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Effective Evaluations: Tips for Rewarding Your Top 20%

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RISMEDIA, Jan. 24, 2008-(careerbuilder.com)-Business owners must rigorously evaluate their workforce, rewarding top employees while encouraging those in the middle to work harder for these rewards. Learn principles for making the top 20% of your employees feel loved and motivated to continue producing for your business.

There is a golden rule that says 80% of your business is performed by 20% of your customer base. This means that just 20% of your clientele accounts for the largest percentage of your profit from year-to-year and that you should do everything in your power to please this 20% and keep each as a customer.

It’s the 80-20 Rule, taught in Business 101, and known by virtually every business owner across the country. But what many business owners fail to realize is that in theory, this same principle applies when evaluating your workforce.

According to former GE CEO Jack Welch in his book Winning, “An effective performance appraisal system relies not only on honest feedback but also on meaningful differentiation among employees.” At GE, he put these principles into action by implementing a forced ranking system that divided employees into three distinct segments: the top 20% of performers who account for the largest percent of your profits, the middle 70%, and the bottom 10%.

“Why are grades acceptable from the time that you’re in fourth grade to the time you’re getting your MBA, but not acceptable once you’re an adult?” Welch asked. “You need to use the same rigor to evaluate your people that you use to evaluate your financial statements.” Using a forced ranking system requires this type of discipline.

“You should take the top 20 percent of your employees and make them feel loved,” Welch advised. “Take the middle 70 percent and tell them what they need to do to get into the top 20 percent.” Managing out the bottom 10% of performers is necessary not only for the organization’s continued success but also for the sake of employees affected by the rigorous appraisal system.

“People need to know where they stand,” Welch said. “Failing to differentiate among employees-and holding on to bottom-tier performers-is actually the cruelest form of management there is.”

Techniques for rewarding your top performers

So how do you reward the top 20% of your workforce? After all, these people are or some day will be the leaders of your business, so you want to be sure to show your appreciation. The answer is that you reward the top 20% with perks that continue to motivate them to produce for your business, while motivating those in the middle 70% to work harder to achieve what the top 20% receive.

Eventually, your top performers should receive bonuses and better salaries. However, in the short-term, low-cost perks can make a substantial impact.

Eventually, your top performers should receive bonuses and better salaries. However, in the short-term, low-cost perks can make a substantial impact. Below are some proven incentives that you can use to motivate your workforce and reward your top performers:

Flex Hours – If there’s one reward that rises above the rest, it’s flexible work schedules. Nearly every expert would agree that flex time is a perk that offers the most gain with the least amount of time or effort from the employer.

Give the overachieving top 20% of your workforce a little latitude in determining work schedules and to provide them with time for family or personal issues (such as doctor’s appointments and banking errands). As long as the employee deserves the flex time and doesn’t abuse the privilege, this can go a long way to building trusting and mature relationships with key workers. It also serves as a great motivator for those 70% of employees to work harder to make it into the top 20 next year or next review time.

Extra Days Off – Give your top employees a few extra paid days off to use as they see fit. Employees get a few of these a year and can use them as they like. Everyone can use more time to themselves or to spend with their family. Extra paid days off provide a chance for the employee to re-energize and continue to work at a high level for your business, and it doesn’t really cost you anything extra to do so.

Better Parking or Workspace – Reserve the best 20% of your parking spots, or best workspaces for those who make it into the top 20% each year. This is an extremely low-cost, yet effective reward.

Publicize the Top 20 – Take out an ad in the local newspaper recognizing your top 20%, or have plaques made that hang at the entrance of your business. You could schedule a company wide lunch once a year that honors those top 20% or even hand out these plaques at the company holiday party at the end of the year.

Regardless of how you publicly honor these individuals, it should be in front of the entire workforce and serve as a reminder to all to work hard and you will get noticed for it.

Profit Sharing or Stock Options – Most Employees appreciate public acknowledgement and special perks, but nothing says you truly value them as part of your business like giving them a piece of it. Set up profit sharing or stock option programs, whichever is relevant to your business’ size and type.

For instance, the first time an employee makes it into the top 20% they receive X percent in a profit sharing plan. The second time they earn more, the third even more, and so on. This encourages employees who have made it into the top 20% once to continue to work hard, knowing that their efforts are truly rewarding them monetarily. If profit sharing is a consideration, consult your accountant or lawyer on setting one up correctly.

Travel Time – Those employees who crack the top 20% would appreciate the chance to spend a few days doing nothing – the complete opposite of what they do for you on a day-to-day basis. Send the top 20% to a spa for two days or on a two-day golf outing; or give them a travel voucher to use how ever they want.

This does not have to be something outlandish, but should shows your appreciation for their hard work and dedication. Publicize this incentive as a reward so that the middle 70% will notice that their peers are missing and enjoying a reward for top-level performance.

Remember, it is fair to say that your top 20% are making you roughly 80% of your profit. You need to keep them happy and reward them for their efforts, while motivating the remaining 70% of your staff to work harder. Doing this ensures you keep your core in tact and keep the competition hot on their tails.

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