It’s not hard to understand why the Bell Curve (also known as Normal Distribution) is regarded with such disdain... It is after all a horribly flawed methodology that tends to do more harm than good!
Although most HR leaders would agree wholeheartedly with this sentiment, as one recently pointed out, ‘Some of us don’t have a choice... We are stuck with it!’ With this in mind, in this article I will attempt to explain what an organisation can do to manage the curve, and not be managed by it.
What exactly do we know about the Bell Curve?
The Bell curve came into the spotlight when it was first introduced by General Electric in the 1980s under Jack Welsh. Referred to as the Vitality Curve, it was based on the premise that 20% of employees were the most productive, 70% were adequate (vital), and 10% were nonproducers and should be fired.
Despite the controversial nature of this performance management practice, the curve quickly rose to popularity through organisations the likes of Amazon, American Express, Dow Chemical, ExxonMobil, Goldman Sachs, Hewlett-Packard, IBM, Microsoft and Yahoo.
- Assumption 1: The curve assumes that employee performance follows a Normal Distribution; an equal spread of performers above and below average. Whilst there may be some validity to this with some job functions, there is sufficient evidence to show that a Power Law Distribution (also known as Long Tail Distribution) is more representative.
- Assumption 2: The curve assumes that the carrot and stick approach works with everyone, and that people will make a positive behavioural change when external motivators are applied. Whilst there may be some validity to this with some people, there is sufficient evidence to show that external motivators have a negative impact on behavioural change.
As you can see from the above example of the curve, performance is rated as 1-2 standard deviations from average. It assumes that the majority of employees are average, and that an equal percentage of employees are either above average or below average.
As you can see from the above example of the Long Tail, there are varying grades of high performance, a much broader range of average and a smaller proportion of low performers.
Problems Caused by the Curve
Whilst the curve makes the task of budgeting easier for the finance department, it causes no end of trouble for human resources, talent management and managers in general, as they are forced to rank and yank employees into an appropriate box through some form of moderation.
- The Low Benchmark: The curve promotes average, as employee performance is rated against average. It indirectly implies that its ok if you are not a top performer as long as you are not a bottom performer. It doesn’t take into account how much you have improved!
- The Paper Exercise: The appraisal system becomes a paper exercise, as managers and employees alike know that the final rating will depend on moderation. Appraisal conversations become an afterthought, as there is no collaborative agreement on the employee’s performance.
- The Distorted View: Moderation has a tendency of being biased or influenced… The perception of how much an employee has contributed to the business will often depend on their visibility or the visibility of the projects they are working on, or how prominent or outspoken their manager is.
- The Stagnant Individual: Manager’s cease or avoid having individual development / career planning conversations because they fear setting expectations that they cannot fulfil. As a result, employees stagnate; not knowing how they are performing or where they are going.
- The Me Effect: People start to work in silos and knowledge sharing ceases. This leads to increased conflict and politics as Individuals, teams and managers look to protect their own interests. This behaviour has been described it as a Darwinian "survival of the fittest".
All of these key points negatively impact how motivated and engaged employees feel towards their employer. Whilst they may have a positive impact on functions that require a competitive spirit, they have an adverse effect on functions that require high levels of collaboration.
What’s the Solution?
Jack Welsh has repeatedly said that culture eats strategy for breakfast… Herein lies the challenge, as you need to foster a performance culture that works for your organisation. Here are a few things to consider:
- Define Performance: Be clear about what constitutes performance for each and every position. It should be based on a combination of actual results versus targeted results, actual performance improvement or decline and attitude to work. There should be no ambiguity whatsoever.
- Delink Compensation: Compensation should be given out when it is deserved - not just during the appraisal process. There are lots of ways to compensate employees for their contribution to the business. Money does not motivate!
- Be Transparent: Ensure that there is complete transparency around performance measurement, and explain why employees get promoted or didn’t get promoted. Be clear around where employees need to perform better in order to be promoted.
- No Surprises: No employee should ever be surprised about their performance rating. They should know how they are performing at all times and where they need to improve. They should be given every opportunity to improve.
- Empower Managers: Give people managers a level of budgetary control and the autonomy to decide who gets promoted and who doesn’t get promoted. There should be a system in place whereby these promotions are justified against clearly defined criteria.
- Develop Managers: Ensure that people managers are properly equipped to manage performance. This includes making sure they are trained on how to conduct an effective appraisal, how to provide constructive feedback and facilitate an individual development planning session.
- Agile Feedback: Employees should be given the opportunity to provide, request and receive constructive feedback on demand. Feedback should not focus on the past, and should always focus on what the employee needs to do differently in the future.
- Develop Employees: Each and every employee should be trained on how to provide, request and receive constructive feedback. There should be no awkwardness surrounding whether to give feedback or not.
- Systemise It: Invest in a performance management system that provides employees with access to their performance records and individual development plan. The system should allow employees to provide, request and receive constructive feedback on demand.
Is your organisation managing the curve or is the curve managing your organisation? If its the later, there here are some ideas to get you moving in the right direction.