Do your best performers leave you?
When I managed radio stations, I worked in small-sized markets.
We were often recruiting fields for larger markets looking to hire good salespeople. Competitive radio stations would refer our best salespeople to larger stations outside of the market to remove them.
Recognizing I would lose my best salespeople over time, I rewarded and recognized them consistently, while continuously recruiting. I developed a reliable hiring process to help make sure to make good decisions for replacements.
This is what I could control. My salespeople’s “punishment” for doing well was a rewarding career in a bigger city.
There’s another performance punishment infecting businesses today…
What is Performance Punishment?
In Why Paying Unfairly is Fair we shared how compensation fairness can cause your best people to leave. Jim Collins in Good to Great shared Discipline #2, When to Act, on when to release poor performers. Poor performers make good performers question, why they’re working so hard.
Performance Punishment: The Reason You May Be Losing Your Best People, reveals the downside of achievement, as well as why performance punishment can’t be solved by those overachievers who are being punished. The problem is only solved by the leaders.
As Liz Wiseman, in Multipliers: How the Best Leaders Make Everyone Smarter, shares in, Performance punishment, “How many times, when faced with an impending deadline or critical situation, have you called upon that person on your team who can always deliver exactly what you need? In doing so, how often have you also considered that you might be contributing to or hastening their burnout or resignation?”
It’s easy to fall into the trap of giving challenging work and deadline projects to those you depend on the most. The consequences can be detrimental.
When High Performers Get ‘Punishment for Performance’ by Andria Taylor, provides symptoms and solutions for you to consider.
It may be time to review your compensation and develop your People Strategy to connect your people practices to your company purpose and stakeholders’ expectations.
This diagram from Scaling Up Compensation starts with the end in mind and works backward. What do the various stakeholders (customers, employees, shareholders, and community) expect your firm to deliver? How do you deliver, in a differentiated way, on those expectations?
Your People strategy should connect to your company strategy. This “different way,” which Harvard strategist Michael Porter calls differentiating activities, necessitates a certain culture. Your team must hold beliefs and values that reinforce a set of behaviors/actions which support these differentiating activities.
The role of your compensation system should incentivize behaviors in your employees your customers appreciate.
Your HR policies then create true value for the firm and make you stand out in the marketplace.
“In large part, culture is a product of compensation.” – Alec Haverstick, Bessemer Trust
Change to Strange Different strategies requires different people. Don’t expect your employees to be different if your People practices are the same as everyone else’s. Everything you do in HR, including compensation, should reinforce these differences – the more extreme these differences the better.
In Scaling Up Compensation - 5 Design Principles for Turning Your Largest Expense into a Strategic Advantage we outline the 5 Principles for Effective Compensation from Verne Harnish, and Sebastian Ross’ Scaling Up Compensation.
Verne notes, “When leaders give compensation some thought –they attempt logic and reason, pretending to have the “homo economicus” they learned about in business school in front of them. Yet, as Nobel Prize winners Daniel Kahneman and Richard Thaler, and also the later quoted Alfie Kohn, Daniel Pink, and Jeffrey Pfeffer have taught us, few human beings act fully rationally, and much less so when it comes to pay.”
Business isn’t just about spreadsheets. As Kip Tindell explains in Communication is Leadership – Kip Tindell Dallas Growth Summit in his One Great Person equals three Average ones, performance differences among people are huge. Tindell carefully hires the very best, monitors and manages performance very closely, and then pays people according to their actual contribution.
Verne and Sebastian ask, “What is the end goal of compensation?” Their conclusion: energy.
Your people systems, including compensation, should increase the total energy of everyone in the organization. To the extent someone’s monetary compensation gives them energy or at least doesn’t dampen their excitement for the work and company, you’ve succeeded.
Your intention should be to create a compensation plan to drive positive energy throughout your organization. To achieve that, your plan needs to be clever and fair.
Your comp system needs to reward the behaviors you consider desirable and penalize the ones you deem undesirable.
To create an environment where everyone is inspired to give their best, contact Positioning Systems today to schedule a free exploratory meeting.
Growth demands Strategic Discipline.
Michael Porter the founder of the modern strategy field, describes Strategy as the creation of a unique and valuable position, involving a different set of activities. To develop a coherent strategy including your people, we need to develop 3-5 differentiating activities. We’ll explore this next blog.
Building a great enduring organization requires disciplined people, disciplined thought, disciplined action, superior results, producing a distinctive impact on the world.
Discipline sustains momentum, over a long period of time, laying the foundations for lasting endurance.
Meeting Rhythms achieve a disciplined focus on performance metrics to drive growth.
Let Positioning Systems help your business achieve these outcomes on the Four most Important Decisions your business faces:
Positioning Systems helps mid-sized ($5M - $500M+) businesses Scale-UP. We align your business to focus on Your One Thing! Contact email@example.com to Scale Up your business! Take our Four Decisions Needs Assessment to discover how your business measures against other Scaled Up companies. We’ll contact you.
NEXT BLOG – Strategy - Your Differentiating Activities