Bell Curve: To bell or not to bell

Bell curve is a normal distribution of variables in the shape of a bell shaped line. Normal distribution is where the data is adjusted and is put in a way so that the most frequent values are near the center of the curve and the less frequent values which can be the extremely large values and extremely small values will be towards the tail of the graph. For performance appraisal in different companies, bell curve is used with a general formula of 20-70-10 or the 10-80-10 percentage. This being 20% are the high performers, 70% are the average performers and 10% are the below average performers. Different companies have different formulas to suit their needs. Bell curve is one of those things which evokes strong emotions from people on both sides- there are some who swear by it and on the other hand there are people who hate it.

This was a concept strongly supported and advocated by the GE ex-CEO Jack Welch where the performance of the employees boiled down to hard numbers and where the bottom 10% was fired subsequently. But after years of practicing this system, GE is now shifting from this rigid system of annual reviews to get continuous feedback.

Let’s take the side of the people who swear by the bell curve and see some of the viewpoints that they have, supporting this way of performance appraisal.

• Bell curve helps the company to identify the top performers. The top 20% or 10% of the project of the company can be easily identified and can be suitably rewarded. It is these employees who can be given more complex tasks in the project and can be given leadership roles. These employees can be identified from the rest of the group and be given incentives like bonuses or wage increases so that they can feel special and needed in the project. This will help them to retain the top talent in the company and also attract the talent from other companies seeing the incentives given to the top employees.

• It helps the managers to easily grade the employees according to their wishes. The managers can grade people in a lenient way with more people on the right side of the curve making majority of the workforce under him happy. Whereas a stricter rating standards by the manager will mean more number of people on the left side of the bell curve skewing it on one side. There are some managers who have high standards in work and also expect that from the team. They push their team to same level of standards but this can play both ways with discouraging the employees as they don’t get a favorable rating.

• The job position of employees can be changed with the analysis of the ratings. HR dig deep into the strengths, career plans and competencies of the employees and assign them suitable roles in the company that aligns with their interests. People with lower rating or who have a history of lower ratings can be analyzed as to the reason why they are performing in this way and their work profile can be changed so that they can perform better in an another role. People who have very good ratings can be moved to a more challenging role or be given more complex tasks where they perform better and help the company grow. Trainings can be provided to the associates to move them into new roles or to grow further in the roles they are currently in.

Now let’s see from the opposite perspective where people don’t like this form of performance appraisal and what are the problems they have with this.

• Bell curve is very rigid. As the bell curve needs to be maintained there is always a need to give some people less rating. There can be situations where the whole team is a talented lot and all do equally challenging work day in and day out but because their company follows the bell curve, the manager will be forced to give a bad rating to someone and also pick out the best performer leaving maximum number of people with average rating. This will lead to large scale dissatisfaction amongst the workforce and might lead to resignations or drop in enthusiasm to work.

• People do not want to be rated on a scale. Quantifying data and making analysis is fine but quantifying work done over a year or 6 months and being given a number at the end of that tenure is degrading. There are many times in a course of a project where there is enormous pressure on a group of people who are working nonstop and when their part is done, they might relax for some days before being given another task. If this rest time coincides with the appraisal cycle then this might lead to a bad rating which will wash over all the efforts they put in before. Also it is hard to differ between rating of say 6 and 7 when both the employees have done the same kind of work and delivered the results together.

• The loss of morale amongst the workforce. Before and after an appraisal cycle is one of the most tense times in offices around the globe. Before giving the rating, all the employees are giving their best performance trying to get a better rating. Managers are looking at their team more carefully as to who might be leaving the company and can be given a low rating so that the bell curve is maintained. Once the ratings are out there are a lot of hushed voices around the offices and lot of disgruntled staffs. Many a times it is hard for a manager to give lower ratings to his team members just to maintain the bell curve ratio, even if he knows that the whole team performed well. The team members who get good rating might get a promotion and then look to switch to another company. There are large numbers of people who get average rating who expect getting a higher rating get frustrated by what they got. There are also some people who get average rating and think that this is fine for them and don’t aspire to get higher rating. Both of these kinds of people are harmful for the team as the person with frustration will not give his best for the project and the person who is happy with their rating will not try to go beyond his comfortable surroundings and give the extra 10% to become the high rated employees of the project.

