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Perf & Comp: Note to CEO or Executives

IN RELATION TO PRINCIPLE #2: PERFORMANCE & COMPENSATION

Move your company to a market-based compensation structure and eliminate ratings-driven compensation.

This is my ultimate recommendation. You can still have a strong culture of feedback and performance. You can still part ways with employees who aren’t performing. Market-based comp does not mean a loss of performance or an acceptance of mediocrity, which is some people’s knee-jerk reaction. In fact, doing market-based comp well is predicated on being willing to separate from poor performers.

Ask yourself the following 3 questions about performance reviews:

Are you comfortable perpetuating a system fraught with well-documented biases?

What are your goals for tying performance reviews to compensation?

Are you achieving those goals with your current system?

If you still decide to maintain a rating system, use rating calibration sessions that include multiple managers. This will help ensure that ratings are more consistent across the org (ie, that one manager isn’t a “hard grader” while another is an “easy grader”), and that a rating is more representative of the employee’s performance and includes more perspectives than her direct manager.

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