Rewarding Star Performers at the Expense of Others

Friday, April 29, 2011

It is very difficult to make the argument that organizations should NOT pay for performance and with almost microscopic merit budgets, only pay the absolute top performers. For many years as a compensation analyst, planner, and manager it often fell to me to construct a typical merit matrix which allocated increases based on the employee’s performance and their position in range. And to that end, my designs generally reflected the common thinking that the higher the performance, the higher the increase. Even if that meant that low performers would receive nothing and a “Meets” employee would warrant a very small increase.

One organization I worked for prided itself on hiring “Race Horses”. These were highly talented individuals recruited away from large metropolitan areas to work in a long-standing regional billion-dollar bank. They often came from the large banking centers in Texas, Louisiana, Tennessee, and Georgia. We saw them as rising stars who were going to reshape our lending, trust, consumer or personal banking departments. They were enticed away from their current billion dollar banks with recruiting bonuses, large salaries, and promises of great growth opportunities. Initially all seemed well; they impressed our current customers, they brought in new customers, maybe even developed large business opportunities and integrated into what was really a one family owned bank.

However, after a respectful period of time, they left, they moved on to Chicago, New York, St Louis, and other banking centers. As it turned out, we were merely a stepping-stone in their career improvement plan. Once they moved on, it was quickly realized that they contributions were far less than once perceived, in the light of their departure. In the post analysis, we often found that the Race Horse had lots of show and very little go. The new business they developed was on referrals from existing employees who were merely “Plow Horses”, who had worked their way up from Item Processing or some other department. The organizational reshaping we had hoped for were the initiatives of other Plow Horses whose ideas had been appropriated by our star employee. Eventually, we concluded that what passed for performance and talent was superficial and that much of the talent we needed to succeed we already had, they just needed to be managed differently.

Once we came to recognize the difference between the appearance of performance and real performance we were able reshape our organization with the talent we had in place and do so through the relationships those Plow Horses had built and maintained for many years. Not that new blood is never warranted, it just has to be the right blood type, compatible with the organization and with a desire to do what it takes to succeed. A Race Horse that is only good for one race is not going to be able to sustain the organization for a full ten furlongs.

Is there a moral to this story? When rewarding and recognizing talent and performance, organizations need to make sure they are in fact paying for performance and not window dressing. True talent runs deep and is best demonstrated under pressure. When the faint of heart fold, organizations need to look for those left standing.