Every company has a ‘compensation philosophy’ that it uses to guide how it sets the pay of employees, from the CEO on down. We talked about the challenges we were having meeting the performance expectations of shareholders and our need to increase the level of talent in the organization.
Then, as if we had just forgotten the previous conversation, we reconfirmed our compensation policy – to target pay at the market median (otherwise known as ‘average’). We were doing exactly what Godin proposes is lunacy – expecting above-average talent to deliver above-average results for average pay. Guilty as charged. Reflecting on this got me thinking about other ways organizations and leaders ‘kill’ the potential for excellence:
Rate everyone’s performance as ‘above expectations’: A few years ago I had the opportunity to help a client ‘fix’ their performance review process. We discovered there was nothing wrong with the performance criteria, the forms or the process. The problem was the ratings – the average performance score was 4.2/5. Only 10 per cent of employees scored a three (‘meets expectations’) and no one scored less. If the organization was delivering exceptional results perhaps this statistical improbability could be overlooked. But it wasn’t. The organization was reinforcing average performance and getting exactly what it deserved – average results.
Reward loyalty and effort: Long-service, loyalty and effort are all laudable and should be encouraged. But they are insufficient if the goal is to create organization excellence. The world stopped being a meritocracy several decades ago. One of the most common reasons I hear for keeping long-serving but poor-performing employees around is their knowledge and institutional memory. We are in the information age. It is time to think long and hard about how you are managing and transferring knowledge in your enterprise. The statute of limitations on gold service pins has run out.
Offer a defined benefit pension plan You are not enjoying one of these unless employed by a large corporation or anything resembling a government. Had I understood the implications of the pension when I was 20, I would now be happily retired and vacationing on a desert isle. Pensions are wonderful things and of tremendous benefit to employees and society, and I wish we all had one. They are also guaranteed to stop people who really need to get out and do other things from voluntarily leaving your organization.
Ask extraordinary people to work for average leaders: Talent is attracted to talent. If your goal is to bring in exceptional people, you need to staff your leadership roles with people who will inspire and engage them. A strategy of recruiting exceptional people to shore up an organization’s weaknesses is guaranteed to create a revolving door.
Make personal development optional: My job requires me to regularly ask people ‘what is on your current development agenda?’ The answers I typically hear makes me want to tear my hair out. ‘Nothing really’ or ‘I actually don’t have a development plan right now’, or ‘I still need to have that conversation with my boss.’ I used to think people were busy working away on things designed to help them get better and just didn’t want to tell me about it. I turned out to be wrong. Many of us don’t seem particularly concerned about honing our performance, as if personal excellence has little to do with organizational excellence. Leaders, when they put off having those conversations with their teams, are complicit. Organizations who take a casual attitude toward people development will never deliver consistently outstanding results. Because for a business to survive these days requires constant improvement, and we’re not just talking about processes and IT systems.
Building and sustaining organizational excellence requires exceptional people dedicated to the task and supported by the right values, expectations, processes and leadership. Jack Welch was a lighthouse for all of us on the topic of organizational excellence. As the CEO of GE he taught us exceptional performance is a relentless and disciplined pursuit, not a happy accident. Jack may have retired and moved on, but that idea still burns bright.
Rebecca Schalm, PhD, is founder and CEO of Strategic Talent Advisors Inc., a consultancy that provides organizations with advice and talent management solutions.
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