Many companies struggle with the question of whether to invest in the development of their people. When they do decide to invest, they often ask, “Whom do I invest in?” Many choose to invest in the development of their top performers. After all, these companies reason, if they are already the best, doesn’t that mean they have the most potential to do even more? While investing in the top performers as a reward or to keep them motivated can be worthwhile, does that really provide the largest return to the business?
To examine this question, let’s take an example sales role and look at a typical distribution curve among a 100-person sales force.
|Category (%)||Sales people in category||Assumed average % of quota met||Average sales per person ($)||Total revenue contribution ($)|
|Total sales revenue||$172,000,000|
For illustrative purposes, let’s assume that a company’s development initiative improves performance by 10 percent across the board. Though it is quite realistic to move the average performers by 10 percent, moving the already high-performing group by an incremental 10 percent can prove more challenging. Meanwhile the bottom 20 percent of the population may have fundamental fit issues that make the 10 percent goal an improbable stretch. Nonetheless, in our simple example we will assume all three categories of performers improve by an equal 10 percent to bring the new total sales revenue to $189 million (see table below). How this increase plays out among the three performance categories is interesting.
|Category (%)||Number of sales people in category||% of quota met after improvement||New average sales per person ($)||Group change in revenue contribution ($)||% added to the revenue line by group|
|Total change in sales revenue||$17,200,000||10.00%|
|Total sales revenue||$189,200,000|
As the second table illustrates, the overall sales revenue grows from $172 million to $189 million with the same resource base. The somewhat surprising element in this simple example is that the revenue increase provided by the average performers is double that of the top performers. Given that boosting the output of the top performers can be more difficult, the implications are significant. Organizations must focus their improvement efforts on the middle of the distribution curve where the potential for improvement is often greater than 10 percent. As our example shows, the impact is substantial.
Closing the gap between the top and average performers delivers much better overall organization improvement than can be achieved by trying to squeeze more out of the top performers or spending enormous energy to improve the bottom.
Question to consider:
- What insights does the distribution of your top twenty, average sixty, and bottom twenty provide you?