The New and Improved Three-Tiered Talent Evaluation System

“This employee should go far — and the sooner he starts, the better we’ll be.”

“Since my last report, this employee has reached rock bottom and has started to dig.”

“He sets low personal standards and then consistently fails to achieve them.”

Anonymous Employee Reviews from U.S. Federal Evaluations

One of my doctoral dissertation committee member from many years ago, Professor Sam Culbert at UCLA created quite a stir in 2009 with his best-selling book called “Get Rid of the Performance Review.”  He still didn’t get it completely right though as companies will continue to need and use some form of talent evaluation system for personnel related decisions like salary increase, promotions and terminations (he argues for a performance preview).

I’d like to suggest we create a new system based on the following three evaluation tiers and some newer research suggesting that performance isn’t normally distributed as believed by the human resource management practitioner and research community:

1. Non-Performers (10%)
2. Under-Performers (70%)
3. Performers (20%)

The percentages next to these performance labels provide an idea of how many employees typically fall under each of these three new suggested performance tiers. A remarkable set of studies by Ernst O’Boyle and Herman Aguinis from Langwood University and Indiana University, respectively, focused on 198 samples of employees including 633,263 researchers, entertainers, politicians and amateur/professional athletes ((Boyle, E. & Aguinis, H. (2012).  The best of the best and the rest: Revisiting the norm of normality of individual performance.  Personnel Psychology, 65-79119)).  Their findings are incredibly consistent across types of jobs, industries and performance measures.

Simply, their studies show that individual performance is not normally distributed but instead follow a Paretian (power law) distribution with long tails and the majority of employees clustered in one large band.

Their findings suggest that most performance outcomes are attributed to a small group of elite performers and they argue that new theory and practice should focus on how to select and cultivate these elite performers. For example:

• Nearly two-thirds of academic researchers included in the their study (65.8%) fall below the mean number of publications
• 83.3% of all Emmy-nominated actors fall below the mean in terms of number of nominations
• For U.S. representatives, 67.9% fall below the mean in times of being elected
• For NBA players, 71.1% are below the mean in terms of points scored
• For major league baseball players, 66.3% are below the mean in terms of career errors

Even with performance ratings for coaching and development, we find that normal curves just don’t really appear very often.  For example, we ran an analysis of a sample of senior level executives using our Executive View 360 assessment and just looked at an overall score based on a composite of the 17 competencies composing the performance leadership, change leadership, interpersonal leadership and intrapersonal leadership areas.

Our sample of over 17,000 ratings revealed a mean score of 5.44 using a 1-7 frequency scale.  We superimposed a normal curve over this fat tail distribution and it is easy to see that we have ratings of elite leaders and a lot that are either non-performers or just under-performers (the old “meets expectations” club).

O’Boyle and Agunis  point out that the contributions of pre-employment testing and coaching/training high potential talent should be re-interpreted (and valued) from a Paretian point of view that acknowledges that performance differences between talent at the end of the productivity tails and the median are considerably wider than ever thought.

However, the findings of these studies actually support the idea that organizations should ignore the masses and focus on the elite performers. These findings raise some interesting ethical issues like:

• Should there be separate policies for elite performers in organizations?
• Should most of an organization’s resources be allocated to only the elite performers? There are real differences between the top performer in most organizations and the second best performers

Super stars and the elite make or break organizations in today’s competitive global market place.  And, if you can’t keep your best talent it’s not likely you will survive very long.  No doubt, personally negotiated arrangements (e.g., flex time for high potentials) can be a valuable source of flexibility and personal satisfaction, but at the risk of creating inequality and resentment by other employees.

Implications for Implementing the New Three-Tiered Talent Evaluation System

Here are a few suggestions and ideas for practical implications on looking at the “new normal” in talent potential and performance to consider:

• New pre-employment assessments should be explored that identify “superstar stuff” (e.g., personality traits, interpersonal and communication skills)
• Conduct “stay interviews” with your most valued talent to discuss leveraging their signature strengths and what will engage them to stay with your organization in the future
• Provide more perks, flexible benefits, training and coaching to the top 20% of your talent
• Constructively confront and consistently vote the lower 10% “off the island” and invite them to work for a competitor
• Engage in “I-Deals” (Idiosyncratic deals; Rousseau, 2005) with high potential talent that are special arrangements, concessions, perks and career opportunities only available to these elite performers
• Change your performance appraisal ratings to use only three categories with forced distributions to minimize the normal curve (Non-Performers, Under-Performers, & Performers)
• Encourage researchers to focus more on the psychology of the elite—and how to identify and cultivate this talent

One thing is certain—performance isn’t what it appears to be and the sooner we recognize that not everyone that is “average” is really a solid performer we can shift our focus and energy on the few in each organization that really make a contribution (and difference). The “Matthew Effect (Ceci & Papierno, 2005) suggests that those in an advantageous position leverage what they have to gain disproportionate rewards.

I’m not sure this Blog will be very comforting to those who endorse the rising economic inequality ideology of the Occupy Movement. It’s important to clarify that I support that in a “fair” organization (and society) the “have nots (average performers)” should gain, but the “haves (elite performers)” should gain even more…..Be well….

Ken Nowack

Kenneth Nowack, Ph.D. is a licensed psychologist (PSY13758) and President & Chief Research Officer/Co-Founder of Envisia Learning, is a member of the Consortium for Research on Emotional Intelligence in Organizations. Ken also serves as the Associate Editor of Consulting Psychology Journal: Practice and Research. His recent book Clueless: Coaching People Who Just Don’t Get It is available for free for a limited time by signing up for free blog updates (Learn more at our website)