Unclear leadership expectations make your company low-performing
Fix grade inflation and clarify career paths through skill-based Performance Management and mastery levels.
Grade inflation and vague career paths stall organizational growth and demotivate high performers. Mastery levels clarify expectations by defining skill-based performance standards for every role. This AI-Native & People-First approach uses the VEGA Model to standardize performance management, ensuring that leadership development is anchored in objective capability rather than tenure.
As performance problems go, this is an easier one to fix with a performance based level framework
"You know the grade inflation you saw at Harvard Business School? Well, our company has that in our promotions." Did this C-suite executive who said this to me need to bring my alma mater into this discussion? No. But I got the point.
He explained that his company was caught in a prisoner's dilemma. When one executive inflates grades during promotions, it puts pressure on all the other executives to do the same. The result? Middle managers and senior executives who simply aren't ready for their roles.
These vague expectations contribute significantly to leader burnout. Recent data shows that managers are 36% more likely to report feeling burned out compared to non-managers. A 2025 survey revealed that 71% of middle managers in the U.S. reported experiencing burnout—higher than both more junior employees and senior executives. Over half of leaders (56%) reported feeling burned out in 2024, up from 52% the previous year.
Ultimately, the lack of clarity from grade inflation results in periodic waves of leader layoffs (i.e., "delayering"), which destroys momentum and motivation.
To solve the problem of lousy and demotivating leadership expectations, you need to start with defining your leadership levels (i.e., job grades) well. We'll show you a future-proof approach to defining these leadership levels.
Are your outdated job grades silently killing your company's potential?
Take a look at your horoscope. Does this feel right?
This month is about "pruning the garden." You’re entering 2026 with a desire for more stability. While you usually strive to keep everyone happy, January asks you to prioritize your own equilibrium. It’s a time for setting boundaries that actually stick.
The trick of a good horoscope is that it feels specific but it is vague enough to apply to everyone. This is how many job level frameworks have evolved. This vagueness is a huge problem. U.S. employee engagement recently plummeted to a 10-year low, according to Gallup. "Clarity of expectations" and "someone encouraging their development" were among the biggest declines.
The truth is, legacy leveling models were built for a different era. Today, organizations are fundamentally different:
- Greater decentralization of problem-solving to move faster and innovate better. AI will only make this decentralization the new normal.
- Team sizes, or spans of control, are also getting bigger, which reduces layers and speeds up organizations.
- Gen Z has completely different work norms and values.
- Hybrid (and in some cases remote work) is commonplace.
- Deep technical expertise is required in more companies.
- Industries are more competitive and thus businesses plateau faster.
The legacy level frameworks were built for a more stable, less volatile age. As a result, they contribute to many performance problems:
- They lead to middle manager bloat. If you can't get promoted without a change in leadership scope, those ranks just swell. When people leaders represent the largest compensation pool in most organizations, companies end up managing their comp budgets poorly.
- They allow leaders to stagnate. They get too much credit for maintaining the status quo and not enough encouragement to drive growth. When leaders stagnate, companies stagnate, and growth stalls. This is not clear to many executives. Stagnating people predict stagnating companies.
- That vagueness contributes to bias and feelings of unfairness which ultimately decrease work motivation.
The good news is we can do much better.
How can you redefine job levels to unlock growth?
K.I.S.S - Keep it simple, silly.
If your aim is to build and grow high performing organizations, you must learn about the distinction between tactical performance and adaptive performance. The bestselling book, Primed to Perform, devotes a few chapters to this important topic, but I'll simplify it here:
- Tactical performance: Convergence. Aiming to get many people to follow the process and plan.
- Adaptive performance: Divergence. Aiming to get many people to do better than the process and plan.
Tactical is how organizations create scale once work becomes BAU (i.e., "business as usual"). It is driven by KPIs and processes. Artificial intelligence is disrupting tactical performance by automating it more.
Adaptive is how organizations create new growth and quality. It is driven by OKRs and skills. Artificial intelligence, for example, the Factor.ai platform, is disrupting adaptive performance by making it easier to decentralize more problem solving.
When leaders fail to manage both types of performance, they end up with sub-optimal performance cultures.
To create a modern, and effective performance based level framework, there are three critical first principles that are critical to incorporate:
- The levels must be defined in terms of tactical and adaptive performance.
