This article is written by Aman Sagar pursuing Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho.
Performance appraisals are an integral part of any and every business. It concerns each and every employee as well as an employer. This process enables employees to understand and deliver where their performance lies based on what is expected of them and if there is any scope to improve. In this article, we will discuss the evolution of the bell curve, why it has become a fierce debate among future leaders and the alternatives to the bell curve model that new-age organizations must embrace in order to drive a winning people strategy for enduring success of their business.
Performance appraisal : differing views
Employers view performance appraisals as an opportunity measure as well track their employee’s performance, productivity, proficiency etc. and reward the employees through promotion who stand out in terms of performance, potentially shown to take higher responsibilities and respectively organize training and development interventions for the ones who show the right skills and inclination and can be improved further.
However, a lot of people may have a very different opinion about performance appraisals and question their abhorrent existence. This is primarily because of the giant elephant in the room known to us as the bell curve model. Bell curve is one of the most debated topics among HR Professionals as well as the Corporate world during this decade. The bell curve, while it creates a clear sense of direction towards the distribution of rewards from an organization’s perspective, creates rifts and divides among the employees since it is forced ranking and labelling of employees into high, average and low performers with fixed percentages. All employees despite the efforts that they put in are all rated on a barbarian scale where only it’s the survival of the fittest theory that works and a hand few get rewarded for their hard work and the majority of the lot are tagged average and ineffective which is a bitter pill to swallow after what they’ve sacrificed through their continued efforts. Also, this brings together complacency and mediocrity in the way people work because they know that only a handful will achieve the top tiers and no matter how much they do, will never be enough for them to grow within the organization.
Bell curve model : turning a page back to its evolution
The origin of the bell curve dates back to the 1980s when Jack Welch- then Chairman and CEO of General Electric brought this system with an objective to bring a sense of objectivity while measuring the performance of employees and clearly differentiating the top performers and bottom performers along with building a culture of meritocracy in a High performing organization. Also, this model evidently helped them in clearing out the low performers and planning the necessary interventions required. Given below is a diagrammatic representation of what a bell curve looks like which is derived out of a Normal Distribution curve which most of us have studied as a basic in statistics.
Source: Empxtrack- https://empxtrack.com/blog/bell-curve-for-performance-appraisal/
Why are companies moving away from the bell curve?
It is the endeavour of every new age organization that wants to build a competent workforce for their future needs to move away from the bell curve model because of the following reasons:
- The rigidity, uni-dimensional approach it takes by not taking the competencies and potential of the individual.
- It acts as an entry barrier to the collaborative as well as connected workforce and culture which is the new normal of a dynamic, technologically-enabled environment we all are a part of.
There are multiple scenarios that can be drawn based on the uncertainties this model brings in the minds of employees and prevents them from reaching their full potential. We are all privy to the biases of different parties because of which the deserving may not be getting what they had thought that they deserve. Although, this scenario may turn up despite getting rid of the bell curve approach.
With the scarcity of talent on the rise and an increasing number of positions that require employees with deeper expertise, more independent judgment, and better problem-solving skills, organizations have a herculean task ahead of themselves when it comes to retaining top talent and such inefficient performance management models will only cause more damage. Major multinational companies such as Microsoft, Accenture, KPMG, CISCO, Google etc. to name a few have already discarded the forced ranking system and given way to systems that encourage collaborative and innovative workforce culture and a continuous feedback approach that doesn’t undermine the contribution of their employees. If a manager rates 50% of his/her team as high performers/superstars, it is perfectly alright.
Distributing rewards in the absence of a bell curve
Rewarding our employees remains a hot discussion in a no bell curve setting. However, the biggest concern employees have regarding moving on from this is that they feel this will give way to more biases. The absence of bell curve setting provides the flexibility to distribute higher as well as differential increments to top performers. There are several alternatives that the leaders may take into account like the industry-wide benchmarking, gauging the potential of the individual apart from performance and peer group reviews which has been adopted by some of the big brands like Tata Motors. Individuals must be rewarded on the basis of their sustained performance, their current compensation as per the market practices, demonstrating continuous improvement in what they deliver compared with what was achieved the previous years, willingness to attain new skills necessary to stay ahead of the curve etc. The thought of getting rid of the system is almost heretical for most HR Professionals who find it very convenient and direct.
