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Golden Oldies: Pay For Performance

Monday, April 17th, 2017

It’s amazing to me, but looking back over more than a decade of writing I find posts that still impress, with information that is as useful now as when it was written.

Golden Oldies are a collection of what I consider some of the best posts during that time.

Money. Everyone’s favorite subject that no one wants to talk about. Especially when it comes to work, as in, “what were you making previously” and “what are you looking for now?”  

Tomorrow’s post focuses on a new law enacted in Philadelphia and New York City that has the potential to change that entire, unwanted conversation, forcing managers/companies to focus on the future, as opposed to history.

Read other Golden Oldies here.

starIn a post last week I asked for opinions on the ideas presented in a series of articles in Business Week on managing smarter but especially one that claims that “treating top performers the same as weaker ones is ‘strategic suicide’” and said I would add my thoughts in a future post.

Bob Foster left two interesting comments (well worth your time to click over and read). Regarding pay for performance he tells the story of a company where everybody from the CEO down all quit.

“Taking on the task to salvage the company, I hired new people that met unusual qualifications: they had to be qualified for the job they were applying for; they had to be unemployed and available immediately; they had to work at sub-standard wages; they had to work while knowing the company could close at any minute; and they had to work without supervision. The team that came together produced a highly successful company, and it was not because of high pay, or performance bonuses (there were none). The team stayed together, and performed, because of mutual respect, trust, appreciation, and consideration—people were ‘valued.’ To me, this is the truest form of ‘pay for performance.’”

I agree that trust was one of the key ingredients in what Bob accomplished, but it wasn’t the only one—or maybe I should say that it needs to be based on fairness and honesty.

Bob says the pay was ‘sub-standard’, but I assume that it was universally sub-standard relative to position and experience. If he had chosen to pay part of the team, say 10% more than their peers, the team wouldn’t have coalesced.

And that is exactly why I disagree with the idea of paying top performers, AKA stars, big sign-on bonuses or higher salaries than their peers.

  • Based on my own experience, 98% of star performers become stars as a function of their management and the ecosystem in which they perform. Change the management, culture or any other parts that comprise that ecosystem and the star may not survive.
  • Just as a chain is as strong as its weakest link there is no star in any sport, business, media, etc., who can win with a team that is subject to constant turnover and low morale.

Consider this common example.

Two people are hired at the same time with the same background, same GP0 and similar work experience, but with the one exception. One graduated from a ‘name’ school and the other from a community college. Starting salary is $50K, but the manager adds a 20% premium to the first candidate’s offer on the basis that she must be better to have gone to that school.

Neither candidate lived up to their potential because the manager made poor choices. In doing so he set both up to fail but for different reasons; one thought she had it made and the other that he was low value.

Merit bonuses fairly given for effort above and beyond acceptable performance levels make sense as long as they don’t come at the cost of developing new talent.

But one problem with ‘pay for performance’ is the pay often comes before the performance, but there are others and I’ll discuss them more Thursday. In the meantime, here are links to five posts from 2006 that give more detail on the trouble with stars.

Stars—they’re in your MAP

More about stars and MAP

Rejects or stars?

Star compensation

Retaining Stars

Image credit: sxc.hu

There were several interesting comments on the original post; check them out.

Ducks in a Row: Brains and Performance Reviews

Tuesday, October 7th, 2014

Performance reviews are a frequent subject of management gurus, the media and pundits of every variety, myself included.

More recently the focus has been on what’s wrong with reviews and how they often act as a demotivator.

A new article in strategy + business uses brain science to look at exactly why and how reviews demotivate.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

On another front, it’s Leadership Development Carnival time and the offerings are excellent. Click on over and I’m sure you’ll find information that will be of active use both at work and in your non-work life.

YouTube credit: strategy + business

Gap Outlet Is Going ROWE

Tuesday, September 22nd, 2009

Three years ago after reading a Business Week cover story I wrote about ROWE, the results only work environment, and why it is imperative that your MAP support it before you try to implement it.

Last week Michelle Conlin, who wrote the original BW story, brings us up-to-date on Cali Ressler and Jodi Thompson, the two HR pros who originally formulated ROWE and used a stealth approach to build the initiative at Best Buy; no longer at Best Buy they now run a consultancy called CultureRx that helps other companies move to ROWE.

Conlin reposts a story that appeared in the Society of Human Resource Managers (members only) about Gap Outlet, which is migrating its headquarters staff to a ROWE environment.

