"The Best vs. the Rest" (Wall Street Journal - Managing)

I read Erin White’s “Managing” article “The Best vs. the Rest” with great interest. Over twenty-five years in management with AT&T, Lucent Technologies and Avaya provided me first hand experience with a number of different pay for performance plans.

AT&T swung from brutal rating and ranking banded pay based on performance after divestiture in 1984 to the elimination of ranking and treating pay individually in the early 1990s under Jerre Stead’s leadership. At Lucent Technologies, ranking and pay for performance reappeared, but stock options and team awards buffered the change for a time. The spin-off Avaya from Lucent established pay for performance with a new vengeance, generally without the options and often without payout of the company-wide performance award. Fewer incentives and less money became available. There was increased focus on greater rewards for top performers at the expense of the other managers. As with most companies, there was also an increased drive to do more with ever fewer people and operating through numerous matrix teams across the business became commonplace.

While the performance outlined in Ms. White’s article may have thrived at GE and other companies, what I observed was a demoralizing effect on managers of all performance levels. Top performers were driven to succeed, for the most part, without the additional financial incentive. Companies cannot expect to motivate and retain talented managers by rewarding the majority of them with raises ranging from modest to none.

George Franks is the founder of Franks Consulting Group – a management consulting and leadership coaching firm. Visit:

www.franksconsultinggroup.com