The Business Case for

Benchmarking Top Performers

Improve productivity, performance, profit and competitive position
Long-term by “cloning” your most valuable players.
competitive
advantage
comes only Recent research on corporations and competitive advantage is instructive: low price
from fully can give a company an edge for six months or a year; improved or innovative
engaged
and fully technology can provide competitive advantage for a year or two; however, a
competent competitive position for seven years or even longer is achieved only by creating and
people.
maintaining a fully engaged, productive and competent workforce.

Companies have a horrible track record when it comes to hiring the right person for
the right job. Management guru Peter Drucker says that 66% of your organization’s
hiring decisions are wrong. Marcus Buckingham (author, First Break All the Rules &
Soar With Your Strengths) estimates that as many as 80% of workers are in

“The ability to positions that do not capitalize on their strengths.

make good
decisions
regarding Hiring practices across industries-- from health care and retail to hospitality and
people manufacturing—have not been successful in predicting performance among
represents one
of candidates. In your own organization, do you have some employees who out
the last reliable perform others doing the same job? Most probably. Were they hired in the
sources of
competitive “standard way?” Most probably. Why the variation?
advantages,
since very few
organizations Perhaps your situation doesn’t fit the 80/20 rule exactly (whereby 20% of the people
are very good produce 80% of the value), but wide disparities in performance are more the rule
at it.”
– Peter Drucker than the exception. In sales, the differences are much more clear than in other
positions. The clearer the performance metric, the clearer the difference.
Nonetheless, productivity can be enhanced in any job or function.

What if you could consistently hire people who performed like your most valuable
players? Benchmarking competencies and developing a “success profile” are the
keys. Organizations that use empirical competency benchmarking to select and
develop individuals for key roles experience competitive advantages and enhanced
HUMAN performance.
CAPITAL
DEVELOPMENT

Imagine Great People!

 Copyright 2008-2009 POLARIS, LLC. All rights reserved.
________________________________________________________________________________________

Imagine Great People! 2

 What Are Success Profiles?
Generally, the term “competency” describes some characteristic or attribute that
“Competencies affects a person’s ability to perform a certain job or role in an organization.”1
are to Specifically, for top performers, it is an “underlying characteristic which enables a
performance person to deliver a superior performance in a given job, role or situation.”2 It
what DNA is to describes the person in the job, rather than the job itself.
people.” They
determine a With a reliable and valid method to describe relevant characteristics of people in
person’s match work settings, the task is to develop a “success profile” or a benchmark of top
with the job performers to make it possible to hire, train or deploy to that benchmark. So, if you
and the culture. hire someone with the same “success profile” as top performers, it is probable that
(s)he will also be a top performer—“if (s)he walks like a duck,” etc.

Moving Productivity to the Right (Clustering Performance at the Top)

A best practice
model for
employee The impact of “cloning” top performers is dramatic; effectively, it produces superior
selection, performance in all jobs across industry sectors. The figure below describes the
retention and Economic Value Added (EVA) by superior performance: increased productivity
development ranges from 119% for low complexity jobs to as much as 220% for sales.3
efforts across all
industries and Economic Value Added by Superior Performance
sectors, a model
that supports Job Complexity Increased Productivity
Average 100% Low +19% = 119%
lean, quality and Moderate +32% = 132%
balanced High +48% = 148%
scorecard Sales +48-120% = 148-220%
approaches.

Superior Performance
Top 1 in 10 in Job
-1 S. D. +1 S. D.

“5-10% of a
company’s 0% 15% 50% 85% 100%
employees Percent of People in a Job
produce the Salary : $52,000 $100,000 $148,000
biggest and
Value @ SD
best results.
This is true
across
disciplines and
across This “performance clustering” is achievable for virtually any position in any industry,
industries,
as illustrated by the following examples:
from
operations and
technical to SALES: One study showed that, in performance distribution for sales in the United
sales and States, superior performance of 123% resulted in an Economic Value Added (EVA) of
marketing.” $3.0 million.4
Corporate

1
Charles Handler, “’Competency’—What is it and what’s it good for?” 2004
2
See our white paper, “Identifying Top Performers with Competency Benchmarking,” 2004.
3
Lyle Spencer in Cherniss, C. and D. Goleman, eds. (2001) The Emotionally Intelligent Workplace
.
4
This and the following 3 cases are from Lyle M. Spencer, Jr., Spencer Research & Technology
Imagine Great People! 3
MVPs, Margaret
Butteriss, Bill
Roiter, 2004

____________________________________
CONSTRUCTION PROJECT MANAGERS: Superior performance of 147.3% resulted in an
EVA of $27 million (310 times salary).

“Great ACCOUNT MANAGERS: Superior account managers produce 600% of the revenue
companies produced by average account managers.
are
comprised of MANUFACTURING: Superior teams out performed average teams by 30%. The EVA
great talent, was an additional 7 million pounds of fiber equal to nearly $10 million.
not Distribution of Production of Pounds of Polyester Fiber
mediocre by Self-Managing Workgroup Teams
talent.
The “A”
player is the
source of +1 S. D. = 30%
competitive - 7 mil lbs.
advantage,
and
companies -1 S. D. +1 S. D.
that settle
for less face
a downhill
slide.
0% 15% 50% 85% 100%
“ David
Forman Global Estimation: Salary Value +1 S. D = + 30%
$270K $351K
+ $81K
Productivity Value Added lbs. 17 mil. 24 mil 31 mil
Value @ $1.40 / lb $23.8 mil $33.6 mil $43.4 mil
Economic Value Added + $9.8 mil
Leverage: Salary Value :: EVA 121x

____________________________________________________

CASE STUDIES
Our POLARIS files include case studies of business results from various sectors (case
studies available upon request):
CALL CENTER: CSR turnover reduced by 54%; cost savings over $500,000.

