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Second-year student Rohan Rajiv is blogging once a week about important lessons he is learning at Kellogg. Read more of his posts here.

Incentives drive behavior. Our “Leadership in Organizations” professor repeatedly stated that incentives are among the strongest levers to changing culture.

As we discussed incentive systems, we discussed the issues with the traditional tier-based evaluation systems.

Most companies have some variant of a system that grades people above or below target/expectations relative to their peers. We discussed a couple of issues with this:

  • Peer-based evaluation systems often lead to unhealthy competition.
  • Telling someone they were really close to the next tier actually causes a lot of unhappiness. Our professor did research on Olympic medal winners and found that silver medalists were more unhappy than bronze medalists. While the bronze folks were just happy to be on stage, the silver folks were generally unhappy at missing the elusive gold.

So what’s an alternative solution?

We discussed a 100-point scale with 20 questions scored for five points each. These 20 questions could be divided into four areas – e.g. task performance, leadership, culture and teamwork. Each question would drive to specific questions about how a team member performed. Of course, the manager(s) would need to substantiate each question with clear examples.

Why would this be better?

  • First, it eliminates tier regret. Your yearly evaluation is a score out of a 100.
  • Second, it focuses competition against yourself. The relevant question here is, how did I do versus my performance last year?
  • Third, it encourages self reflection and alignment. Each employee should do a self evaluation and compare notes and points of difference with their managers.
  • And finally, it provides more granular feedback on performance versus a couple of letters and bullet points.

We discussed this almost a year ago, and it is clearly one of those discussions that has stuck with me. I’ve been looking for counter points nearly every time I’ve thought about it. And I’m yet to find too many.

So, here’s to giving it a try … someday.

Rohan Rajiv is a second-year student in Kellogg’s Full-Time Two-Year Program. Prior to Kellogg he worked at a-connect serving clients on consulting projects across 14 countries in Europe, Asia, Australia and South America. He blogs a learning every day, including his MBA Learnings series, on