Journey in the Valley of the Bell Curve – Do we Ring it Loud or make it Silent?

Bell curve

Bell curve

‘Bell curve’ has been a guiding framework for most of the organizations since the last so many years, and it has helped in bringing about a discipline in terms of – defining, standardizing, differentiating, measuring and rewarding performance.  Clearly, it has been a handy grading tool for creating a high performance culture.

I see that it broadly addresses three key issues that drive corporate performance:

First it encourages management to identify and focus not only on key talent, high potential but also on low performers. Good thing is that this process encourages open dialogue and common understanding among other managers, so that none of these decisions are left to the whims and fancies of individual managers.

Secondly, we all know that in order to remain agile and competitive, organizations have to optimize, conserve precious resources and devise strategies to offer better services, products and experience than their competitors.

Whether we agree or not, relative performance and assessment is a fact of our life. Be it in office or even in schools (where teachers compare good vs average vs bad students) or even at home, where parents are comparing their children.

We also need to be aware of our business environment. In this VUCA world where intense competition, disruption and innovations are the order of the day, Clients have become very demanding. They demand discounts every time they renew contracts. They don’t care much whether you get it through technology introduction or innovation or cost reduction. Coupled with these the frequent increases in statutory minimum wages and other popular govt measures (like the recent bonus limit enhancement). All this puts tremendous stress and pressure on organizational finances. In this context, bell curve helps the organization to bring in more discipline in terms of leveraging the limited budgets, getting more sharper in identifying real performers and under performers, and later distributing the rewards accordingly.

Thirdly– An important aspect that can’t be overlooked is that the Forced Distribution compensates for the “leniency effect” in many companies, since the latter allows low performers to continually receive satisfactory ratings because their managers do not have the wherewithal to rate them truthfully.

Let’s face it. No managers wants to be unpopular. Dealing with poor performers is probably the most difficult job that anybody with supervisory responsibility has.  The hardest thing to do is to look at a person in the eye and tell them that they’re not good enough.  Being lenient is seen as being kind to the employee, but in reality, it is neither honest nor kind to anyone, including to the underachieving performer.  It can also create problems for star performers who see management “reward” poor performers by neglecting to hold them accountable for their unsatisfactory performance.

Consequently, by adopting a Forced Distribution system, a company effectively “forces managers to make tough decisions that they otherwise wouldn’t or couldn’t make about their employees.” It also encourages managers to look at critical data points on performance objectively and holistically, against all similar role holders before final assessment, thus promoting transparency and meritocracy.

Bell Curve approach has been evolving over time, given the context and complexities. While it continues to serve the larger purpose for which it was instituted and leveraged appropriately by smart organizations, however, in the last several years, there have been number of dissenting voices also that have brought into fore certain ill-effects or side effects of this otherwise powerful technique.

I would say that some of these are just myths and misconceptions, while others could due to “arbitrary misuse” or a “strict technical interpretation of bell curve” or just “lack of proper knowledge/awareness”. To me it seems that the problem is not in the approach or philosophy, but how it gets interpreted and implemented. For e.g.

  • Bell Curve should not necessarily lead to a rigid and fixed % of employees in each performance bucket. It needs to evolve over time, given the context, complexities, need and maturity of the organization.
  • Secondly, it does not just mean that low performers have to be thrown out of the organization. It just means that some employees are not performing as per expectations and potential, and need more support than others to come up the learning curve.
  • Some managers start applying it blindly in small teams, or in teams which comprise of real high and above average performers. They are probably afraid to stick out their neck, make a business case and get an exception.
  • Some managers rate everyone as excellent, which then becomes the new average. In such cases, it becomes difficult for them to motivate and retain anyone. The standards and expectations of the managers in such cases are too low. Here, if the organization does not focus on improving the performance management competence of their managers, people start getting disillusioned with the performance management system.
  • Some organizations see a practice where managers are required to force rank people on performance while simultaneously referring to the salary increment rates assigned to the each performance rating. So increment rates decide the performance ranking in such cases.
  • Indian managers are also hesitant to give feedback to their employees because they’re afraid of confrontation. They neither spare time for giving regular feedback to their team members, nor do they maintain a log during the year, so they have no record of the context, efforts, challenges faced by employees during the year. So, while appraising their people at the end of the year, managers tend to focus on results rather than how the results were achieved. So they end up celebrating bad behavior.

Organizations which have been using the bell curve or force ranking sensibly and as an overall guideline, while remaining flexible as per their needs and maturity, have been thriving. They look at employees’ performance curve in light of their own context, viz. industry, market, share performance and customer satisfaction to arrive at a very logical conclusion.

There is no denying the fact that statistics of bell curve distribution cannot be supported fully in the organizational context. As many of us know, the normal distribution of bell curve occurs consistently when it involves random events and large samples. Actually, it is very rare to have teams that big. The teams are not even placed randomly, since all are specifically recruited, placed, trained, and are expected to meet certain duties and responsibilities as laid down in their position description.

So friends, Bell curve may not be the only way to manage employee performance.Forcing it down the throats of the people without explaining the what, why and how of bell curve, and making it a driving force to manage employee performance, is the problem that organizations normally face. If it can be avoided, it is likely to work.

One mistake which normally gets done is that people treat such bell curve approach in isolation. However, if we integrate it with other key elements required for effective performance management system, like frequent genuine conversations, holistic feedback, integrated system, flexible approach, transparent decision making, context & needs of the organization, etc., then it can serve the purpose well.

If it does not serve its purpose, better to do away with it, but before doing it, please be sure of its larger purpose and philosophy.

In absence of a normal distribution tool, we have to look for alternate processes to differentiate performers and overcome most of the challenges we are facing with the former. Such alternate system should avoid both over-ratings and under ratings and manage aspirations of high performers. It should also be able to deal with anomalies of higher outflow of annual salary increase even during difficult times and provide an organizational mechanism on how to identify and deal with the load of under performers.

So, bottom line is that, stopping a practice without agreeing what to start doing, will be a recipe for further disaster.

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