Meritocratic companies are obsessed with absolute performance. This creates environments where high performers are incentivized to overachieve, but at the same time undermines collaboration, learning, creativity and a positive employees' experience. A new concept of merit, which includes but goes beyond performance, is necessary to create organizations that attract and retain the best talent, while delivering outstanding results.
Meritocracy in organizations is commonly seen as a polarity between performance-based career progression and politics-based career progression.
Performance has been universally recognized as the key metric for merit. It worked sufficiently well so far, but the growing complexity of all jobs across sectors is requiring more innovation and collaboration, showing the limits of this concept.
In performance-based organizations, individuals are incentivized to get high-visibility results, pursue high performance scores, and do everything possible to defend those metrics. These dynamics generate high levels of self-motivation, but are also creating a generation of leaders that are opportunist, self-centered, ready to cut throats to shield their performance scores, afraid to make mistakes and to be accountable.
On the other hand, most organizations that are not well known for meritocracy, base career progression on "who knows who", do ut des favors, loyalty to individuals, similarity of backgrounds, friendship, and multiple additional biases.
Picture in your head two individuals, John and Jane, working in the same role, same department but two different geographies in the same country (north and south). John has a boss that invests in him, the market is prosperous in that part of the country, and he has no real internal competition. He has been allocated to a high visibility project, and managed to achieve an internal award by the end of the year. Jane on the other hand has a boss not so capable, the market in the south is more challenging, and works in a team were three people have similar skillsets but longer tenure. She leveraged her high level skills to get prioritized on certain projects, but she needs to fight every time for high visibility assignments. This year she didn't manage to get on anything sufficiently visible, missing an opportunity for official recognition.
In a meritocratic context based on performance, John will have much higher chances to be promoted than Jane. But what if Jane is much more capable than John?
To create organizations that generate great results but at the same time incentivize innovation, learning, collaboration and a positive environment, is necessary to evolve the concept of meritocracy.
Performance is the core driver of organizational strategy for a reason. Without strong performance, the organization dies. This importance though shouldn't make leaders blind about what is really happening with their people.
The core question that should help us understanding better the concept of merit is: What can the individual really control?
Individuals should be accountable for the elements of performance that they can control. Organizations should be accountable for (most of) the elements of performance that individuals can't control. There are also elements of performance beyond the control of individuals and organizations.
In 1936 Kurt Lewin, one of the fathers of social psychology, said it best: behavior is a function of the person in its environment. This was translated in the popular formula B=f(P,E), in a time where psychologists tried to give scientific credit to their theories by using the language of science.
Personal recognition on merit should be based on the P part of the equation: what can a person do. The E part of the equation shouldn't be discarded at all, but while it informs the organization about what should be changed in the context to maximize performance, it shouldn't be considered as merit or demerit of the individual.
To measure merit in this new connotation, there are four steps that should be followed.
The first step is to identify the right baselines. A few examples:
- Market challenge index: How challenging is to succeed in a given market? This should include overall market performance, historical performance of the company in that market, market shares of the organization in that market etc.
- Volatility index: How rapidly the external context changes in a market? How long do projects/entities/companies survive on average in that market? What is the frequency and breadth of transformations?
- Visibility index: How many high-visibility projects are available in a given market? What barriers come in the way of visibility (e.g. language, geographical distance, culture)? How hard is to bring those project into the spotlight?
- Career growth index: How many similar roles exist in a market? How many available seats at the top? What has been the historical promotion time in that market?
- Available support index: What support can the individual leverage to succeed in a market? How many people / teams / partners are in place to provide support on different operations? What is the capability of those supportive actors?
Second step: calibrate the performance scores using the baseline indexes as moderators. Individuals that succeed in challenging contexts will be rewarded more than individuals succeeding in highly facilitated contexts.
Third step: factor in additional variables, in control of the individual, directly connected to merit but with indirect linkage to performance. These include:
- Demonstrated learning: What did an individual learn in a given spell of time? How strategic are the new skills developed? How deep is the new level of knowledge? How rare is this expertise?
- Demonstrated resilience: How did the individual cope with high levels of stress? How persistent and self-motivated has been? What amount of highly stressful events has managed? What has been done to transform challenges into opportunities?
- Demonstrated creativity: How many new things and ideas has the individual generated? Which assumptions have been broken? What was the impact of those ideas on others and on the organization?
- Demonstrated altruism: How much did the individual help others, supported colleagues in need, went above and beyond to do something that impacted other colleagues' performance scores?
- Demonstrated collaboration: What kind of inter-functional projects did the individual work on? What was the feedback? How did the individual leverage and connect different parts of the organization? Which conflicts have been mediated and managed?
Fourth step: Weight each factor according to the organization's vision, values, culture and strategy. Organizations strong in R&D may give higher weight to creativity and learning, while other large conglomerates may prefer to focus on altruism and collaboration.
The combination of "Calibrated performance" and "Other factors" will create an enhanced metric of "Merit" that goes beyond performance.
Changing the concept of merit will change performance review processes, metrics and targets. Employees willing to excel will be nudged that their behaviors, proven successful in the past, may need to change. Ambitious opportunists may be looking into challenging markets, rather than finding the easy way to the top. Defensive and territorial behaviors, typical of meritocratic companies, will raise eyebrows of leaders and colleagues.
Once a new way of working is incentivized, organizations become magnets of people that embrace those values and behaviors with comfort and passion. New generations of employees are looking for environments that go beyond the single performance metric, where they can learn, create, collaborate and pursue their passions.
Analysis of the environmental causes of performance generates reports that inform the organization about internal and external dynamics that are impacting employees' work. Understanding why certain regions are more successful than others or why there are more toxic dynamics in certain departments, will help the leadership team to strategize context changes and improve the overall performance of the organization
Changing the way people access to leadership position, changes the quality of leaders in the organization. Current leaders will be most likely in their roles because they managed to be associated with successful, high visibility projects, as well as high performance metrics. The new leaders will be promoted for their ability to perform in challenging contexts, collaborate with other departments, create, learn and serve other people.
Enhancing collaboration minimizes redundant work, unproductive processes, wasted efforts in making things happen, and maximizes speed of output, go to market and cost efficiency. Enhancing innovation boosts the quality of product design, IP development and creative problem solving necessary to build an aggressive portfolio of solutions, core pillar of organizations' competitive advantage.
Estimating the baselines with objectivity
All the baseline indexes required to understand the complexity and difficulty of the context need to be anchored to solid metrics, easy to be defended when attacked by stakeholders that prefer the "old way of doing things". It's an intense and granular process that requires business savviness, dedicated resources for continuous monitoring and alignment across relevant leaders.
Collecting unbiased data on the additional factors
Understanding how much an individual has been collaborative, creative, learning agile or resilient is the opposite of easy. Some simplifications are necessary, and transforming qualitative data into quantitative generates errors in translation. Comparisons between individuals need to be based on quantitative facts that can't be challenged by detractors.
Complexity of the performance management process
The amount of data required to assess this new concept of merit makes the performance management process more rich and complex. This could imply additional work for the organizations' Human Resources department, confusion for the employees, misunderstandings of the evaluators, and a need for ongoing support to facilitate the process and clarify doubts.
The first priority to implement the new concept of merit is to make a distinction between factors within control and outside control of individuals during performance reviews.
Focusing on the "under control" performance and its relative level of environmental challenge, is critical to start a mindset shift that moves away from absolute performance.
This shift can be done even maintaining the current processes, to test with the management how keen are leaders to transition their corporate culture towards this new concept of merit.
Kurt Lewin - His theories on social groups, behaviors and environmental factors are pillars of my thinking about people, teams and organizations