Navigating through alternatives to the bell curve
In order to drive a more progressive and development focused performance management system, the organizations would be required to first reduce the permanent focus on efficiency-obsessed performance management tools. This change has already been embraced by global brands across industries and they are now emphasizing continuous, quality feedback and dialogue between managers and their teams.
It is almost archaic to set 12 monthly goals these days since there are multiple settings in which people work these days that could involve working across teams, projects, assignments etc. Since millennials (individuals born around the year 2000 Gen Y and Gen Z) account for more than 70% of the workforce in most of the companies, employers are left with no choice but to customize their policies as a result of this shift. The collaborative approach to completion of assigned work tasks is the new normal these days and this is primarily the reason why Microsoft also ended up getting rid of the ratings for their workforce.
If we are considering the high performers even they may be subjected to be placed in the average performer group which is definitely not an encouraging classification to be given and may prove to be catastrophic as they make up the majority of the team. If 70% of the employees are working the best they can and are still considered average by the business, what is going to happen to their engagement levels? They are going to feel demoralised and start exhibiting a lack of productivity going forward, which in due course will result in them leaving the company one way or another.
People development is a very critical area that is catalysed through the removal of forced ranking since it enables managers to have a clear and honest dialogue with their reports and give detailed feedback on what is the organization’s expectation out of them and not stay tongue-tied justifying that rating at the end of the year.
The global IT player, IBM revamped their yearly appraisal process by doing away with annual appraisals and bringing out a new system called Checkpoint which encourages continuous feedback between the appraiser and appraisee. It considers different facets of an employee’s performance – business results, impact on client success, innovation, particular responsibility to others and skills.
The emergence of 360-degree feedbacks that involves feedback of not only one’s manager but also one’s peers, clients, skip-level managers, reporters brings in a holistic approach to determine the capabilities, promotability, recognition and training needs of all employees, thereby negating all the biases and recency effect that performance appraisals are often associated with and a cause of distress for many.
Some of the organisations are making use of the 9-box grid to classify employees into 9 buckets linking their potential to their performance. 9-box being a two-dimensional model helps the organizations in understanding this grid that an employee falls into and also can form the basis of essential individual development or organizational changes. The aim of the organization must be that their employees reach the higher grids, where the performance is exceeding or at least meeting the potential. If there are a lot of employees who fall into Low grids where the performance is less than potential, that is indicative that the organization has failed to motivate and engage their employees to realize their true potential and reach the expected performance levels.
Source: BambooHR- https://www.bamboohr.com/blog/9-box-grid/
The assessment centre is one of the tools that companies use to gauge individual potential and performance and typically involves the use of methods like social/informal events, tests, exercises, assignments administered to a group of personnel to assess their competencies to take higher responsibilities in the future. The experienced evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job linked characteristics. The major competencies that are judged during this exercise are in areas of interpersonal skills, intellectual capability, planning and organizing capabilities, motivation, career orientation etc. It is also an effective way of training and requires identification for different employee groups.
Behaviourally Anchored Rating Scale (BARS) is yet another assessment tool that encompasses a set of specific behaviours that represent degrees of performance and uses common reference points called “anchors” for rating employees on various behavioural dimensions. BARS may provide a greater degree of accuracy relative to performance evaluation, but improved precision under BARS is dependent on developing language that is specific, concise and readily understood when defining each competency and behavioural attribute.
Performance management systems when not managed well can turn counterproductive and do more harm than good to the organizations. Based on the discussions we have had through numerous illustrations, it has been established that the use of a forced ranking system is definitely not the way to go for organizations that want to engage, empower and retain their valued employees. It is therefore important for us to view this model from a critical perspective because while it has worked well for many organizations for almost 3 to 4 decades, it simply doesn’t work for the majority of the current workforce which comprises Gen Y and Z (Millennials) since their expectations and mindset is very different from what we have seen in older generations who would have spent their work lives in one or maximum two organizations, placing much more importance to loyalty and also were not exposed to the digital way of life as compared to the new generations.
It is almost a prerequisite with the expectations of millennials that they must be provided with regular feedback and debriefed for every assignment on what are the key deliverables on every project, being able to adapt to flexible work arrangements, don’t believe in excessive structures and most importantly expect recognition/ appreciation for a job well done. It is in the best interest of employees as well as organizations that they embrace the necessary performance management systems which support forward-looking coaching for development rather than backwards-focused rating and ranking, exhibiting a greater emphasis on teams than on individuals for the creation of a successful employer brand and long-term value to drive a sustainable competitive advantage.
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