At first glance it seems absurd that the top 1% are 10 times more productive than the average. Yet all research into this topic supports this claim. A ground breaking study “The Best and the Rest: Revisiting the Norm of Normality of Individual Performance” , published in Personnel Psychology, 2012, found that this is true across many different occupations and skills. Taken together their 5 separate studies of researchers, entertainers, politicians, and amateur and professional athletes, involve 198 samples of 633,263 individuals.
The studies show that the top 1% produces 10% of output (ie 10x average), top 5% produces 25% of output (ie 5x of average). This also means that most people are below average.
Based on their Study 1 of researchers, nearly two thirds (65.8%) of researchers fall below the mean number of publications. Based on their Study 2 of Emmy-nominated entertainers in this study, 83.3% fall below the mean in terms of number of nominations. Based on Study 3, for U.S. representatives, 67.9% fall below the mean in terms of times elected. Based on Study 4, for NBA players, 71.1% are below the mean in terms of points scored. Based on Study 5, for MLB players, 66.3% of performers are below the mean in terms of career errors.
On deeper reflection we know this to be true even in our own limited experience. Top salespeople are significantly better than the average, same is true for managers, artists, programmers, lawyers, UX designers, customer service, data scientists … the list goes on.
This has startling implications for performance management. The current zeitgeist is that the median worker should be at the mean level of performance and thus should be placed in the middle of the performance appraisal instrument. Performance is not a normal distribution, productivity doesn't equate to a normal bell curve.
It also means that the way most organisations think about talent management needs to be changed. Losing a top performer to a competitor because they are being offered a 20-40% pay increase, or more opportunities is going to cost the organisation significantly more, than if the company had taken pro-active steps to limit that possibility.
Netflix in their own words in “No Rules Rules: Netflix and the Culture of Reinvention” talk about “fortifying talent density” by paying top of personal market. They regularly research what is the top market rate for various job functions, and if the market has increased pay, they automatically increase the pay of their top performers. They don’t wait for the top performer to feel undervalued, look for a job, get a job offer, and then counter-offer. That is a ridiculous way to manage your top talent, yet that is the norm.
Not only that, Netflix encourages their staff to talk to head-hunters and competitors so that they can let Netflix know what is happening in the market place. It is sound business to pay 40% more to someone who is 10x better than the market. It makes them feel valued, and significantly reduces the risk of them being poached and leaving. Of course recognition, interesting meaningful work, great colleagues, supportive culture are also important, but in reality they are all a distant second when comes to cash in the bank, for most of us.
Food for thought!