Recently I have been working with a company that has been losing some of its most talented middle-level employees. These are precisely the type of folks you don’t want to lose. The question to be answered was why was this happening?
The company had a formal appraisal process that was executed once a year and each individual ended up with a sheet of paper from their boss with their strengths and weaknesses discussed, results from the prior year, and a plan for the next twelve months. Also, the employee was given a performance grade of 1 through 5, with 1 being unacceptable and 5 being excellent performance. I was impressed.
I then asked to see the distribution of middle level employees across the 5 possible ratings. After a week, Human Relations finally unveiled the following: 0% got a 1, 7% got a 2, 79% got a 3, 13% got a 4 and 1% got a 5. The executives were shocked and the HR folks were embarrassed. The answer was simple: They were not telling their best people that they were really strong and highly valued.
It got worse. I asked what the average annual salary increase target was and they indicated +3%. I then asked to see the average salary increase by performance rating. After two weeks, HR supplied the following: 2.3% for the 2’s, 3.0% for the 3’s, 3.3% for the 4’s and 4.1% for the 5’s. Basically everyone was getting about the same size of an increase.
The scenario described above is actually quite typical. Bosses tend to be reluctant to tell their best performers they are really strong and highly valued, and to pay them accordingly. Here are a few tips that any organization should follow:
Top performers: You should isolate the top 15% or so (not 2% and not 25%) and tell them they are great and give them increases that are at least 2 to 3 times the size of the overall average increase for their level. Yes, that means you have to take the extra dollars from the average and below average employees to fund this.
Weak Performers: You should identify the bottom 3 to 5% and make sure they understand that things are not going well at all and you need to see significant improvement within 6 months or you will need to start working with them to find a job that is a better fit; either inside or outside the company.
Talent is everything. You need to nurture and grow your best performers and deal quickly with the weak performers. It is easier to just avoid this topic completely, but I will guarantee you that you will lose good people and weak ones will never leave.