Enabling An Anti-Performance Culture

When considering an organization's merit increase process, a common complaint is, "we have too many employees rated too high."  Which means the performance rating distribution curve is skewed.  Too many employees walk on water, while too few are not carrying their own weight.

What's Normal?

A "normal" distribution curve of performance ratings, using a typical five point scale,  looks something like this:

• Distinguished: Up to 10% of employees

• Superior: 20% to 30%

• Fully Successful: 60% or more

• Needs Improvement: 10% to 15%

• Unsatisfactory: Less than 5%

The descriptive language differs between companies and percentage guidelines vary as well, but you get the point.  Most performance ratings would normally be expected to cluster around the middle, with smaller percentages moving out to the extremes.

Is this how your company scores employee performance?  Don't be surprised if it doesn't.  The pervasive problem that fuels inflated ratings can be boiled down to a single question; "what employee wants to tell their mother that they're average"?  We all think that we're achievers.

And it's worse at the top.

The Trickle Down Problem

The problem of skewed performance ratings usually starts with how a company's management treats themselves.  Leadership sets an example in performance assessment that's inevitably  replicated by the rest of the population, for good or ill.

Usually it's for ill.

Management tends to consider their performance using a different measurement stick or justification than the rest of the organization.  Actual performance seems to be less a rating criteria than you would expect.  Sometimes it's overlooked if not downright ignored.

Let's take a look at some common management reasons for skewed performance ratings.  How many have you seen?

Entitlement:  When management feels that at least a portion of their annual bonus or merit increase is due them, "just because."  It's been 12 months and they feel entitled to receive their annual reward. 

Feel good: When you want the employee to feel good about themselves and the company.  When you want to recognize effort instead of results, or when the company has had a tough year and the employee has "hung in there."  

Retention:  When the rationale is that the company  has identified a particular employee as a talent that needs to be retained.  This card is usually played when the reward process coincides with a reorganization. 

Leaders need competitive pay: This is a fall-back position for the desperate, when performance arguments don't work.  In order to retain leaders the company has to ensure that their pay is competitive.  This is not about performance at all, but keeping up with the marketplace. 

Cannot use the rating scale: Here is a problem as old as the performance appraisal process itself.  Some managers have a difficult time rating an employee less than "average."  Excuses are legion, but the result is that objective assessment takes a back seat as almost all employees are rated average or above.  And if marginable performers are bumped up into "average," how do you think the truly average are rated?

Leadership is always rated higher than the regular folk:  This one is rarely voiced out loud - though repeatedly we see the results in the statistics.  If you're a leader and not being readied for termination, then you must be pretty good.  Having poor performing leaders is a strong criticism of senior management, and we can't have that!

What Can You Do?

Training sounds like a nice problem resolution strategy, but is often a throwaway thought - like "let's push the EASY button and then go to lunch."  In my experience behavioral change rarely results from sitting through a classroom session or by sending out a bunch of memos.

You need a bad guy.

You need to inject a healthy dose of discipline into the performance rating process.  Calibration sessions are useful, but you need someone in HR and at the top of the organization who demands a performance-related reason for each rating.

Someone has to say "stop!" when ratings no longer make sense; when they don't correlate with how the business performed; when appraisals are poorly written, and when excuses trump objective assessments.

Lack of managerial discipline enables bad practices to continue, to even flourish and to spread throughout the organization.

That culture change you might be hoping for could morph into the very opposite of your goal; you could be developing an anti-performance culture.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a clowder of cats.

Creative Commons image, 'See No Evil," by allyaubry

Comments

[E. James (Jim) Brennan]

What organization selects, hires, trains and develops average workers? Even the military won't admit to that, and armed forces are the best employers for getting good results from normal people with no special skills. Having reviewed many military performance ratings, I can attest that I never saw any officer reach field grade who was ever rated less than at the 90th percentile (the highest rating possible in the old scale). Remember that having subordinates with less than acceptable ratings is a black mark against their manager, too. But sometimes low ratings are negotiated in exchange for job security.

Forced distributions create forced mediocrity, internal dissention, hypocrisy and cynicism. Nevertheless, they are loved by bean-counters as a cost control mechanism that gives lip service to "pay for performance." They are a plague upon our profession.

[Jacque Vilet]

Another excuse for rating all employees either Average or above is ---- "All the poor performers have been terminated".

[Shawn Miller]

To piggy-back on Jacque's comment, I continue to be confused about the value of telling an employee that they are average or below performers once a year.

In an ideal world, yes, "All the poor performers have been terminated" (or put on a PIP and returned performance to an acceptable level) at merit time. But we all know this is not true, so push the Easy Button and rate folks as at least meeting expectations.

We're seeing the pendulum swing away from formal ratings and forced distributions as we continue to grapple with this age-old conundrum--perhaps as we are experiencing a growing population of workers who have received ribbons, trophies and honorable mentions for 'participating' throughout their lives in school and athletic events.

