In 1984 after completing my Post Graduation, I had rejected a rare campus offer those days, from Mettur Beardsell (current Madura Garments) Ltd. and opted for Hindustan Aeronautics Ltd., a PSU. My uncle who had retired from Bharat Petroleum, a PSU but had joined this company when it was Burma Shell Ltd., a multi-national Private company lambasted me for opting out of what he called a meritocracy and opting for the mediocrity, driven by the need for job security. Having seen both the worlds, I reckon he was convinced that the job-security to reward trade off should be made in favour of rewards.

This was the first time as a 23 year old I heard the word meritocracy. Thereafter since 1990 I have been part of one meritocratic organisation or the other at least that is how we have been conditioned to view multi-national and private organisations. During the last 15 years the term meritocracy has become the buzz word for leaders as well as employees. However, we frame the meaning of this in a convenient manner. In our definition big bonuses, fat increments, accelerated promotions, etc. qualify to be meritocratic. The moment we assign performance differentiation and do consequence management such as no bonus, no increment or even asking those rated low to leave the organisation, it becomes draconian. In my experience, this dichotomy exists not only in the minds of the employees but also in most of the leaders.

Many of us fail to understand that meritocracy is a choice that both organisations and individuals make. It is also important for us to comprehend that the core of meritocracy is the risk reward equation. Until the mid 90’s even in the best multi-national organisation the rewards were more in the form of reasonable paced promotions than highly differentiated bonuses. Thus, the impact of risk reward equation was very minimal.

I can confirm that HLL, ICI and ICICI until the turn of this millennium had very moderate level increments and there was nothing to write home about bonus. The concept of wealth creation through stock options was being tentatively experimented with. The more important part of the equation the risk side almost never manifested, especially for the middle and the senior management. The power of the unions made it near impossible for the risk to manifest with the non-management staff, including the sales force. The only risk was a probationer not being confirmed. All this has changed in last 12 years.

The essence of meritocracy is that outcomes mainly and to a lesser extent competence should be the determiner of rewards and exits. In this definition loyalty, hard work and even discipline counts for nothing. This definition moved the emphasis from effort and potential ability to measurable or verifiable output. Meritocracy borrowed its conceptual moorings from the world of sports such as:

How good are you in relation to the competition?

Did you win or lose? Did you at least outperform your best to date?

How many you scored does not matter? It only matters whether it was one higher than the competition – external and internal.

The bar constantly moves up – Allegorically and literally.

Targets became aspirational; aligned to both institutional and individual ambition. How high was high and how fast was fast, lost its significance. It now only mattered how much further than the nearest competition and how much faster than the peers. The oft told story that you have to only out run your peer to escape a tiger exemplifies this.

The capital markets became the ultimate arbiter of the Corporate league standings and hence the reward to both the owner and the players of the “Corporate clubs”.

The premium for player transfer from one Corporate club to the other started mimicking the sports leagues of the world. Concepts such as, “maximum job value” or the right price for a job became obsolete.

Induction of new vocabulary such as “War for talent” and “Talent management” replaced more moderate corporate terminologies. Suddenly a bank clerk & an electrician were as much talent as a fresher from a B-school or a CEO. Job seekers now reflected this new ethos and started seeing themselves as talent being traded in the talent capital markets, where the value was more the potential (PE Multiples) and upped their ante.

This hunky dory world made people blind to the risk aspect of the equation. As they say nothing comes free in the world. The club that paid a premium to buy you will be impatient for you to deliver. Otherwise like the owners of Chelsea, Man U or Real Madrid the Corporate clubs will also have a revolving door. The one through which you came in as a hero will now beckon you to be thrown out as a failure. David Moyes found it out last month, after just 10 months with Manchester United.

Do we not check out our risk appetite before we decide to invest our money? So why then do we not do so with our ability, which is our capital? Does anyone of us choose to invest in capital markets when our risk appetite is for the safe fixed deposit? Sure the rewards are meagre in FD compared to trading equity. Does any one of us invest in property whose value is much beyond us, by taking loans beyond our ability and court misery? So why then do we do these mistakes when we choose jobs and organisations?

This is where our limited understanding of meritocracy fuelled by our ambition plays games with us. We presume that meritocratic organisations will only shower us with the rewards and the associated risks will not manifest; at least for us. This would have been called a gamble if we had adopted this approach with our investments. As long as the expected rewards materialises we eulogise the organisation but the moment the risks materialise we conveniently find the same policies, which rewarded us faulty. In addition to this we discover new meanings about the value of loyalty. We conveniently forget that it is loyalty that we have traded for reward premium.

It is even more bizarre that we demand loyalty from the institution and want it to be patient and give us more time and opportunity, to get over a bad spell in delivering output. Let us counter pose this expectation with the loyalty which we are prepared to give to the same institution. Most of us become disinterested in our jobs the day we receive and accept an offer from another competing institution. We want to be relieved of our duties immediately, so that we can maximise the new premium which we have negotiated with the competitor. In rare cases where the institution wants us to continue till they find a replacement, we throw a fit and accuse the organisation with which we were associated thus far. So the moral of the story is that there is no place for loyalty in a meritocratic pursuit. We get the loyalty and forbearance that we give.

Meritocracy is a race; it is a competition; its ideal is in pursuit of excellence. The standards that the competition sets are non-negotiable. No point in complaining about how realistic these standards are. You entered this competition by choice and you can exit it if the new changed standards do not agree with your abilities or you will be forced out by the organisation no matter whether you think it is fair or not. Let us say you enrol and qualify to compete in the Tour de France; the premium cycling marathon in the world. This is a gruelling 2900 km over some 22 days meandering through Alps, Pyrenees and the valleys of Europe. The competing field sets the standards year after year. If your fitness, technique and support from the other cyclists in your team are inadequate, the least is you will be eliminated from the competition and the worst is you will have serious injuries, because your muscles will tear and cease. This is the risk in meritocracies. If people chose them only for the rewards and do not day after day take care of fitness, ability and team support they will be punished mercilessly.

The Olympic motto is “Citius, Altius, Fortius” meaning “Faster, Higher, Stronger”. No doubt it is inspiring and even rewarding. But also remember that this is a metaphor of relativity; meaning you are only perceived as good as how better you are in relation to a fellow competitor and your own best performance of the past. Meritocracy demands the triple jump in quantity, quality and consistency.

In conclusion it is important to place meritocracy in context and understand the true meaning before we worship it blindly. This is an ideal everyone has to embrace for wealth, progress and prosperity: Countries, Institutions and Individuals. But its consequences are bitter-sweet. It is a fantasy to believe that only the sweetness will materialise and the bitterness does not exist.

When blind pursuit of reward and when vaulting career ambition overtakes ability, the bitter side of the equation comes to roost. Sometimes breaks the heart. Yes I mean both emotional and cardiac health.

Users, especially leaders beware! Meritocracy promotes excellence, prevents institutions from decay and even makes them last longer yet inevitably leaves behind debris in the form of perpetually anxious leaders and employees, a few destabilised homes (at least temporarily), hurt sentiments and individualism. True these can be mitigated by care and sensitivity, but in the end whether we like it and accept it or not, the core of meritocracy is Darwinian!