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Pay for Performance that Works – Lessons from Pro Sports

on August 20, 2015

Where can you find two co-workers in an organization in the same role, where one has 5 years more experience, but the other is making 10x the salary? Could you have two middle managers, one with 3 years’ experience and one with 8-10 years in the role, and the more junior employee was making much more? How would that go over in your organization? To complicate things more, at your competitor, you have the exact opposite, where the more tenured manager was making much more than a junior role. Sound unfathomable? Not if the two organizations are two professional football teams and the employees are all quarterbacks.

Believe it or not, this is common and widely accepted in professional sports. Take a look at these examples:

The Tampa Bay Buccaneers quarterback Mike Glennon is 25 years old with two years’ experience, and is paid $846,563 this year. They also just hired another quarterback, Jameis Winson who is 21 years old, just out of college (no experience) and is making $4,609,323. Over 400% more for a new hire with no experience?!!!

How about the Indianapolis Colts, who have a quarterback Matt Hasselbeck, with sixteen years’ experience, and is making 70% less than Andrew Luck, their other quarterback with only three years’ experience.

Not a football fan? How about baseball? The New York Yankees have five starting pitchers. One pitcher has only one year of experience and is making $22M per year, while another newly signed pitcher makes $533,000. The other three pitchers have 3, 3 and 4 years’ experience and make $2.1M-$3.3M.

Pay for performance, not experience, is how professional sports organizations succeed. It is also how they recruit. The Yankees recruit high performers/high potentials and overpay to get them. The formula works. While they consistently have the highest payroll in baseball, their success rate is unmatched by any other organization.

But can this work in your organization? CHROs and HR leaders are beginning to think so. Laszlow Bock, SVP of People Operations at Google, discusses their “Pay Unfairly” strategy in his book Work Rules. Organizations, boards of directors, even healthcare patients are taking note. Executive pay is often tied to earnings and stock performance. Healthcare is looking at patient outcomes.

As HR leaders, a first step is ensuring your performance management systems, with goals and outcomes, can be correlated with compensation, incentives and rewards. To learn more on Pay for Performance talent management strategies and solutions download our white paper Getting Your Pay for Performance Strategy Right.

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