July 5, 2019
Very often, we see that the performance management in a team or an organization at large is done by management and leadership through what is called “Management by Objectives” (MBO) – set a target, hold people accountable for it, reward them if they meet it (and then set a higher target), and, if they don’t meet it, either put action plans in place or punish them with some measures, like withdrawing bonuses.
While, in theory, this is good and works most of the time, in our zeal to drive performance and reward the top performers, we tend to forget that the bulk of the team performance actually comes from the middle order. We reward the top performers, the outstanding stars; but what about those in the second quartile – people who have done better than most others and yet get precious little for their effort and performance?
Consider the following. Here is an example of a program or a team that measures the performance on some metric – let’s say Customer Satisfaction (measured as the percentage of customers who respond “satisfied” or “very satisfied” to a survey). The measure is not the point here; it can be any performance measure or KPI (key performance indicator).
Now, see the distribution of the performance. It follows a typical normal curve, with some doing very well and others doing poorly. Surely, for all businesses, there will be action plans for the bottom performers – that is, the ones marked in red to the left. They are about 10% here. We will visit these ‘bottom-quartile’ action plans in a later post.
Now, look to the right. About 12 to 15% of this team, marked in deep green, are the ones who are over and beyond the stretched expectation of performance set out by the management, which, let’s say in this case, is to be over 85%. So, these are the people who will be celebrated, given rewards and incentives, even considered for promotion.
This is all good, no doubt. But now look again. There is a sizable group, about 35 to 40% in this case, that is marked in light green and gold. The ones in gold perform better than most others, have been consistent, and are, in fact, even better than the program average across the enterprise. (This is a classic case of a business where the target is rather steep, and only a handful make it. But the general principle is true, even if the performance is close to target).
Look at those in light green. They are even better than those in gold. They are, in fact, better than the expectation on paper (in this case it is about 82%). They are so close to 85%, and yet, since they have not crossed the line, they do not qualify for any reward or incentive.
They do not get anything for performing better than others because they are not ‘the best’.
Now, you might say, “Hold on just a second. It is the fact that they have not met their target. It is right that they should not get rewarded…” You might even go one more step further and say, “…which is exactly what will motivate them to stretch further the next time and push to meet the targets.
But, look at it from the employee’s point of view. Say you are Anaya, one of the staff members in this program. Out of many teams for this program, she is part of a 15-people team. She is in the gold group or the light green group. Say her score is 83%, so the light green group. She asks around and finds that others are also with her with similar scores. She seems to be better than others, yet she knows she is not in deep green.
But when the incentives are announced and reward functions are held, she sees that the incentives are lapped up by one or maybe two people most of the time. She asks around and finds none of her friends get anything at any time. Slowly it starts to feel as if the rewards are unachievable, meant only for the elite few, for the stars. She starts getting disenchanted. This happens month over month.
And the next thing you know is that the rewards lose their ability to motivate. As Victor Vroom would say (expectancy theory), the rewards should be felt as ‘achievable’ in order to motivate people. And here we are, thinking that the stretch goal is driving performance, whereas, in reality, it is only driving anxiety, stress and disengagement.
Even as leadership and management, consider this. We are looking for a consistent, sustained performance more than superstars. Like cricket, this is a team sport. We need those who make hundreds of runs, but we also need those who keep ticking during the slog overs so that the average keeps building – to keep the sports analogy going. So, if 40% of your team are now the Anaya’s of the world, it is not going to be long before your overall team average starts slipping.
This is a slow-ticking time bomb. We need to do something about it.
So, what should we do? This is a people management issue, so we normally do not have a silver bullet. Things work sometimes while they don’t at other times. But here are three things that I have seen work better, usually.
Look at the Spread – Not Just the Top Order but also the Middle Order
Remember that the bulk of the performance comes from the middle two quartiles, and it is the second quartile that is usually the key for the overall team performance. Study the folks in this group, see what profile they are from, what they do, how they do their work, and what can be done to get them to move just a few notches up.
Most often we have specific action plans for those in red, but not for this group. Having specific action plans, coaching, and mentoring for this group usually goes a long way in staff performance as well as their engagement and motivation. I have seen it in at least two clients, and it has worked well in getting a sustained, steady improvement in performance with these employees.
Give the ‘Almost-There’ Group a Label
It is almost always true that the motivation gets driven, first and foremost, by recognition more than by monetary rewards. I have found in a couple of places I work with that the leadership team gives this middle group catchy, aspirational names – like the ‘Road Warriors,’ ‘Seekers,’ etc. – and it turns out great.
The reason to name the group thus is to recognize two things – that they are better than average, and yet they are not ‘achievers’ of the goal. Naming them also indirectly indicates that you recognize that they are the ones who are driving the overall team performance ahead.
Make some action plans for the group as such. Get them together. Have them share their ideas. Let them buddy up with top performers and learn from them. Let them also teach the people in the third and fourth quartile to improve because although they are not the best, they are still better.
Spread the Love
At the cost of sounding cocky, I would like to say that you need to look at your outflow of incentives. There are several problems we see in the industry with this. In some cases, managers try to be thrifty, thinking that they are doing the company a favor. I have seen situations where half the annual budget for rewards and recognition is saved up and moved to the next fiscal year as savings.
In some cases, the outflow is so wonky that only 2% of the people get the incentives. I am not saying you should look at the ‘Gini index’ (a measure of income inequality) like they do in economics, but maybe you should. The point is, this is not about increasing the outflow in rewards but having a more equitable distribution such that it drives and motivates people, they think it is achievable, and they strive for a better performance.
So, in summary, looking at the middle order, giving them recognition, and rewarding them (even marginally) will go a long way in getting the overall performance up and sustaining it for your business. You will also start seeing an improvement in the employee morale for the bulk of your team.