Sunday, December 16, 2007
The Corporate Review System
The comic for Dilbert yesterday was fantastic and it actually covers a topic I've been wanting to talk about. I've done a lot of thinking about how reviews work in corporate America and how they fail miserably at achieving what they are set out to achieve. Reviews should be set up to give honest feedback to someone about their job performance, set clear goals going forward, and to motivate an employee to reach their full potential.
Everywhere I've worked, there has always been a mantra that "Our people are our most important asset". This is particularly true in the tech world because your business is based on information and knowledge which must be created by smart and creative people. So, on the surface, there is at least some recognition that for a business to succeed in this space, they must have great people.
But almost every employer bases their review system on a bell curve. Now think about that. A bell curve represents a normal distribution. It is supposed to represent a nice AVERAGE population. For every "great" person you have, you must have someone who is not so great. The majority of the people will be "average".
Now, I'm all for differentiation. I believe people need to be ranked within an organization and under-performers need to be pruned. But to go into a review with the expectation that your employee pool must come out "average" is laughable. If you are a knowledge based business, and you have average people, you are going to get average results. It's a simple equation.
But differentiation does not mean that there needs to be winners and losers. I think the only incidence that I have heard of someone getting this right is Netflix. Netflix has a policy of keeping only the best. There are no "average" reviews. Getting an "average" review means you will be shown out the door. They openly advertise that they pay more than market rates. And I agree. If you want great people, you need to pay for it. Great people know they are very hard to replace. You may pay these people 15% more, but you will get 100% more work.
It reminds me of a controversy at Princeton when I was there. Grade inflation was a big topic there and at other Ivy League schools. It seemed that too many students were getting A's and B's. At the time, I agreed. I thought more people needed to get lower grades. But now being removed from the situation, I kind of see how ridiculous that is. Almost every single person at an Ivy League school was a top performer in their high school. Giving someone an 'F' because someone got an 'A' would be ludicrous. Someone else's success should not diminish yours. Certainly, their success needs to be recognized and appreciated. They should get better rewards. But the notion that the only way to succeed is to make sure your peers fail is a very dangerous path to go down. But it is something that corporate America hasn't seemed to figure out yet.