Talent Management Column

Checking in With the Next Generation

Wharton's annual mid-term exam explores students' view of their last job and the way they were managed. In most cases, management was lacking. Feedback was limited or nonexistent, and bonuses -- instead of resulting in engagement and motivation -- often prompted these high-potential candidates to quit or slack off.

Monday, December 6, 2010
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The mid-term exam at the Wharton School for the past 20 years asks students to write about their last job and how they were managed.

These students are about 28 years old and, as you might expect, are an extraordinarily accomplished bunch. Many have already started and run companies. These aren't your average workers, but they may well be the typical executives or business leaders of the future.

As you might expect given the economy, a larger number than usual this year bailed out of the then-sinking financial-services industry to return to business school.

To be fair about the conclusions, everyone in this group quit their last job to come to business school, so perhaps they aren't the most committed of employees. But, on the other hand, employees quit all the time -- not just them.

Their essays provide a quite remarkable insight into what things are like inside the trenches of the white-collar workforce, especially in service industries. What do we learn from the roughly 800 stories this year?

Many people -- perhaps one-third or more -- were pretty happy in their last job. Like Tolstoy's happy families, their experiences were similar and had to do with managers, especially supervisors, paying attention to them.

The more interesting stories come from the problems, which make up the majority of cases.

Some themes have been underway for awhile. Many people will be surprised to hear how important the performance appraisal and review process was to these folks. They wanted to hear how they had done and they wanted to get development: How can I get better? How can I learn new skills? They want to be pushed.

Indeed, the most common overall complaint was that they were not managed carefully or in many cases, not at all. No onboarding or training. No reviews. No new or challenging tasks. No development. Please get in your job and grind away.

Consulting firms come out well as employers, especially the big ones, because they have systems in place for giving feedback, for providing opportunities and for learning.

Who comes out poorly? The financial-services industry, not surprisingly. Some of this could be because it is difficult to pay attention to employees when you are in crisis mode.

What is perhaps more surprising is that the smaller hedge funds and private-equity firms, where personal relationships might substitute for formal management, did no better managing their employees than did the big ones.

The biggest development -- and the one that I found the most interesting -- has to do with bonus payments, which are ubiquitous in the financial-services industry. The idea is to have a huge amount of pay at risk -- as much or more than annual salary -- based on the performance of the firm but also on the performance of the individual.

These bonuses were by far the biggest reason people quit their jobs: Story after story describes how they were at least OK with their jobs and in some cases pretty happy even with their bonuses until they found out what someone else got.

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It wasn't the amount of the bonus that was the issue, it was the perception that it wasn't fair when compared to others. Many of those who didn't quit their jobs reported that, after getting a bonus they perceived to be unfair, they started slacking off at work.

What's going on here? One explanation is that these are competitive people who expect to be No. 1, and not everyone can be No. 1, so most are going to be miserable.

Another explanation could be that the allocation of bonuses really isn't done fairly in proportion to employee contributions.

And a final explanation, which is surely at least part of the problem, is that expectations are being mismanaged or, more accurately, not managed at all.

The employees had no communication before getting their bonuses about how they were performing. In many cases, the bonus payment is the performance appraisal: Here's your bonus for the year, which is your signal as to how you've done. So it isn't surprising that employees fixate over it.

Especially if the reward system is going to be relative -- the best contributors get the biggest bonuses -- it is important to know both how one is doing in absolute terms and in comparison to others.

One gets the sense in these organizations that they believe money substitutes for management: The bonus payment should be enough to ensure your motivation and commitment. Guess what? Turns out not to be true.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School.

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