Most organizations allocate a percentage of the current payroll to each department for merit increases. For example, a merit pool may be 3.0% of a department’s payroll.  Thus, increases greater than 3.0% must be offset by lesser amounts for others.

Manager A said to me, “For my absolute best producers, I recommend 3.5% based on a 3.0% pool.  Marginal contributors get 2.5%, but most everyone’s increase hovers around 3.0%.”  

“Why do you use this approach?” I asked.

“I want to keep my team happy.  If I give too much to my stars, others complain.”

By contrast, Manager B said, “I recommend a 6% to 7% increase for my stars. I may recommend 2% for my average producers and 0% for a marginal performer, but I take care of my top performers.”

“Do you get complaints?” I asked.

“Yes, but the complaints come from team members who produce less.  I don’t want to base financial rewards on whether average or low performers complain.”

TalentGuard, a training company, reports that it takes $250,000 to $500,000 to replace talented producers.  Star performers, according to studies, create four times the value of average employees.  Recommendation: Pay your top performers. 

“We want to hire the best,”  a talent manager said to me.

I asked, “How do you define the ‘best’?”

“We look for candidates who have the education, skills and talents required for the job.”

“Do you discuss your company mission and core with candidates?”

“I don’t think we do.”

Well-known author and consultant, Simon Sinek, says “If you hire people who can do the job, they will work for you for money.  But if you hire people who believe what you believe, they will work for you with blood and sweat and tears.”

How can you determine if a candidate believes what you believe?  Traditional selection tools—resumes, interviews, reference checks—do not clearly identify candidates’ beliefs.

Try this.  Spend more time with candidates.  Take them to dinner. Get to know them.  Talk about common interests. Ask your high performers to spend time with candidates.  What do candidates know about your company’s purpose and core values?

If hired, use the probationary period (typically three to six months) to learn more about the new hire. If a new hire’s actions are not consistent with what you believe, it is better to acknowledge the misfit and let the person go.

Two contributors informally compared their leaders during a coffee break.

“My manager is very smart, ambitious and confident.  He has achieved a lot and has a grand vision for our company.  But he is hard to work for.  He does not listen and thinks he must prevail on every issue.  He comes to every meeting with a strong point of view and quickly criticizes opposing views. If one of his suggestions goes South during implementation, he is quick to blame others.”

“My boss is hard to work for also but for different reasons.  He lacks confidence, seldom proposes suggestions and defers to the most verbal members of our team.  We spend a lot of time passionately debating differing views.  Most meetings end without a clear path forward.  And we are slow to take advantage of opportunities.”

These two descriptions represent leaders with differing egos—individuals’ sense of self-worth.  The first leader appears conceited with an exaggerated ego.  The second leader is modest, humble, and perhaps insecure.

Effective leaders balance confidence and humbleness.  They are true to themselves and value input.  Healthy egos proudly recognize others’ successes and confidently make “tough calls” when facing risky alternatives.  

“I am frustrated at work,” Jarrod said to me. 

“What is the issue?” I asked.

“My manager sets targets—he calls them key performance indicators (KPI’s)—for me to achieve.  He says I need to sell $2.5 worth of services per year and he sets specific metrics for new prospects, selling attempts, repeat business, and revenue collected.”

Jared was convinced that the targets were deliberately high.  He also believed the manager would keep increasing the targets no matter what. “I spend a lot of time documenting my efforts in case I miss a target, and I do not invest time in long-term projects even though they may have potential value.”  Jared also refused to help individuals in other departments. He did not think his efforts would directly impact his personal KPI’s.   

Six months later, Jarrod told me he had a new boss that he really liked.

“What is different?” I asked.

Jarrod said she regularly talked with him about KPI’s but did not set specific performance targets.  Her typical communication was, “What do you need from me?”

Jarrod became more energized; and after two months, his performance regularly exceeded his previous boss’s expectations. 

Without proper support, performance metrics may lower commitment, hamper teamwork and increase turnover. 

“I don’t know why management keeps Harvey around.”

“You cannot depend on him.  He produces little and makes too many mistakes.”

“He misses a lot of work too which makes our jobs harder.”

 What impact do low performers have in the workplace?  A survey by Eagle Hill Consulting reported that 68% of respondents said low performers lowered morale and 44% said they created more work for others.  Top performers rarely reduce their efforts when working with a low performer, but they are more likely to quit.

Managers average between one and three days a week working with low performers.  And they seldom see improvement.   Effective managers spend less than 10% of their time with low performers.  Rather, productive leaders spend 50% of their time with high performers–learning from them, seeking ways to help, and showing sincere appreciation.   

How do you know when to begin the termination process?  Netflix asks two questions:  (1) If the employee got another job offer, would you fight to keep the person?  (2) Knowing what you know now, would you hire the employee again?

If the answer to either question is “No,” it is better for all to part ways.