I hope you are sitting down for this, because I have some bad news. We are thinking about employee performance all wrong. And, it’s causing a ton of problems in how we manage people. Bear with me as it gets a little nerdy.
The Myth of the Normal Distribution: Most People Are Average PerformersFor decades, most people leaders assumed that employee performance is best represented by a normal distribution (or Bell curve), like below: Under this conceptualization, a company has a few under-performers, a few top performers doing a better-than-average job, and mostly a bunch of “normal” performers doing an average job. There’s a few outliers, but most people are average performers. Under the assumption that people’s job performance is distributed normally, we might reasonably take the following actions to manage talent in the organization:
- Cater to the middle. Under a normal distribution, 68% of the people fall within one standard deviation of the mean. In other words, more than two-thirds of your workforce is normal, average, or pretty close. It makes sense to cater to this crowd rather than top performers or underperformers, since they are the bulk of the employee population. So, we’ll cater our performance management systems, compensation, hiring practices, etc. to please and benefit this group.
- “Rank and yank.” Let’s identify the underperformers and get rid of them. They are a drag on organizational resources and clearly not pulling their weight.
- Leave the high performers alone. It’s not fair to give this group additional training, coaching, and other investments, because they’re smart enough and talented enough to figure things out on their own. In addition, these employees are so rare we can’t expect to plan our talent management strategy around them.
In a forced rankings system, the top 20% are designated as “A” players, the middle 70% are defined as “B” players, and the bottom 10% are “C” players. Once employees are grouped into the buckets, the “A” players are showered with perks, recognition and pay increases, the “B” players are given coaching, training and other investments in the hopes that they too can become “A” players, and the “C” players are, in one way or another, shown the door.
The assumption that most people are average performers is alive and well. Many Fortune 500 clients that I have worked with are still using some form of forced rankings to this day.
The Power Distribution Truth: Most People Are BELOW Average PerformersBut does performance really play out in a normal distribution in the real world? Researchers Ernest O’Boyle Jr. and Herman Aguinis set out to answer this question by looking at performance across multiple studies. From their abstract:
“We conducted 5 studies involving 198 samples including 633,263 researchers, entertainers, politicians, and amateur and professional athletes. Results are remarkably consistent across industries, types of jobs, types of performance measures, and time frames and indicate that individual performance is not normally distributed—instead, it follows a Paretian (power law) distribution.” (emphasis mine)These results eviscerate the model of normal distribution: in over 90% of the samples in the study, performance was best described with a power curve (drawn below) rather than a normal distribution. In a power distribution, there is a small group of hyperperformers who account for an incredibly outsized portion of the results, and then there’s everyone else. Hyperperformers don’t just produce a little more than their peers, their productivity is 2X, 10X, or even 100X or more than the typical performer. It’s commonly known as the “80/20 Rule,” where 20% of the people are responsible for 80% of the results.
O’Boyle Jr. and Aguinis refer to these two groups as “the best and the rest.” Rather than three groups (high, average, and low performers), there are actually two groups: the hyperperformers, and everyone else.
Which brings us to a somewhat paradoxical truth about performance: most employees are below average. Sometimes, significantly below average.
Example #1: Sales at the “Shoes of Best Fit” shoe storeLet’s say that you own an imaginary shoe store called “Shoes of Best Fit” and employ five salespeople. Four of them sell $10,000 of shoes, but you have one superstar salesperson who sells $100,000 of shoes.
Production Per Salesperson at “Shoes of Best Fit”
|Average Sales Per Salesperson||$28,000|
Here’s the same information in a graphical format:When we calculate the average sales per salesperson ($28,000), we can see that four out of five salespeople are below average performers. The superstar shoe salesperson has destroyed the notion of “normal” sales for a salesperson, and indeed, the majority of salespeople are performing significantly below average.
Example #2: Marathon Race TimesEarlier this month, I was a spectator at the Detroit Free Press race, an event with more than 26,000 registered participants. As an average (read: below average) runner myself, it’s a humbling experience to watch such a power distribution in action:
- The first runners finish with plenty of elbow room. Often, one runner dominates the others. (In this year’s Detroit Free Press Marathon, winner Jonathan Mott was nearly five minutes faster than the second-place finisher.)
- As time progresses, more and more runners finish, and the course gets more and more crowded.
- When the recreational runners are finishing, there are so many people crossing the finish line at the same time that they’re practically shoulder to shoulder.
Example #3: The trampoline park membership contentJust yesterday, I ran into yet another example of the power distribution in real life. I took my daughter to an indoor trampoline park and chatted with an employee:
TPE (Trampoline Park Employee): Would you like to sign up for our free membership program?
Me: Actually, one of your colleagues already told me about it.
TPE: Oh, ok. We are having a contest to see who can get the most people to sign up. The winner gets $100. But I guess it doesn’t really matter anyway, because the person who is winning has 56 new memberships and the person who is in second place only has 14.
Me: That’s interesting. What do you think the difference is?
TPE: I have no idea how she does it, she’s just way ahead of everyone else. She’s like a freak of nature!The HPTPE (hyperperforming trampoline park employee) produced four times as many memberships as the next-highest performer. Her performance is a strong outlier, and the performance of the team is clearly best represented by a power distribution.
So what’s the big deal? Why worry too much about replacing one curve for another? The truth is, we are harming our people, and organizational performance, when we assume that employee performance is normally distributed when it’s actually not.We’ll discuss the implications of this misconception in Part 2, and what to do about the performance of your team in Part 3. To get these delivered to your inbox, subscribe to the newsletter.