Leadership Done Right

Brandon W. Jones

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Performance Review

Should Leaders Be Paid Based On Performance?

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During the last few months, there have been a number of articles in the news about leaders and their compensation. In March, I did a post about an article that showed statistics stating that CEO compensation increase for new CEOs had only increased by 1.5% in 2011 compared to 11% in 2010. This was significantly down from past years even though their performance had improved and the performance of the company had improved.

I did a post about Carmelo Anthony because he was paid a high salary to help the New York Knicks become a top team and win a championship. The organization has not been as successful as expected since he joined the team and they have paid him a very high salary for results.

Once again there was an article in the news about compensation and performance. The Wall Street Journal article CEOs That Delivered The Most And Least Bang For The Buck by Joann S. Lublin and Dana Mattioli stated, “A Wall Street Journal analysis of compensation data for 300 top U.S. companies assembled by Hay Group found that while pay generally tracked performance last year, some CEOs delivered far more bang for the buck when it came to shareholder returns.”

The article went on to explain that although the results discussed in the March article showed that in many cases the compensation during the last year was equilivalent to performance, there were also companies that didn’t follow suit with compensation based on performance. The article explained the stories of four CEOs that were significantly underpaid or overpaid.  The graphic above shows some of the statistics related to the performance and compensation based on the CEO.

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Use The Bell Curve To Your Advantage In Leadership

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The bell curve is a good indicator of where to expect performance from your employees. The bell curve is the normal curve used to show the average and standard deviation of a set of data points. With the bell curve, 95.4% of the data falls within two standard deviations.

Employee Performance – Bell Curve

When it comes to employee performance, how does the bell curve apply? Employee performance within a particular system should fall within the bell curve. Sometimes employees will perform a little above average while other times employees will perform a little below average, but their overall performance should all fall under the curve.

Use The Bell Curve To Your Advantage In Leadership

Learning from Outliers

The real learning comes from the outliers. When people underperform or overperform significantly, there is a factor that led to their performance. Sometimes they lack the proper training, while other times they may not understand the training they received. [Read more…] about Use The Bell Curve To Your Advantage In Leadership

Make the Performance Review a Positive Experience

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Each year most employers give their employees an annual performance review. One complaint I have with many leaders is that they save up all they negative feedback for the annual review. This is very inappropriate. The annual performance review should be a time of reflection on the past year, not a gripe session. The annual performance review is a time for leaders to do three things.

Give Constructive Criticism

It is important for leaders to point out strengths of their employees prior to giving any criticism. Once the strengths have been discussed, leaders can identify areas of weakness within their employees. Once the weakness has been discussed, the leader should give the employees suggestions on how to improve and overcome their weakness. If the leader does not give suggestions for improvement, the employee will feel less valued. [Read more…] about Make the Performance Review a Positive Experience

Compensation and Performance Review at Arrow Electronics

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In the case study, “Compensation and Performance Review at Arrow Electronics,” the performance review and compensation systems at Arrow Electronics were broken. There are two specific aspects of the system that are broken: the employees are rated on a bell curve type system for their evaluations and the compensation system for the sales force isn’t competitive for the market.

Compensation and Performance Review at Arrow Electronics

Performance Review System

First, the CEO, Steve Kaufman, has required that the employees are rated on a bell curve type system for their evaluations. Since the evaluation system is set up as a bell curve, the supervisors and managers must always be comparing their employees against each other. Once the employees realize that they are being compared against each other, they will stop working as a team and begin competing against each other rather than viewing the group as a team that works together. [Read more…] about Compensation and Performance Review at Arrow Electronics

Get Rid of the Performance Review

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The main point in the article was that performance reviews are a waste of time and don’t promote progress within an organization. I agree with some of his points but disagree with others.

Get Rid of the Performance Review

Downfalls of the Performance Review

It is true that a performance review is completely ineffective when the boss doesn’t give the employee any specific targets/goals for performance. When the boss just does a performance review on abstract principles and not on concrete metrics, it is an ineffective performance review.

On the other hand, when an employee has a very specific job description with very specific tasks, such as a factory worker, a performance review can be very effective. When the employee has a set of responsibilities that are clearly outlined, it is very easy to do a performance evaluation. Either the employee completed their work or they didn’t and there isn’t much room for interpretation. For an evaluation system to be very effective, the metrics need to be very specific for both the evaluator and the person being evaluated.

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