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.