Why Google Quietly Uses the Power Law Rule to Pay Its Superstar Employees "Unfairly"

Imagine you have 100 employees and I ask you to graph them in terms of performance. Most likely, your graph will look like a bell curve: a small percentage of high performers on the left, a few mediocre performers on the right, and a ton of average performers in the middle.

Yet, as Laszlo Bock, former Senior Vice President of People Operations at Google, writes in Rules of Business: Insights from Inside Google That Will Transform How You Live and Lead:

Organizational researchers have shown, similar to the 80/20 rule, that the majority of your company's output comes from a minority of "superstar" artists: what's called a power law.

In terms of performance, think of the power-law distribution as a long tail of progressively lower performance. In visual terms, like this.

Yet the standard bell curve underpins most HR systems. According to Bock, this means that many leaders "undervalue and under-reward their best people, without even knowing they are doing it".

For example, I once rated all of my employees as "superior", and for good reason: they were the most productive team in the factory. HR canceled my reviews and told me I needed to distribute my reviews more "fairly".

"Enough", of course, meaning "bell curve".

As a result, a few outstanding employees were undervalued and, therefore, underrewarded. Because salary was tied to evaluation scores, they didn't get the raises they deserved.

Or attention.

Put your best people under a microscope

Instead of focusing on what makes poor performance poor, Google has taken the opposite approach.

Take the lead. Google has used its analytics power to determine how well teams are trained and led. They found that good managers produced reasonable results, but exceptional managers produced exceptional results. The result was a list of attributes shared by top performing managers. (Interestingly, only one attribute involves a manager's knowledge, skills, and experience. The others were soft skills: communication, feedback, coaching, teamwork, respect, and consideration.)

Google then used these attributes, and the resulting assessment tool, to develop better performing managers, and in particular to help those who were struggling.

This is one of the benefits of adopting a power law mindset for employee performance. Instead of seeing superstars as outliers whose skills can't be replicated, identify what they do differently. Then use this information to move the curve further to the right.

After all: helping top performers improve by 5% will pay dividends. But helping average employees increase their performance by 10% makes a bigger difference.

And helping relatively low performers increase their performance by 20% makes an even bigger difference.

According to Bock, working to develop underperforming employees can not only improve productivity and quality, but it also serves another purpose. "People improve dramatically," Bock writes, "or they leave and succeed elsewhere."

So pay your best employees more

Most companies have pay scales. Each position is "worth" a certain amount, and eventually even the best performers come out on top. Logic. The salary must be "fair".

But "fairness" gives rise to superstars...