Mediocrity drift: Difference between revisions

Mediocrity drift (view source)

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 A curious, unintended, negative feedback loop of lazy [[human capital management]]. If you don’t proactively ''retain'' good staff, and if you don’t actively manage out poor staff — if you manage by tactical hiring and “[[natural attrition]]” — the general quality of your staff ''relative to their cost'' will ''decline''.
-This is not just your correspondent’s usual curmudgeonly complaint — though it is that, too —but rather is a logical consequence of managing by [[natural attrition]], at least if you accept three general assumptions:
+This is a logical consequence of this style of management, at least if you accept four general assumptions:
-'''Good staff leave by themselves''': Staff with [[lateral quitter|the gumption to leave]] tend to be ''relatively'' good employees, relative to what you pay them.
+''Good staff leave by themselves'': Staff with [[Lateral quitter|the gumption to leave]] tend to be ''relatively'' good employees, relative to what you pay them. These people are, therefore, ''underpaid''. No surprise: that’s why they’re leaving.
-'''Bad staff don’t''':  Conversely: those who aren’t much chop — who are already overpaid for what they do — tend not to quit, because they are onto a good thing, would need to find an even more gullible employer to hire them: consequently they will only leave if you make them, by performance management or through a [[RIF]].
+''Bad staff don’t'': Conversely, those who are already overpaid for what they do tend not to quit, because they know are already onto a good thing. These staff ''may'' leave, but only to join an employer even more gullible that you. Otherwise, they won’t leave ''unless you make them'', by performance management or through a [[RIF]]. These people, therefore, are generally ''overpaid''. That’s why they stay.
-'''Subgroups are normally distributed''': That all personnel, however you categorise them, are evenly distributed relative to the [[cost-value threshold]], and that any given subgroup, however classified (except by reference to pure value) will be about as good as any other. So, IT professionals as a group will be as good ''at what they do'' as will lawyers; young as well as old, men as women, and so on. Each group — IT pros, legal eagles, the young, the old, men, women — will ''within their own group'' have broadly similar distributions of outperformers and plodders.
+''You have to pay lateral hires the market rate'': When you replace leavers, you have to pay the market rate. If the person leaving was underpaid relative to the market, you have two choices: pay more for her replacement, or hire a less experienced replacement. Either way, you are getting someone who is paid at their own cost-value threshold.
+''Subgroups are normally distributed'': That the ''equilibrium'' value of your personnel is normally distributed around the cost-value threshold, and so is that of each subgroup of your personnel however chosen. So, you will have as many good staff as you do bad ones. And you’ll have as many good compliance staff as you do bad ones, and as many good left-handers as bad ones, and young, old, men, women and so on. Each such group will ''within their own group'' have broadly similar distributions of outperformers and plodders. (This is simply assuming that the law of averages applies).
+Now we can see a negative feedback loop here. If all people you hire have an equal chance of working out well — their relative competence is evenly distributed — and those who outperform are likely to quit while those who disappoint are likely to stay, over time, the competency of your workforce will skew ''mediocre''.
+Call this “mediocrity drift”.
+Outperforming quitters will be replaced — at necessarily greater cost, [[Ceteris paribus|''ceteris paribus'']], because the one and only time you are obliged to [[mark to market]] is when you hire — by those having no institutional knowledge, no internal network, and even controlling for that, only an “evens” chance of working out well.
 ===System effects===
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 and secondly, notice how pernicious the idea of the ''average'' is here.
 How your incoming [[lateral hire]]s perform will remain to be seen but, remember, performance is measured relative to cost. Since by leaving they have marked themselves to market, overperformers leave their old slot in the [[quincunx]] where they were at the top, and enter their ''new'' quincunx at the median. The vicissitudes of random chance mean the new arrivals might wind up in any slot but, in any case, their slot on average will be normally distributed. Your arriving at a higher cost than the ones you are replacing, they start not as outlier good staff, but average ones.
 ===Affirmative action bummer===
 If so, then a system which favours one group (group A) over another (group B) has a counterintuitive effect on the remaining populations of both groups: on ''average'', the unfavoured group will ''increase'' in relative value, and the favoured group will ''decrease'' in relative value, ''even though no individual performance, in either group, changes at all''.
 On average, the group A is paid progressively less. It looks like group A members are being systematically discriminated against on pay, but this is not so (in this model, ''no-one’s'' pay changes) in fact group A members are being ''favoured for poor performance''.