 

 

While the problem may be complex, the answer is relatively simple. Not all employees contribute equally, and therefore not all employees should be compensated and rewarded in the same manner. 

 

Appraisal and reward systems for top performance continue to go under-recognized in terms of their positive impact on engagement and ability to enhance the competitive position of organizations. Perhaps the lean current economic backdrop will propel more employers to evaluate each employee and their contribution to the organization’s success.

 

Selena Rezvani is a Consulting Lead at Management Concepts based in Vienna, Virginia, where she builds and administers assessments targeted at individuals.  Selena has consulted widely on issues of organizational change and has worked with organizations internationally and across many industries.  Selena holds an MBA from The Johns Hopkins University and MSW and BS degrees from NYU.  She can be reached at srezvani@ManagementConcepts.com.