Want engaged employees?  Want better performance from your employees?  Don’t compare them to their peers. If you do, achievers lose their drive to achieve and under-achievers surrender.

Comparing employees to their peers de-motivates people.  Iwan Barankay’s study supports the conclusion that “telling people about their rank reduces their effort.”  The experiment demonstrated that those who received feedback were 30% less likely to return to work than those who had no feedback.  Of those who returned, those receiving rank feedback were 22% less productive than those receiving no feedback. The Wharton article summarizes: “people who rank highly think, ‘I am already number one, so why try harder?’ And people who are far behind can become depressed about their work and give up.”

Rank feedback is inadequate because the comparison is made against the wrong benchmark.  After all, your products and services must compete with those of your competitors.  It stands to reason your people must be better than the competitor’s in order to “win” in business.  Many a high school valedictorian found the competition at the next level made them average. Their performance hadn’t changed in absolute terms, but in relative terms they lost ground.  According to Einstein,

When a man sits with a pretty girl for an hour, it seems like a minute. But let him sit on a hot stove for a minute-and it’s longer than any hour. That’s relativity.

It’s all relative.  How disappointed would you be if Employee A left for the competition? What about Employee C?

If you must rank employees, the pivot point is to benchmark performance relative to the competition, not one another.

Einstein’s Theory of Employee Rankings
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  • Good points here. It makes sense that whenever you compare anything you need to be careful what you are comparing too.

    I was on a sales team once where each reps sales numbers were compared other team members. The problem I had with this was that my customers stayed customers and some of our other team members lost their new customers very quickly because these reps were not 100% honest and pulled a bait and switch to get their numbers up. This was very demoralizing and the group wound up essentially turning into two teams -one who operated that way and one who operated my way. There was no respect and a lot of contempt – not qualities you want to find on a team. What we should have been comparing overall was our customer retention against our competition. Things would have been very different if we did that!

    • Thanks for your comments Jen.

      I agree! I’ve seen the behavior you describe most recently in the mobile phone business. Reps were compensated by the number of customers acquired. So even though it was detrimental to the business, the reps _wanted_ customers to leave so they could re-acquire them.

      The real issue to me seems to be: are we measuring the right things to get behavior that is in the best interests of customers, employees, and shareholders. In your example, the answer was clearly NO!

      You might enjoy this post: What are Customers Worth? http://bit.ly/cwQDWH