Differentiating Performance

Differentiating Performance

Companies win by differentiating performance. They lose with performance equality. Differentiation means calibrating individual performance relative to one’s peers with comparable levels of responsibility. Differentiation increases the caliber of an organization by continually raising the performance bar. Because leaders must allocate resources for the greatest return, the strong must be cultivated and the weak must be culled. Non-performance limits an organization and creates resentment. It also makes the pie smaller for giving the biggest rewards to top performers.

One of the most popular models of differentiation was the 20/70/10 ranking system implemented by Jack Welch at General Electric. The top 20% of people received the highest rewards and promotions. The middle 70% were developed and kept engaged. The bottom 10% were terminated. While many academics and practitioners said the GE model was Draconian, Welch believed it helped both the company and its people improve. Welch was a firm believer that rewards, whether financial or other, should be directly linked to performance.

Whether you believe in the GE model or not, performance must be differentiated. Strong performance must be rewarded and weak performance must be addressed. Throughout the year, leaders must be candid with people during appraisals, discussions and reviews. Candor is the quality of being frank, open and sincere when communicating. People need clear expectations. They also need to know how they are doing and where they stand. It is unfair not to be 100% candid with people, especially weak performers.

The three common inputs for differentiating performance include: WHAT results were achieved relative to the individual’s commitments? HOW were the results achieved relative to the company’s core values? Was PROVEN CAPABILITY demonstrated by taking on greater, more challenging work while delivering results? Differentiating performance must always be based on an individual’s current results, not their anticipated future results. That is, what did they do in the current assessment period? Not what can or will they do in future periods?

How do you differentiate performance for sellers? First, did each seller deliver their number (what)? Calibrate based on percentage of quota attainment. Second, did each seller demonstrate the company’s core values (how)? If yes, maintain calibration. If no, calibrate on: If strong results and strong values, high potential. If strong results and weak values, strict scrutiny. If weak results and strong values, second chance. If weak results and weak values, termination. Third, did each seller take on a meaningful stretch assignment (proven capability)? Calibrate on added value.

Delivering results is no longer enough. Differentiating performance requires people to deliver higher results relative to their peers while consistently demonstrating the company’s core values. If good performance is compensated well, extraordinary performance must be compensated extraordinarily. Great people make great things happen. Having the best people ensures the company is realizing its full potential and customers are receiving as much value as possible. If good is the enemy of great, differentiating performance helps drive greatness.

All contents copyright © 2012, Josh Lowry. All rights reserved.

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