Should You Give Your Star Employees Star Treatment?

Executive Summary

Many organizations refrain from telling their star employees that they are stars, but there are several problems with this approach. Some managers worry that star employees will become entitled. But true stars have the capacity to remain motivated and humble even after their contribution to the firm is acknowledged. Remember that fairness is not treating everyone the same, but treating them as they deserve to be treated: if you make your stars feel that they are just like everyone else, they will feel unfairly treated, and rightly so. And no matter how much potential people have, they will need to be developed in order to live up to it. This means investing in them, and since you cannot invest in every single employee — and investing in your stars will produce the biggest ROI — you will probably want to tell them that they are worthy of investment. If you’re worried about the risk that your stars might leave after you invest in them, remember that, as Henry Ford noted, “the only thing worse than training your employees and having them leave is not training them and having them stay.”

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How vital are your vital few? In any team or organization, a small number of individuals will account for a substantial amount of collective output. These “stars” are able to systematically outperform the majority of their peers and confirm the well-established Pareto effect whereby 80% of collective output can be attributed to 20% of the people in a group, or even fewer.

Contrary to popular belief, there are universal traits that predict whether individuals will be part of an organization’s vital few, such as their higher levels of intelligence, work ethic, and social skills. In other words, people who are smart, nice, and hard-working tend to outperform their peers. They also learn faster and are more likely to adapt to new demands, which means they have higher levels of potential even for jobs they have not done in the past.

Because of this, stars are more likely to be in demand than their peers, so they will be approached by recruiters and rival organizations, who will try to entice them with better job offers and career opportunities. As McKinsey predicted 20-years ago, there is a War for Talent, and, in the age of human capital, a company’s stars are the commodities being fought for. This is particularly critical in high-complexity jobs, where the average output difference between average and star employees is 800% (as opposed to 50% in low-complexity jobs).

So, what can you do to keep your star performers motivated? Since engagement is a critical driver of performance, minimizing the gap between what your stars can do and actually do will be vital to achieving the highest level of collective output. Here are a few data-driven suggestions:

Know who they actually are: This may sound obvious, but since most organizations rely on subjective ratings of managers to identify their star performers, false positives are the norm. Unfortunately, this unreliable methodology turns the pivotal exercise of internal talent identification into a popularity contest whereby politically astute employees who manage up and take credit for others’ achievements are more likely to emerge as high potentials — though they more faux po’s than hipo’s. Consider that a seminal meta-analysis on the main predictors of career success identified that political skills are the strongest predictor. As I argue in my forthcoming book, this is one of the reasons why men are more likely to emerge as leaders, even when they are incompetent. In order to ensure that you know who your star performers really are, you should: (a) put in place reliable quantitative performance indicators to compare people’s relative contribution to the team’s performance; (b) use valid psychological assessments to identify their potential (beyond their past performance); and (c) pay attention to your employees’ reputations, particularly what their peers and colleagues think of them (you can’t fool all people all the time). And remember: some people will always get annoyed when they find out they are not regarded as stars, but fair rules and transparent criteria will significantly reduce the number of complainers.

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Retention

Let them know that you know they’re valuable: Although many organizations refrain from telling their stars that they are stars, there are several problems with this approach. First, if your concern is that by telling your stars that you consider them stars they will become entitled, then you should note that true stars have the capacity to remain motivated and humble even after their contribution to the firm is acknowledged. In other words, if their performance decreases because you told them, then they were not real stars (and you will not lose too much if they go). Second, fairness is not treating everyone the same, but treating them as they deserve to be treated: if you make your stars feel that they are just like everyone else, they will feel unfairly treated, and rightly so. Third, no matter how much potential people have, they will need to be developed in order to live up to it. This means investing in them, and since you cannot invest in every single employee — and investing in your stars will produce the biggest ROI — you will probably want to tell them that they are worthy of investment. And if you are worried about the risk that they might leave after you invest in them, remember that, as Henry Ford noted, “the only thing worse than training your employees and having them leave is not training them and having them stay.”

Make an effort to engage them: With global estimates suggesting that only 13% of employees are engaged, and that the major cause of engagement (and disengagement) is their manager, it is essential that you minimize the risk that your stars fall into this category, and this will require special attention. First, you will need to ensure that they regard their role and contribution as meaningful, which requires aligning their activities with their core values and drivers. Second, provide them with opportunities to develop their curiosity, including the freedom to learn and to nourish their hungry mind (top performers are often more naturally curious, which means they will have lower tolerance for boring and repetitive jobs). Third, focus on the universal drivers of engagement, namely autonomy, affiliation, and achievement. That is, give your star employees resources and leave them alone (as opposed to micromanaging them); make sure they experience a sense of belonging and camaraderie with others and the wider organization; and help them perform beyond their expectations (engagement boosts performance, but performance boosts engagement).

Remember that money isn’t everything: While money is the main vehicle organizations use to keep their star performers happy, it is generally a poor driver of satisfaction. In fact, meta-analytic studies indicate that there is just 5% overlap between pay and pay satisfaction, and merely 2% overlap between pay and job satisfaction. In fact, when you pay people too much for doing something that they enjoy, they may end up enjoying it less. And even if that isn’t the case, your stars will likely habituate quickly to your financial rewards — so a fat wallet is unlikely to buy you their love in the long run. Fundamentally, there are many other psychological drivers people will want to fulfill at work, including their need to help others, to influence others, and to enjoy what they do. And since one size does not fit all, you will need to devote enough time to decoding the personal values and drivers of your stars if you truly aspire to motivating them and keeping them happy.

Regardless of the approach you take to managing and retaining stars, it is essential that you make everyone aware of what the rules of the game are. To be sure, nobody likes to find out that they are not part of the vital few, but the proportion of individuals who will accept this will increase systematically if you are very explicit about what it takes to be part of the vital few, and you enable others to verify that those criteria are actually put in place. At the end of the day, even if everyone wanted to be a star performer, it is not the case that everyone is willing to do what it takes to attain that.

In short, your stars do deserve star treatment, but there is a rational, data-driven, and fair way to provide it, which will minimize perceptions of a rigged or nepotistic culture in your team or organization. For sure, having no approach or avoiding the issue will decrease rather than increase the perception of fairness.