- The level definitions must be built on clearly observable behaviors. Level behaviors need to be obvious and transparent.
- The levels can have overlapping compensation bands to support deep experts who have not progressed.
What does a 10-level performance-based level framework look like in practice?
Let's get practical. Here's the 10-level performance based level framework that can transform your organization. This model isn't just about new titles. It's about clearly defining ownership, work organization, leadership scope, and accountability in a way that makes sense for an AI-native, people-first company.
This framework is designed to be future-proof. It aligns with the fundamental shift in value from routine "business as usual" (BAU) management to dynamic, growth-driven problem-solving. It also supports the idea of democratizing growth, empowering more employees to engage in adaptive performance.
Take a look at the table below. It outlines each level, distinguishing between BAU-oriented and growth-oriented work ownership. You'll see how leadership scope evolves and how ownership over leadership habits changes as people progress. This transparency helps everyone understand their career path and what's truly expected at each stage.
| Level | Tactical performance ownership | Adaptive performance ownership | Leadership scope | Ownership over Leadership habits | Typical job titles | Rough compensation range in USD for a typical mid-sized company | Example skills |
|---|---|---|---|---|---|---|---|
| Level 1 | Owning primarily tactical process work steps (e.g., learning and delivering against an SOP) | N/A | N/A |
|
| $45K – $60K |
|
| Level 2 | Core scope is still driving tactical / BAU-oriented work. | Performing adaptively in SOPs and tactical process work steps (e.g., handling exceptions and driving continuous improvement experiments in SOP-oriented work) | N/A |
|
| $55K – $80K |
|
| Level 3 | Core scope is still driving tactical / BAU-oriented work. | Owning deliverables in more complex BAU-oriented work (e.g., high-skill process work where deliverables have space for skill, adaptability, and judgment) | N/A |
|
| $80K – $105K |
|
| Level 4 | Core scope is still driving tactical / BAU-oriented work. | Owning deliverables that contribute to your organization's growth priorities (e.g., important but not urgent, "zero-to-one" work that contributes to growth, developing new capabilities where there is no standardized template) | N/A |
|
| $95K – $125K |
|
| Level 5 | Core scope is still driving tactical / BAU-oriented work. | Owning a whole growth problem to solve (e.g., unknown deliverables and solutions; leads the collaborative problem-solving for their growth problem) | N/A |
|
| $115K – $155K |
|
| Level 6 | Managing the tactical / BAU work for a team (e.g., SLA adherence) | Owning multiple growth problems to solve | First-time people leader |
|
| $150K – $190K |
|
| Level 7 | Managing the tactical / BAU work for a team (e.g., SLA adherence) | Constructing team-level strategies (i.e., the team has a balanced selection of problems to solve to drive growth) |
|
|
| $190K – $250K |
|
| Level 8 | Running the system of BAU performance management (e.g., KPI-driven targets, dashboards, and continuous improvement processes) | Establishing priorities that bridge between senior-level strategy and team-level problems to solve. |
|
|
| $230K – $350K |
|
| Level 9 | Running the system of BAU performance management (e.g., KPI-driven targets, dashboards, and continuous improvement processes) | Converting the enterprise-wide vision into organizational strategy (e.g., themes that become priorities and problems-to-solve) |
|
|
| $350K – $600K (typical total) |
|
| Level 10 | Running the system of BAU performance management (e.g., KPI-driven targets, dashboards, and continuous improvement processes) | Building the enterprise-wide vision, strategy, and adaptive performance systems (e.g., strategic routines, adaptive performance OKRs, skills) |
|
|
| $1.0M – $2.5M+ (typical total) |
|
This ultra-simple model makes expectations air-tight clear, facilitates performance management and compensation, and helps to avoid stagnation.
How does compensation work within these levels?
To make this model work really well, it should also drive compensation.
In traditional systems, a person's compensation within a level is negotiated. This is a problem for many reasons:
- Squeaky wheels are rewarded.
- Introduces bias, and this legal risk.
- Introduces distortion (e.g., accidentally rewarding risk aversion).
Instead, use skill-based pay. In skill-based pay, granular skills have market values, and a person's compensation is the sum of their skills values.
For decades, compensation researchers have been saying that skill-based compensation is a superior way to pay. They have been proving that skill-based pay (SBP) can drive organizational success by:
- Increasing productivity and product quality while reducing labor costs and absenteeism.