One day we'll see a return to forced distribution performance ratings as the next 'new thing.'

[Deb Marshall]

I don't think we can look at performance as 'normally distributed' as normal distribution assumes some randomness. We don't hire employees randomly. I expect that most employees do their jobs quite well, and are, to use a golf analogy, PAR performers. Anyone who plays golf knows having a par round of golf is not easy. Jordan Spieth is an extraordinary golfer, but he couldn't do your job or mine. We should be expected to be par performers at our jobs. Framing the expectations this way avoids (or at least reduces) the whole "average" mentality. Those who are not 'up to par' are either coached up or out. Compensation is distributed with this 'par' mindset, and holding managers who have comp responsibility accountable is critical. I agree with Chuck that SOMEONE needs to be the arbiter of what is par - preferably the CEO, with support from HR.

[E. James (Jim) Brennan]

In my dreams, I see people rated Super, OK or Lousy while pay is distributed accurately/equitably per the Brennan Payout method.

The subpar Lousy group get PIP treatment with increases deferred until whatever (as Shawn and Deb also advised). The amounts granted to others come from a different process. It ignores parametric statistical silliness. The total budget is precisely disbursed in performance-weighted pay units computed from central job values. Everyone with the same MRP or midpoint gets the same cash amount for their Super or OK ratings. The amounts are a percentage of their job value. Absolute increase dollar parity by PA and grade provides symmetrical progression patterns superior to those forced by difficult to design merit grids. Much easier to explain and justify, too.

[Trevor]

What outcome is everyone trying to get to? Mandating a forced distribution is pushing the "Easy" button but has so many unintended consequences it's not funny.
Forcing a certain percentage of "Does not meet" encourages managers to hold onto bad performers until the rating process is over and not deal with them when they should.
Taking away manager discretion in performance increase distribution negates all the other factors that come into play that some comp guy sitting in the corp office is not aware of.

If your company is performing well above average compared to its industry using a standard forced distribution does not relate. This works in reverse if the company is under-performing.

The core of the problem is that performance management should not be a once a year event. It needs to be part of the fabric of everyday management. There is no perfect approach and all strategies have to take into account the unique differences of each company. What is "easy" is often the lest effective.

[Joe Thompson]

I’m always amazed by the Lake Wobegon effect that creeps up in performance management: "Our average employee performs significantly above our average employee."

In most cases where I’ve seen this play out, the cause is usually the carcinogenic toxin of low expectations. Of course our ratings are high! We only hire top talent! This, of course, is nonsense. The Olympics represent a gathering of some of the finest athletes in the world – top talent – yet very few Olympic athletes walk away with a medal of any color, let alone Gold or Silver. When I’ve worked with managers who insist that their employees are the workplace equivalent of Olympic athletes, I ask them: “Why then, are you holding them to High School Track and Field Standards?” So often, managers want to set the bar at the lowest common denominator (I’ve never understood why people default to that standard vice the highest common denominator). In addition, there is a tendency to underestimate what staff are capable of accomplishing. Yet, my experience tells me that people will generally rise to the level of expectations that are set. (And, if the bar is set low, they’ll generally sink to the level of expectation set!)

Sticking with the track and field metaphor, I try to coach that the bar (fully successful) is probably set appropriately when the average employee can clear it roughly half the time. It should never be set at a level that the average employee can sail over it with ease every time.

As for the leadership sense of being rated higher, I’ve tried to coach that expectations must be appropriately set for managers as managers, not as line staff. Typically, managers were elevated to that level because they were the (proverbial) water-walkers. Accordingly, the minimum performance expectation should be that they can walk on water. If you want to exceed expectations as a manager, you better be able to walk on water on water while carrying an orphan on your shoulders!

Alas, while the metaphor is easy to visualize, getting managers to agree on what that performance looks like is a challenge – for all of the reasons Chuck has laid out.

[Warren Antonik]

I would agree with the previous comments. I think its relatively easy to visualize, poor performance, par performance and outstanding performance. I would add that you can probably identify those folks developing satisfactorily into a role as well.

Ultimately though, the question is whether having "labels" is useful. Some companies have reached the conclusion that these are not useful... i.e. if the dialogue is ongoing and employees have indictors of performance they are pretty clear as to how performance stacks up and will understand why they receive the compensation they do. There are a lot of 'ifs' there but good leaders do this.

Lets face it ...what most companies currently have doesn't work that well either so its probably time to shake it up.

[E. K. Torkornoo]

Hmmm. Chuck you've stirred it up again. Far beyond the Midwest, I've seen Lake Wobegun effects in more continents, countries, and cultures than I can count. In almost all cases, (almost) all clansmen, civil servants, and/or the usual claque.... are 'above average' (even when popular opinion and the hard data on their perfomance say otherwise). Thanks once again.