In sports, we would quickly question Kraft’s sanity. Yet, in the corporate world, we call this talent management.

Google indirectly addressed this issue after trying to figure out how to keep its high performers after the IPO in 2004. They stumbled upon research from Ernest O’Boyle and Herman Aguinis showing that across a wide range of fields, human performance followed the power law: high performers are not only one or two standard deviations above the average — they have dramatically higher levels of impact than average performers. This led to changes in the way google rewarded its people.

As google’s former Chief People Officer Laszlo Bock wrote in his book Work Rules! “we have many cases where people at more “junior” levels make far more than average performers at more “senior” levels. It’s a natural result of having a greater impact, and a compensation system that recognizes that impact.”

Google tells their MVPs to stay on the field.

Do people even want to climb the ladder?

Despite the clear signals from organizations that success and climbing the ladder go hand in hand, most people are unconvinced. McKinsey’s Women in the Workplace 2016 laid out this lack of desire for both women AND men.

They found that only 40% of women and 56% of men had the ambition to become a top executive in a company. If we are basing our metrics of success on obtaining powerful positions, why don’t more people actually want that power?

It could be because the climb is exhausting. As companies have become more complex, the range of functional expertise and skills has expanded. What this means for selecting today’s leaders is that they need to meet an almost impossible set of requirements.

At the CEO level, the demands are even more extreme, with them having to be highly skilled in investor relations, operations, strategy, community relations, politics and on top of that, being cheerleader in chief for the organization.

We are requiring today’s leaders to be the best player on the team, the coach, general manager and CEO. Instead of attracting people that want to lead and inspire, we end up attracting those the types of people who are motivated by money, power and status – many of which happen to be narcissists and psychopaths.

Creating paths for coaches

Bill Belichick is seen as an incredible leader. However, in sports, that is exactly what you are looking for in a coach. In organizations, there is no coach. You have to throw 50 touchdowns before you even have the chance of leading others.

If we want more diversity, more vibrant organizations and more fulfilling work, we need to change our assumptions that being ranked higher in a company should be the goal for everyone. Authority does not equal performance and being promoted is not always the best way to unlock creativity and innovation.

We need more organizations that want to let their star quarterbacks stay on the field and create paths for the people that are driven to lead and inspire those stars.

The post The Tom Brady Principle: Don’t Promote Your Best People appeared first on Boundless by Paul Millerd.

I had been brainstorming ways to evade paying it back.  Would they really come after me in small claims court?  Most people asked me “why not wait six more months?”  I don’t have a good answer other than the psychic costs of staying and not getting started on my freelance journey being too high.  I felt a deeper pull towards this journey that I could not explain.  That and I figured if my life came down to having $24k on hand, I had enough friends to go begging to.

Mounds of research have shown that bonuses are a bad idea.  Save for routine tasks, bonuses decrease performance on average.  Yet we keep offering them over and over.  In a conversation with a senior executive at a previous company, I shared some of the damning research.  She assured me that I was wrong.  “My personal experience has shown that bonuses make a difference…How else would you motivate people?” I decided not to show her the research on confirmation bias and moved on.

However, is the research open and shut? Nassim Taleb has opened my mind to questioning even the acceptance of my own confirming research that bonuses are a bad idea.  Taleb argues that the types of behavioral economics experiments that show money is a de-motivator are too simple – results at the individual level often do not scale at the group level.  Which got me thinking.

What might be the sensible reason for a bonus program to exist at the organizational level? 

The Intended Function Of a Bonus Is To Signal Fairness – If you Work Hard, You Will Be Rewarded

Most companies fail the tests of fairness.  In my experience, most organizations pay a bonus to all employees and only slightly more to top performers compared to bottom performers.  Research has shown that human performance matches a power distribution, which means that top performers should be paid dramatically more than average performers.  Google has tried to implement this at the company – but most companies are not google.

The Actual Function Of a Bonus Program Eventually Defaults To Signaling That the company is a “serious” company (skepticism mine)

I will argue then that in the absence of serving a fairness function, the bonus defaults to a signaling mechanism of showing that the company takes itself seriously.  If a senior executive wanted to get rid of a bonus program, they would have a lot of explaining to do, not to mention be undermining the very beliefs in which they have raked in massive bonus payments throughout their career.  It would be personal narrative suicide.  Just look at the flack the CEO of Gravity Payments got when he made the minimum salary at his company $70,000 – people still call him crazy to this day.

It takes courage to not follow the script.

The Unintended Consequences of Bonus Programs Ends Up Being Manipulation, Destruction of Trust & Personal Annihilation

It felt painful to write that $24,000 check because it made me realize that I was just a cog in the wheel.  I was given a sign-on bonus so that I would be scared to leave.  Nothing more, nothing less.

The unintended consequence of a bonus program is that it incentivizes de-motivated employees to stay in their job.  Take Sarah, who hates her job.  She has her performance review in December and is told how much she will be paid as a bonus, to be paid in April.  Many companies make it unclear whether Sarah can still get her bonus if she leaves within those four months and Sarah would be crazy to bring it up.  So Sarah stays until April when the money finally hits her bank account.   Yet at this point, she is wondering whether it is worth it to stick it out another eight months to find out her next bonus.  This is crazy for both the employer and employee – yet I hear about this dynamic all the time from friends and clients.

Everyone has worked with Ralph.  He is the guy at the company that is able to game the system.  No one really likes working with him, yet he is politically savvy and knows how to maximize his bonus.  Its not a secret either.  “Ralph knows how to game the system.”  As soon as Ralph gets paid, as a certain amount of trust is forever destroyed within the company.  Once people acknowledge the system is rigged, everyone thinks they are getting screwed.

Finally, bonuses encourage all-out personal destruction.  In many companies, performance is still relatively hard to measure – so we default to the easiest proxy: time at work.  Investment banking is the extreme example.  If an alien landed on this planet and observed investment bankers giving up sleep and ruining their human relationships they might assume they are working on the most important mission on Earth.  In investment banking you don’t even have to worry about who is working the most – they are all maximizing the number of hours they are working and sitting tight until the next annual bonus. I would be surprised to find an investment banker that is not burned out (and have yet to find one in my personal network)

How can this be good for anyone?

The post Paying back $24,000 to my previous employer and the absurdity of bonuses appeared first on Boundless by Paul Millerd.