When Chris and Pat both get a 7% bonus despite vastly different performance, Chris questions why she should keep excelling. Only 22% of leaders differentiate between high and low performers, and in 42% of companies, top performers are actually less engaged than mediocre ones.
Giving everybody the same bonus trains your best people to stop trying. Imagine 2 employees at review time. Chris did incredible work this year. Pat did barely passable work. Not fireable, just nowhere close to Chris. Then they both get the same review and the same 7% bonus. Pat just learned that barely passable is totally fine. Pat's thinking, giving 100% effort here must be for chumps. And Chris is thinking, how many more times am I going to give 100% effort when my boss treats 50% as, as exactly the same? In our performance appraisal research, only 22% of people say their leader distinguishes between high and low performers. And in 42% of companies, high performers are less engaged than low performers. Managers avoid differentiating high and low performers because the conversations are uncomfortable. But if you reward Chris and Pat identically, you're still sending both of them a message— you're really just hoping that neither of them hears that message.
