Zero. Zilch. Nada. If someone in your organization is under-performing, they should get nothing: no raises, no bonuses, no promotions, no stock options. That might seem harsh at first glance. But it's a very intentional strategy whose purpose is to deliver a clear message, namely that as a C player--you are not going to make progress here.
As a reminder from my prior post, the talent in most organizations breaks down as follows: you have about 10% to 20% of the team composed of A players (your top performers); 60% to 80% made up of B players (your dependable contributors); and the remaining 10% to 20% of the team are your C players--your under-performers. You should remember that this grading system is curved, so there are always C players.
When it comes to dealing out compensation increases and opportunities, B players, for their part, will get average raises and compensation with an average rate of promotion as their competency grows. Your A players, on the other hand, will get the biggest raises, the most incentive pay (such as stock options), and the opportunities to grab more responsibility throughout the organization.
C Players Get Nothing and A Players Get Double
By giving your C players nothing, on the other hand, you nail two birds with one stone:
1. You send a clear message to your C players that they are underperforming.
2. And, just as importantly, you also make room in your budget to pay your A players double the average without breaking the bank.
As an example, let's say that you award your B players a 5% raise and your C players 0%. By doing that, you can now afford to give your A players a nice 10% boost (the same idea applies to stock options) without changing your overall spend. Of course, as you consider where to delegate challenging tasks, as discussed in "The 70% Rule", you should look to your A Players.
Building a Talent Moat
Giving your C players nothing also works at a strategic level. You might find yourself paying your B players at the 75th percentile range compared to the market, for instance, while paying your A players at the 90th percentile and your C players down at the 50th percentile. By creating those kinds of thresholds, you make it much harder for your competitors to hire away your best performers. At the same time, you make your weakest performers more willing to exit themselves from the organization and available to others.
Isn't This Harsh?
Now, most people avoid this strategy because they want to avoid having the hard conversation with their under-performers. But the humane thing to think about when it comes to C players is to be clear with them about their level of performance and why, because of it, they will not be receiving any additional compensation or responsibility. Certainly, making the decision to give your C players nothing is a way to force having that tough conversation. Good leaders would have already been having feedback conversations so the poor raise would not be a surprise.
There is a school of thought that says that everyone can be successful. The challenge is merely to find the perfect job for that person that they can excel in. And while we like to believe that is true, the perfect job for that C player might not be in your organization. And the longer you keep them around, the more of a disservice you are doing to their career because you are playing a role in keeping them from making a productive step in their career elsewhere. That's where actively counseling and coaching your C players to find a better fit for their careers is not only better for them, it's better for your organization as well.
In our next post, we'll talk about a few steps you can take to try and turn the most promising of your C players into keepers.