The Power Law distribution, also known as “Long Tail, is one of the approaches that has replaced bell curves/normal distribution/Gaussian distribution.” This approach is based on the research conducted by Ernest O’Boyle Jr. and Herman Aguinis. The core philosophy of this approach is that people are not ‘normally distributed’, in fact, there is small group of people who are “hyper high performers”, a large group of “good performers”, and smaller group of “low performers” – the belief that the hyper-performers account for a very high percentage of the total business value; similar to the Pareto Principle (the 80/20 Rule). The hyper-performers are the people you would like to attract, retain, and empower; several organizations pay outsized rewards to retain these hyper-performers, compensation between two people doing the same job could vary as much as 500%! The power law distribution emphasizes on several levels of high performance, starting from hyper-performers, followed by near hyper-performers, high potentials, potential high potentials, to a very small group of low performers. The philosophy of this approach is that the organization wants everyone to become a hyper-performer and that there is no limit on the number of hyper-performers; in fact, the idea is to develop many more hyper-performers. The cornerstone of this approach is collaboration, development, coaching, and empowering people. So how does one identify a hyper-performer? A hyper-performer is identified on three parameters – skill/performance at the current level, the rarity of skill, and his/her potential.
We have designed an increment planner based on the power law distribution. The increment planner splits the increment budget for a team automatically based on relative performance and potential. In the power law approach, a small increase in rating results in a high increase in increments and hence most of the increment budget is allotted to a small number of high performers.
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