The Stunning Performance Differential Between Top and Average Performers – Quantifying the Value of Hiring Top Talent

I became the world’s most aggressive recruiter after learning the huge performance boost that top performers provide. That realization forces you to become aggressive because you simply have no chance of landing these top performers unless you use the most aggressive recruiting tools and strategies.

Until recently, I often stood alone as an advocate for placing a dollar value and calculating the ROI of recruiting top performers. However, there has been a recent wave of multimillion-dollar recruiting packages being offered by companies like Meta, Microsoft, and Nvidia to top performers. Now, these moves make me realize that a handful of other TA leaders have joined me. They are also suddenly becoming practitioners of what I call “Performance Differential Recruiting” (or PDR).

Therefore, the remainder of this article focuses on estimating the performance differential produced by top performers and why recruiting top performers produces the highest ROI in recruiting.

The highest performers are 800% more productive than an average performer in the same role (McKinsey).

Share These Performance Differential Numbers With Your Colleagues

Although their research has been mostly ignored over the years, a number of credible sources have calculated the tremendous performance differential that can exist between a top performer and an average employee (in the same job). As you can see in the following table, the discovered performance differentials can range from 8 times to a whopping 300 times!

Alan Eustace, a Google vice president of engineering, once stated that it would be better for Google “to lose an entire incoming class of engineering graduates, than one exceptional technologist.”

What Are The Key Implementation Elements Of Performance Differential Recruiting?

If you have decided to take full advantage of this huge performance differential by focusing your recruiting on hiring top performers, here is a list of implementation steps that you should consider.

• You will need a distinct recruiting sub-process to land them – because top performers realize that they are in constant demand. You won’t be able to successfully land them unless you have designed a recruiting sub-process just for them. To be successful, that recruiting process must be data-driven and customized to the specific wants, needs, and expectations of “top-performer candidates.”

• You must define what a top performer is – top performers are truly exceptional workers. Some define them as those candidates whose historical performance ranks them in the top 10%. I, however, recommend that you designate a much lower percentage, defining a top performer as an employee who produces in the top 5% of all employees in their same job. Also, you will likely have to redesign your candidate assessment process so that it can accurately discover the performance history and potential of each of your highly qualified candidates.

• You must then estimate the performance differential for each of your high-impact jobs – you need to work closely with the COO’s office in order to identify and prioritize your key jobs. Key jobs are the 20% of jobs that have the highest business impact when filled with a top performer. The next step is to identify all of your key jobs that are already quantitatively measured (like sales and customer service) and then use your top-to-bottom performance rankings in those jobs. Calculate the actual historical performance differential between your top and average performers over the last few years. And then, obviously, you must focus your top-performer recruiting on the key jobs with the highest performance differential.

• Realize that proven innovators have a higher multiplier – when calculating your performance differentials for top performers. Realize that a handful of “game-changer” candidates (like Shohei Ohtani in baseball) are likely to be already proven innovators and/or those who work in mission-critical areas (like AI and Quantum Computing). These game changers are likely to generate a productivity differential several times higher than that of other top performers.

• Don’t forget to calculate the ROI – in most cases, it’s a mistake to lose a top performer candidate based on their salary demands. Even if Shohei Ohtani demands the typical 25% higher salary that top performers usually receive, his increased salary costs will be more than made up for by his multiple times higher job performance. You should also realize that, normally, it doesn’t cost any more to recruit, manage, or provide benefits to a new-hire top performer.

• Don’t focus on cost per hire – when you’re recruiting someone as impactful as Shohei Ohtani to your MLB team. It’s actually better to spend more money on the recruiting process if that’s what it takes to land him. Because no matter what job you’re recruiting for, the cost per hire rarely reaches 2% of the new-hire’s first year output.

• You will need metrics to assess process performance – in order to demonstrate to your executives that your top-performer recruiting effort is meeting its goals. You will need a set of new-hire performance metrics that calculate each new hire’s actual performance differential and the dollar impact they had after their first and second years.

Note: You can learn more about calculating the dollar value from recruiting top talent here.

Final Thoughts

In addition to the performance differential between top and average performers, you should realize that corporations themselves can also have significant performance differentials. For example, under the “revenue per employee” talent performance metric, Nvidia employees produce an average of $5.2 million each year. By comparison, the average Apple employee produces only half of that ($2.5 million), and Dell employees produce less than 1/5 of that ($965,000) — source MarketWatch.

Incidentally, now that the job market is tight, there are a large number of top performers actively looking. In my view, now is an opportune time to focus your recruiting on top-performing candidates for key roles. If you succeed in hiring a measurably larger percentage of top performers, it will be clear to your executives that the recruiting function has contributed directly to the bottom line.

Thanks for finding the time to read and share this article.

Notes for the reader

This is the latest article from Dr. Sullivan, who was called “the Michael Jordan of Hiring” by Fast Company. You can subscribe to his Aggressive Talent Management newsletter (which focuses on recruiting tools, current recruiting opportunities, and recruiting trends) either here or by following him on LinkedIn