The biggest reason the employees despise this type of performance appraisal is that they don’t understand how the process is done and many a times they don’t want to understand also. So what are the different alternatives there in the industry if not the bell curve:

• Calibration: One of the frequent complaints when peers talk about their ratings that are in different projects is that your manager is lenient and mine is much stricter. With the ratings in bell curve being the prerogative of the managers, this sort of bias and complaints is not so uncommon. To eliminate this varied judgment styles of managers and to have a uniform rating across different employees, Calibration type of rating is very helpful. So how does this performance appraisal work? Multiple managers come together to discuss about the performances about the employees working under them. This leads to a healthy discussion and also different ways of assessing the employees. People can get ratings done against their fellow peers and also know where they stand in the company. As many managers are a part of this, the ratings have gone through multiple checks and balances and cannot be labelled as biasing by one manager. This will also help to identify the real stars in the workplace and who can be rewarded appropriately.

• 360 Degree: Many times when an employee has an issue in his work he/she will reach out to their peers and will get it sorted. This extra work many a times goes unnoticed by the managers or the higher ups and the person who helps will remain in the shadows. 360 degree type of performance appraisal will help to change this and help the employees get feedback from all the sides. In this type of performance appraisal the employees get anonymous feedback from different people including their managers, peers, clients and direct reports. This system takes out the biased rating of managers to their employees and involves many more people who work directly with each other. It takes the customer also as a part of the review because in many jobs there is a lot of communication with the clients on a daily basis. In these roles more than the manager, the client knows the work done by the employee in a better way. There are some problems with the execution with this system like the anonymity of the reviewers and the politics involved. There can be cases of people not giving favorable rating because of competition for promotion or there can be cases for “scratch my back and I’ll scratch yours” which leads to dilution of the effort spent in doing performance appraisal. Apart from these factors one of the biggest disadvantages of this is the effort and the cost involved to this as there will be lot of manpower dedicated to read and consolidate the different views regarding each employee. Thus it will lead to an increase in cost for the company.

• Management by Objective: In this type of performance appraisal, the manager and the employee sit together and fix goals and target either at the start of the year or some months before the appraisal cycle begin. So once the appraisal cycle starts then the manager and the employee sit together and evaluate how many and what percentage of the pre-determined objectives have been met. MBO helps the employee to have a target in the mind and work continuously towards it, it gives a clear direction to the employee and also the system is flexible as different people have different methods and speed of working. This system also has its own problems where people can either have unrealistic goals or below par targets. Both these cases defeats the purpose of having this type of performance appraisal as either the employee will be under tremendous pressure the whole year or will be too relaxed.

• Peer Review: As the name suggests, feedback for the employees will be taken from their peers. This type of performance appraisal is almost same as the one done in 360 degree type of performance appraisal with the same advantages and disadvantages.

There are many techniques that have been developed now as an alternative to the bell curve. Many global companies like Microsoft, Google, Adobe and Accenture have stopped using the bell curve. Closer home, companies like Inmobi and Infosys have stopped using this sort of performance appraisal. Clearly companies have started realizing that their performance appraisal techniques need to change with time. Recently TCS also has announced that they are not using forced rankings but are using the MBO type of performance appraisal. As many of these companies have changed their style recently, it is too early to statically see the difference in terms of headcount and attrition rate but from the feedback of the different HR heads of the companies there seems to be a positive effect on the workforce. In this age of digitization and information being available easily, HR practices should also be flexible and change with time.

My personal view is that the companies should have a mix of calibration and 360 degree type performance appraisal because stakeholders involved in a project should be a part of appraisal of an employee. In the services industry, there are lot of interactions with the clients and peers that the manager might not be involved and might not know. In those cases the valuable input of everyone involved in the project will be useful for the career growth of the employee. After this step and also in the production based industry they can have a calibration method to ensure all the teams have fair ratings. Yes there will be an issue of increasing costs by doing these methods but once the systems are placed, the cost will eventually go down. To quote Richard Branson “If you look after your staff, they'll look after your customers. It's that simple” and after all it is the employees that make a company.