The Leadership Star

3CLARITY

 

‘This is a dumb process — I hate it!’

Damien, my HR director, just looked at me and tilted his head, a nervous smile showing he had some sympathy for me, but not much.

It was performance review time — the end of my first full year as a divisional business executive — and we were now engaged in the annual corporate ranking process.

It was the classic big‐company approach — each executive was given a numerical performance rating of 1 to 5, along with a ‘behaviour’ rating of A, B or C. 1A was the best, while 5C meant you weren't going to be around to receive your rating.

In addition to a rating, each person was ranked relative to everyone else at their level, and this ranking drove their annual compensation result. The underlying goal was to drive a performance culture by paying the top‐ranked people (typically the top 20 per cent) the biggest bonus, mid‐level people less and the bottom‐ranked people no bonus at all.

My task was to ‘force fit’ the executive team into a proportional distribution.

‘But this is a ridiculous review process,’ I responded. ‘We've had a great year, and all of my executives have beaten their goals. How am I supposed to rank them?’

‘I get it, but you have to,’ Damien replied. ‘The bonus system is designed to reward the top performers. And the problem isn't the review process. The problem is your target‐setting process at the start of last year.’

The penny dropped, and I realised he was right.

It was true that each of my executives had beaten ...