“Eric Severson, vice president of HR, believed the culture and the demographics at Gap Outlet were primed for a solution like ROWE. “We are in one of the worst commute cities and in one of the most expensive places to live,” he explained. “We have a 76 percent female workforce with an average age of 34.””

“ROWE also is self-policing, Severson discovered: People ferret out those not doing the work because everyone is highly protective of the initiative. “There are very few talent management programs that don’t create a sense of entitlement,” he said. “This is an agreement between the employees and the company that in exchange for the most incredible freedom to do your job in a way that makes sense for you, you will perform highly.”

Interestingly, ROWE solves another management quandary—how to correct the employee with marginal output, but who puts in the hours. This is especially valuable with Millennials who often feel that showing up is half the job.

Under ROWE all issues become performance issues, i.e., discussions center on results and how to improve them as opposed to attendance. Since work can be done at any time and the choice is left to employees there are no excuses.

Read both stories, do a reality-check on your MAP and then think about how you can implement ROWE or ROWE-like elements in your organization while keeping in mind Gap Inc. executive vice president of HR Eva Sage-Gavin’s admonishment.

The culture has to be right first with a high degree of trust. Check your culture, look at your demographics and if all those are green, then what’s the risk in trying it? Go slow, pilot it and check the results.”

Image credit: drustar on flickr

Pay For Performance

Monday, March 30th, 2009

In a post last week I asked for opinions on the ideas presented in a series of articles in Business Week on managing smarter but especially one that claims that “treating top performers the same as weaker ones is ‘strategic suicide'” and said I would add my thoughts in a future post.

Bob Foster left two interesting comments (well worth your time to click over and read). Regarding pay for performance he tells the story of a company where everybody from the CEO down all quit.

“Taking on the task to salvage the company, I hired new people that met unusual qualifications: they had to be qualified for the job they were applying for; they had to be unemployed and available immediately; they had to work at sub-standard wages; they had to work while knowing the company could close at any minute; and they had to work without supervision. The team that came together produced a highly successful company, and it was not because of high pay, or performance bonuses (there were none). The team stayed together, and performed, because of mutual respect, trust, appreciation, and consideration—people were ‘valued.’ To me, this is the truest form of ‘pay for performance.'”

I agree that trust was one of the key ingredients in what Bob accomplished, but it wasn’t the only one—or maybe I should say that it needs to be based on fairness and honesty.

Bob says the pay was ‘sub-standard’, but I assume that it was universally sub-standard relative to position and experience. If he had chosen to pay part of the team, say 10% more than their peers, the team wouldn’t have coalesced.

And that is exactly why I disagree with the idea of paying top performers, AKA stars, big sign-on bonuses or higher salaries than their peers.

  • Based on my own experience, 98% of star performers become stars as a function of their management and the ecosystem in which they perform. Change the management, culture or any other parts that comprise that ecosystem and the star may not survive.
  • Just as a chain is as strong as its weakest link there is no star in any sport, business, media, etc., who can win with a team that is subject to constant turnover and low morale.

Consider this common example.

Two people are hired at the same time with the same background, same GP0 and similar work experience, but with the one exception. One graduated from a ‘name’ school and the other from a community college. Starting salary is $50K, but the manager adds a 20% premium to the first candidate’s offer on the basis that she must be better to have gone to that school.

Neither candidate lived up to their potential because the manager made poor choices. In doing so he set both up to fail but for different reasons; one thought she had it made and the other that he was low value.

Merit bonuses fairly given for effort above and beyond acceptable performance levels make sense as long as they don’t come at the cost of developing new talent.

But one problem with ‘pay for performance’ is the pay often comes before the performance, but there are others and I’ll discuss them more Thursday. In the meantime, here are links to five posts from 2006 that give more detail on the trouble with stars.

Stars—they’re in your MAP

More about stars and MAP

Rejects or stars?

Star compensation

Retaining Stars

Image credit: sxc.hu

Two Absolute Requirements For Creating A Performance Culture

Thursday, January 22nd, 2009

Wally Bock over at Three Star Leadership tells a great story about Lufthansa Air Line’s culture, a culture that just assumes that nothing is impossible.

But how do you make that happen?

Whether it’s a team, a department or a company, there are two basics to do at the start that are absolutely necessary

  • Hire people whose MAP is synergistic to the culture you envision; have the courage to walk away when the MAP is wrong no matter how right the skills are.

The first step is important, but it’s the second that leads to a true performance culture a la Lufthansa and sustains it for the long-term.

Image credit: flickr

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