Why is Meritocracy Important

When British sociologist, Michael Young, coined the term ‘meritocracy’ in his dystopian and satirical book The Rise of the Meritocracy, little did he know that it would become a modern-day organisational aspiration and buzzword. In the race to stay ahead of the competition, today’s companies make a concerted effort to foster a meritocratic culture by recruiting, rewarding and promoting their best employees based on their skills, ability and merit. Organisations that embrace the meritocratic ethos believe everyone has an equal chance to advance and obtain rewards based on their individual merit and efforts— regardless of their gender, race, class, or other non-merit factors.

Research has demonstrated that merit-based organisational efforts place companies at an advantage, especially in terms of building a diverse workforce. That is, if recruiting practices are solely based on merit, sans biases, it will allow for self-selection of competent individuals across different group identities to foster diversity in the workplace that is not only good for the firm’s brand and for better distribution of economic opportunity but also for the firm’s growth and bottom line. Indeed, diversity translates into better decision-making, enhanced creativity and innovation. A study by BCG Consulting Group found that companies with more diverse management teams report 19% higher revenues due to superior innovation fostered within such teams. According to another study, culturally diverse groups are more effective both in the interaction process and job performance than homogeneous groups. 

Merit-based incentives and reward systems also contribute to productivity. This field experiment found that meritocratic promotions led to higher productivity and conversely, when promotions are not meritocratic, increasing the pay gradient reduces productivity through negative morale effects. Productivity gains in meritocratic organisations are an outcome of greater motivation, exchange of diverse ideas, improved teamwork and collaboration, and enhanced organisational efficiency.

Barriers to Achieving Meritocracy

Despite the triumphs of meritocracy, deep-rooted biases in decision-making processes and ways of work pose salient barriers to achieving a robust merit-based culture. Be it the inequalities that exist in the realm of higher education that were recently brought to light in the infamous college admissions scam or inadvertent gender and race-related biases in hiring and evaluations, meritocracy often remains a distant goal in many firms. This is evident in the significant underrepresentation of women and minorities in certain sectors and fields such as Computer Science, Math, and Physics; wage disparities by gender and race across diverse firms and sectors; more critical evaluations of women during performance reviews and appraisals; or differential representation by gender in high-impact work. These disparities ultimately adversely impact talent selection, retention and promotion.

Other scholarship focuses on how ironically, firms that claim to be meritocratic, are often the worst offenders of biases. This is because their belief that they are more impartial (unknowingly) provides them with the confidence and permission to act on their biases. They are also less likely to self-scrutinise. Researchers Emilio Castilla and Stephen Bernard, who found that organisations with meritocratic principles favour men over “equally performing women” via higher bonuses and favourable career outcomes, call this the “paradox of meritocracy”.

Mechanisms to Ensure Meritocracy in the Workplace

It is imperative that organisations not ignore the risk of hidden or unconscious biases that impede a fair and meritocratic system for all.

One approach to breaking the myth of meritocracy would be to implement diversity and inclusion training that sensitises employees to the fundamental disadvantages that women, ethnic groups and other minorities face in the workplace. For example, in a study undertaken of nearly 100 employees at Rockwell Automation, respondents acknowledged that white men have certain privileges that women and racial or ethnic minorities don't.

The study demonstrated that implicit biases often creep in when people work in a purely meritocratic organisation. Timely diversity and inclusion training can engender greater awareness of biases, thereby allowing managers to monitor behaviour and language to overcome them. Once we learn how to counter our biases, we can begin to unravel the paradox.

However, experts caution against stopping diversity training since this might normalise biases. Therefore, it is important to complement training programs with policies that incorporate greater accountability for outcomes and transparency in processes.

For example, organisations could adopt the following best practices to develop a more meritocratic environment:

• Define the objective criteria that are clear at the outset for hiring and promotion.
• Remove gender-identifying data or ask for comparative instead of absolute evaluations. Women do better with the former.
• Introduce greater monitoring and evaluation.
• Set up incentive and reward systems that demand greater accountability from managers.

In a bid to create more meritocratic systems, academic Emilio J. Castilla proposed a framework that focused on three dimensions: processes and criteria; outcomes, and audiences. Such a framework incorporates accountability and transparency into organisations’ performance reward systems that could also apply to other critical employee career outcomes, such as recruitment, promotions, and training and developmental opportunities. 

First, while establishing processes, companies need to determine how rewards will be distributed among employees. For example, organisations can introduce more transparency into how performance-based bonuses are computed. Second, in terms of outcomes, companies must identify one individual responsible for collecting and analysing the data regarding employee rewards to ensure merit is the sole criterion for such decisions. Third, organisations that are focused on creating a meritocratic workplace must identify one individual who will be allowed to implement HR-related changes that pertain to aspects like bonuses and other outcomes.

The ‘Idea’ of Building Tomorrow’s Meritocratic Organisations

The stakes for organisations to build a robust framework around meritocracy have never been higher. While it’s hard to argue with the benefits of implementing inclusive recruiting practices to onboard superior talent, companies also need to create a work environment that encourages open communication and transparency. This is the only way diverse ideas will thrive in a dynamic global economy. Consistent with this line of thought is the notion of Idea Meritocracy—a radical concept credited to investor and philanthropist Ray Dalio— that is shaping the future of work.  In an Idea Meritocracy, employees are empowered to ensure the best ideas win.

Research conducted by University of Virginia professor Edward D Hess reveals that in an Idea Meritocracy, the power of collective intelligence and collaboration leads to quality decision-making, reducing ambiguity and uncertainty. Such organisations challenge employees to speak up regardless of their seniority and thereby, foster a meritocracy of people that goes beyond rewards and compensation. The study advocates empowering employees to ensure the best idea wins.  Research shows Idea Meritocracy has played a pivotal role in organisations such as Google and Pixar Animation Studios. The book How Google Works reveals how ‘with the sole objective of creating a meritocracy”, the company focuses on managing employee performance through a data-driven strategy.

As we build organisations that are committed to a merit-first approach, the onus is on leaders to create opportunities for employees at all levels of the organisation. Employees should be encouraged to share their ideas in a psychologically safe environment and compete on a level playing field without fear of judgment.

Crucially, crafting meritocratic organisations requires managers’ empathy, social skills, self-awareness and motivation. Therefore, only when leaders make EQ (Emotional Intelligence) part of their corporate culture will they be able to build a truly meritocratic organisation that has its heart in the right place.