MEASURING PERFORMANCE

The A, B and C of the workforce

BY Jayashantha Jayawardhana

Top companies are obsessed with having ‘A players.’ Corporate giants such as General Electric (GE), IBM and Microsoft have well-developed systems, to manage and motivate their high-performance and  high-potential employees, and letting mediocrity go.

The bestseller ‘Execution: The Discipline of Getting Things Done,’ by Ram Charan and Larry Bossidy, calls this type of differentiation among employees “the mother’s milk of building a performance culture.”

“But focussing exclusively on A players puts the horse before the cart,” writes Mark Huselid et al in their article ‘‘A Players’ or ‘A Positions’? The Strategic Logic of Workforce Management,’ published in the Harvard Business Review (HBR).

They note that “high performers aren’t going to add much value to an organisation if they’re smoothly and rapidly pulling carts that aren’t going to market. They are going to be effective only when they’re harnessed to the right cart – that is, engaged in work that’s essential to company strategy.”

Although conventional wisdom claims that companies with the most talent win, it’s practically impossible for even those with the deepest pockets to fill all positions with A players.

So businesses should adopt a portfolio approach to workforce management, and have the very best employees in strategic positions (A positions), good performers in support positions (B) and phase out non-performing employees and jobs (C) that add little value.

It’s easy to assume that employees at the top of the hierarchy and paid the highest typically occupy A positions. But that’s not always the case.

The two defining characteristics of an A position are firstly, its disproportionate contribution to a company’s ability to execute some part of its strategy. And second is the wide variability in the quality of work among employees in that position.

Before determining a position’s strategic significance, you must be crystal clear about your company’s strategy; and for that, you should have clear answers to the following questions.

How do you compete? Is it on the basis of price or quality, through mass customisation or on some other basis?

You must recognise your strategic capabilities – the technologies, knowledge and skills needed to craft the intended competitive edge. For example, Walmart’s low-cost strategy calls for superior logistics, information systems, and a relentless managerial focus on efficiency and cost reduction.

And you should identify which positions are critical to employing those capabilities in the execution of your company’s strategy.

Such positions are as variable as the strategies they promote. Consider Nordstrom and Costco. Both rely on customer satisfaction to fuel growth and boost shareholder value but satisfaction takes different forms.

At Nordstrom, this entails personalised service and advice whereas at Costco, low prices and product availability are key. Accordingly, front line sales associates are vital to Nordstrom and purchasing managers are paramount to success at Costco.

The authors argue that there are no inherently strategic positions and they’re relatively rare – less than 20 percent of the workforce – and likely to be scattered around the organisation. They could include positions as diverse as the biochemist in R&D or field sales representative in marketing, depending on the type of business.

A strategic job that doesn’t display a great deal of variability in performance is relatively rare even for entry-level positions. That’s because performance in those jobs entails more than the efficient execution of tasks.

Take the position of a cashier where the generic mechanics aren’t difficult. But when the position is part of a retail strategy that’s focussed on the purchasing experience of customers, there will be more to it than simply scanning products with a friendly smile.

Cashiers may be required to pay close attention to what customers are buying and suggest other products they may want to consider on a return visit. In such cases, there’s likely to be a wide range in the context of performance.

Alternatively, some jobs may be potentially important strategically but currently represent little opportunity for a competitive advantage as everyone’s performance is already at a high level.

Pilots are major contributors to the strategic goals of airline safety. Thanks to consistent training throughout their careers and government regulations, most pilots perform well.

However, if the performance of some pilots were to fall into an unsafe category, it would clearly hurt an airline’s business. And improving pilot performance in the context of safety will yield little more than marginal gains.

Therefore, effectively managing your workforce begins with identifying the A, B and C positions in your company.