- Enhancing workforce flexibility and employee motivation, provided that perceptions of fairness and justice are maintained and individual learning motivation is supported.
- Offering a competitive advantage over traditional job-based pay by rewarding the continuous acquisition of new skills and competencies.
Over the past two decades, this type of system has become easier and easier to implement. For example, we deploy detailed skill libraries with pre-set values for skills.
Nevertheless, companies often felt they need greater control and certainty in their compensation budgets, and skill-based compensation felt too "unconstrained".
To address this, implement the performance based level framework above and use skills to determine compensation within a level.
So at Level 3, for example, a highly skilled colleague would be at the top of the range, while an underskilled colleague would be at the bottom of the range. To grow in comp, colleagues would need to grow in relevant skills. Skills, in this model, are tied to levels, as you can see with some of the examples shared above.
How does performance management work with these levels?
Performance management. Just the phrase can make leaders and employees alike cringe. It often feels like a battleground, full of subjective opinions and vague expectations. Leaders and employees often have completely different views on what "high performance" even means.
In a performance based level framework along with skill-based gradation, performance management is much easier.
The most common problem for leaders in performance is setting expectation within a Level. The performance based level framework makes this part easy, so colleagues can see clearly if they are performing within expectations.
Then within a level, colleagues and their leaders choose skills to work on. When the colleague has clear examples of fluency, they get endorsed by a neutral panel and their compensation increases up until the level's maximum.
This model shifts the focus from blame to development. Instead of subjective annual reviews, we use tools like Skill Checks, Strategy Checks, Culture Checks, and Weekly Reflections to make performance management truly continuous.
The future belongs to organizations that prioritize skill and clarity.
We've seen how outdated job grades can silently kill your company's potential. They lead to burnout, stifle growth, and create a culture of unfairness. But it doesn't have to be this way.
This 10-level performance based level framework offers a clear, practical path forward. It's designed to build a truly AI-native and people-first culture, where everyone understands their path to growth. This isn't just about new titles; it's about a fundamental shift in how we define work and reward contribution.
Embrace this framework, and you'll gain a competitive edge in a rapidly changing world. You'll reduce leader burnout, foster genuine motivation, and make performance conversations productive, not painful. It's time to stop letting outdated systems hold your company back any longer.
About the authors
Lindsay McGregor
Meet Lindsay McGregor, the best-selling co-author of Primed to Perform, and co-founder of Factor.ai and Vega Factor. She's on a mission to build organizations that are AI Native & People First, because, let's be honest, who wouldn't want a world where every company thrives and everyone genuinely loves their career?
Lindsay is a hard-working nerd at heart. She holds an MBA from Harvard Business School and an undergraduate degree from Princeton University. A former McKinsey & Company consultant, she's also a New York City Library cardholder and a science fiction enthusiast.
Today, Lindsay isn't just talking about change; she's making the tools and doing the science needed to ensure everybody has great professional lives. It's safe to say, she's making work work better for everyone.
Neel Doshi
Meet Neel Doshi, the best-selling co-author of Primed to Perform, and co-founder of Factor.ai and Vega Factor. He's dedicated his career to a pretty ambitious goal: creating a future where all companies are high-performing because they're AI Native & People First. Think of it as making work so good, people actually look forward to Mondays.
Neel looks at this challenge through the eyes of an engineer. He earned his engineering degree from MIT and his MBA from the Wharton School. A former Partner at McKinsey & Company, he's also a Kentucky Colonel and a graduate of the Bronx High School of Science. Neel takes science-nerd to all new heights.
Currently, Neel is focused on showing the world that through science and AI, every team and company can be extremely motivating and high-performing. No one need be left behind in the march of progress.
Further reading
- Should Wells Fargo have fired employees who were simulating keyboard activity? — Why performance culture, motivation, and accountability matter more than surveillance.
- Is everyone fit to lead? — Exploring the leadership skill gap and how to build leadership capacity.
- Three ways to build a culture that lets high performers thrive — How to nurture high-performing cultures and keep top talent.
- My Employees are Demotivated. What Should I Do? — Practical steps to diagnose and improve team motivation.
- "I wish my people would take more ownership!" — How to inspire an owner's mentality and drive problem-solving in your teams.