A New Grad Schools Us on Performance Management

6a0134836082f8970c01b7c870d73d970b-800wiThis is my first non-equity focused article in a few months but a high school graduate inspired me to change direction this week. The video below shows the valedictorian speech at the high school graduation of a friend’s kid. It’s five minutes well spent, but here’s s snippet if you are in a hurry.

“No matter how many details I give I will not able to express the full truth about today…As much as I would like to say that I was chosen because of my hard, dedication and intellect, I would be far from truthful in doing so because I have met and studied with individuals more diligent and talented than myself… 4.63. This three digit number is the reason I stand before you. But, what does it really mean? My GPA is just an artificial number meant to measure my academic prowess.”

And that’s where it starts getting really good! In the next section he tells you why all of your planning, design, formulas, hurdles, thresholds, goals and communication are wrong if you don’t also allow for some discretion.

This kid speaks an eloquent truth that every human resources and compensation professional must remember. When we make performance management purely rules-based the people who score best are often those who are the best at following the rules, not the best at building company value.

Our performance reviews and management systems, as well as our incentive plans and reward programs must all account for the fact that human beings are doing the performing. Even identical twins are fundamentally different from each other. Your systems need to allow for enough discretion to ensure that humanity can trickle through to the final score.

It is important to note that he never advocates getting rid of grades and scores. He simply points out that they are not a perfect measurement of accomplishment. Lately it seems like many companies are considering getting rid of performance review scores altogether. They can be hard and do not, by themselves, answer the question of who is best. But without them performance can devolve into a popularity or personality contest. That’s great for yearbook awards, but not great for measuring effort or academic success.

Someday in the not so distant future, when this kid and those like him are running the companies who employ us, it will be a good idea to have ensured that we truly know the measure of an employee and that the measure includes the fact that they may be human.

Dan Walter, CECP, CEP is the President and CEO of Performensation. He is passionately committed to aligning pay with company strategy and culture and has been deeply involved in equity compensation for a long, long time. Dan has written several inustry respurces including the recent Performance-Based Equity Compensation. He has co-authored “The Decision Makers Guide to Equity Compensation”and “Equity Alternatives” and a few other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @Performensation and @SayOnPay.