MANUFACTURING: Finisher position; 75% decrease in defects; 90% decrease in

scrap; 10% decrease in workforce; productivity maintained.

PHARMACEUTICAL SALES: 33% increase in total sales; 39% increase in percent to

quota; 43% increase in average gross margin; 17% increase in repeat sales.

HEALTHCARE: reduced interview-to-hire ratio by 50%; reduced MHW turnover by

52%; 70% improvement in involuntary terminations; cost savings over $600,000; ROI

Imagine Great People! 4

 of 1400%.

___________________________________
What Are The Business Implications?
The practice of benchmarking top performers has enormous implications for the
“Topgrading”
is the term bottom line of an organization, or for a single business unit. The Economic Value
Dr. Brad Added by clustering performance at the superior level ranges from 119% to 220%
Smart coined
to describe (see page 2). The manufacturing case study (p. 3) illustrates how this practice –
what great applied only to a single function-- produces savings of more than $500,000 for the
companies
must do—as first year and thereafter. To replicate this practice for other positions throughout
opposed to the enterprise would produce remarkable improvements in productivity,
“upgrading.”
performance, profitability and competitive advantage.

This practice has also been shown to reduce turnover and training costs while
supporting succession planning, talent management and leadership development as
well.

If a company
People Initiatives Can Drive Management Practices & Performance
doesn’t start
with the right With this capability, HR can take the lead in enhancing performance and
person in the
productivity throughout the enterprise and drive financial results. By linking the
right seat,
nothing else it benchmarking process to positions most critical to execution of strategy, HR can
does will work
accelerate the achievement of strategic initiatives.
out well.
Training
resources are
The article, “Human Resources as a Profit Center,”5 presents an example of how this
wasted.
Managers get would play out in sales and produce remarkable ROI:
frustrated.
1. Suppose that 25% of a 10,000-employee company were in sales with quotas of
Productivity
remains low, $500,000, and that 10% out perform the rest by 100%. (That means that 250 sales
jobs turn over,
people would be selling $1 million per year, thus contributing $125 million more in
and the
employee is sales than the others.)
never happy. A
2. Suppose also, that HR can identify the characteristics of top performers, and,
bad hire or a
mis- with a “success profile,” support the recruitment, hiring, management and
deployment
development of an additional 125 (5%) top performing sales people. (They would
never works
out for increase sales by $62.5 million.)
anybody.
3. Finally, suppose that HR spends $2 million to produce the above result (i.e.,
$62.5 million sales increase), the ROI would be 31 to 1.
5
James M. Perry and Russell Lobsenz, HR.com, October, 2004.
Imagine Great People! 5
Of course, the business case for sales is easier to make because the performance
metrics are clear. But leaders can make such a case for critical positions in
operations, as well.

How Competency-Based HR Practices Add Value

This approach shifts performance of people in a given job or role toward SUPERIOR
performance-- the outcomes achieved by the MVPs, which serve as the benchmark
for the best a job can be done. Spencer intones,” The ideal is ‘mastery learning:’
selecting, training and managing
all employees to superior performance.

Imagine Great People! 6

 ____________________________________
Deming/Lean/Sigma quality objectives applied to people:
reduce variance so almost all achieve the ‘total quality’ standard.
____________________________________
“You may be able
to teach a turkey
to climb a tree,
but you would be
better off hiring a
squirrel.”

As illustrated above, numerous studies have shown that selecting for MVP
competencies can move performance .25 to .36 of a standard deviation,
A systems adding 10-30% increased economic value. Competency -based training,
approach to development and performance management move the curve an average .
Human 60 standard deviation, worth 30-60% in complex and sales jobs
Capital respectively.6
Management
In short, these Competency Benchmarking processes help organizations
consistently and predictively identify, hire, retain and manage the best
possible candidates. The ability to do this again and again, with less and
less variance, helps put people in place who can execute the organizational
strategies and develop competitive advantages that result from having top
performers throughout the enterprise.

The “intelligence” provided by our systems approach allows HR and line

managers to maintain an execution focus and to support employees to
Request the “how enjoy a fully-engaged and winning work experience.
to” white paper,
“Identifying Top
Performers with A competency benchmark-based hiring and development process is the single
Competency most effective system to help a company get the right people in the right jobs to
Benchmarking,”
execute against mission, to gain and maintain competitive advantage and to
and the case
studies on increase profits consistently over time.
manufacturing, ###
healthcare, call
center and sales. HUMAN CAPITAL DEVELOPMENT
1001 Fell St., Baltimore, MD 21231
P: 410.889.1373 c: 410.963.5119
tom@polaris-hcd.com

Imagine Great People! 7

Imagine Great People! 8