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Bell Curve Explained!

Bell Curve Explained!

 

 

 

 

 

A bell curve, or more specifically, a Gaussian Distribution, is a symmetric curve that is pronounced in the middle, and tapered off at the edges (it really does look like a bell). As such, the middle portion under the curve contains more area than either of the ends. The Bell Curve appraisal system is better known as the Forced Ranking Appraisal Systems of a company’s employees. Forced ranking has been defined as “a workforce management tool based on the premise that in order to develop and thrive, a company must identify its best and worst performers, then nurture the former and rehabilitate and/ or discard the latter”. It categorizes people based on their performance, rewards or penalizes them accordingly. Ranking employees is everyday practice at companies like General Electric (GE), Microsoft, Cisco Systems, Hewlett-Packard, and Sun Microsystems.

The entire workforce is segregated as the top performers, medium performers and the poor performers. The percentage varies with the company policy; it could be the top 20%, middle 70% and the bottom 10%.

 

  1. reward top performing employees to boost their confidence and motivate them to achieve business goals
  2. encourage mediocre performers to work harder and get into the square of highest performance
  3. identify low performers to guide them right and get them back on the track of better performance

 

People in past have used Bell Curve for carrying out performance appraisal process brilliantly. To an extent, it is all about enforcing the accountability on the employees and expecting them to do better and better. The normal distribution of this systematic bell-shaped graph places the majority of people in the average performance area while keeping the exceptions on both sides of the dropping slope.

Forced rating assumes that all the employees in a company can be ranked as follows:

  • Top performers – 20%
  • Average performers – 70%
  • Non-performers – 10%.

 

Advantages Of The Bell Curve System

Identify Top Performers Through The Bell Curve Grading

The forced ranking compels managers to make decisions and differentiate between the performances of different employees. Those who are identified as high performers are rewarded; they feel motivated and work harder to grow in the company. Their growth and career plans can be developed suitably and initiatives taken to retain them within the company. This not only helps retain the top talent but also builds succession pipelines.

Manage Lenient And Strict Ratings Of Managers

The bell curve is perhaps the only method that can be used by the organization to manage leniency and strictness of managers’ ratings. Lenient ratings mean a larger cluster of employees in a high-rating group (a right-skewed bell-curve), and strict ratings mean large numbers of employees in a low-rating group (a left-skewed bell curve). These unbalanced ratings may demotivate high performers and retain mediocre employees. The average manager has a tendency to rate on a lenient scale.

Identify Suitability Of Employees In A Job Position

An underperforming employee may be more suited for another position in the company. The forced ranking with adequate analysis and HR intervention can identify other positions for employees. By digging deeper into the competencies, strengths and career plans of employees and placing them in positions which map better to their capabilities, HR can play a key role in employee development.

Manage Training Needs

The training management talks about the importance of the correct allocation of training to employees. The bell curve can help identify the training that is most applicable to different categories of employees.

Disadvantages Of The Bell Curve

Too Rigid

Using the bell curve model may be considered a rigid approach for rating employees. Sometimes managers need to put employees in specific gradients just for the sake of bell curve requirements. This happens more often when the manager’s teams are small.

Loss Of Morale

The bell curve performance appraisal creates doubts in the mind of both managers and employees, who may worry about the possibility of an exit during tough job market conditions. This may lead to a loss of morale and further deterioration of job performance

 

Benefits :

  • The workers, who are high performers, are motivated to keep improving themselves with the incentive of stock options, higher pay etc.
  • The majority of the workers, who are classified as average performers, are provided with opportunities to enhance themselves with various training modules and other tools of improvement. This increases the company’s competence level as a whole.
  • The low performers are warned that they need to get their act together and thus, the productivity of the organization slowly improves
  • Accountability, which is the purpose of performance appraisals, is enforced across the organization by using Bell Curve.

Flaws :

  • The problem with Bell Curve methodology begins with its application. The distribution curve can only be applied to an organization with certain number of employees as a threshold. With small number of employees, the categorization of resources becomes too constrained, and more often, erroneous.
  • Bell Curve method for performance appraisal always creates a doubt about the fairness of the classification system. Many times employees show increased activity in the time period approaching appraisals. Hence, the bias towards visible performance as against actual performance may overshadow fair categorization.
  • Distributing incentives based on Bell curve methodology cannot guarantee an increase in the company’s overall performance. It happens only over a long period of time.

 

Checkpoints Before Implementation of Bell Curve :

Before the implementation of the Bell Curve Appraisal System, Please ensure the following –

  • Use of objective parameters for the performance appraisal system.
  • Determine the reason for poor performance of the employee if there is any.
  • Let the employee take responsibility for improved and only offer your assistance if needed.
  • Document all the performance related discussions with the employee because generally the bell curve system attracts a lot of law suits by fired employees in the west and hence it’s better to have all the discussions documented for you and your company’s safety.

There are nine aspects to the current system –

  1. Change of nomenclature – The present system is called the developmental appraisal, not performance appraisal. This emphasizes the role of appraisal in promoting individual learning and development.
  2. Planning the job for the following year – This provides role clarity and builds a common understanding between the individual and the team leader.
  3. Counseling for development – Counseling is an integral part of the appraisal system emphasizing openness and disclosure.
  4. Team performance – The individual’s contribution to team performance is of major importance.
  5. Process parameters – Process parameters with emphasis on quality, customer focus and systems form the core of the appraisal.
  6. Training – The appraisal system is used to identify the training needs for individuals and teams.
  7. Focus – The appraisal system has a single focus, namely development of individual and teams.
  8. Client-centered – The developmental appraisal system is exclusively client-oriented. There is no complex web of procedures with perforated sheets and flow charts maintained by the human resource department. The forms remain with the team leaders and team members.
  9. Label-free ratings – There is no overall rating with labels such as ‘outstanding’, ‘good’, and ‘average’.

Organization also needs to develop a system of compensation for its managers that promotes team effort. Based on the performance criteria of the business area, the team members in that particular business area receive a percentage of the basic pay and allowance as lump-sum payment. All members of the same grade receive exactly the same percentage. Performance parameters include both qualitative and quantitative indicators. Quantitative parameters include orders and profits. Qualitative indicators include factors such as on-time delivery.

The company classifies individuals into three categories –

Group A includes those who perform far below expectations with special counseling being provided to such individuals.

Group B consists of ideal performers with performance exceeding the expectations of the organization. They are given non-financial rewards in addition to flat equal increments.

Group C comprises individuals who perform strictly according to expectations. All of them receive exactly the same amount of bonus and increments.

To summarize Bell curve by itself is strict no according to my opinion but a few tweaks and this should be the best solution.

Application of Bell Curve for performance appraisal must be tweaked to yield better results. Few tips are –

  • Decoupling of lay-offs from the bell curve results.
  • Customizing of the bell-curve methodology to suit the organization structure & needs.
  • Combining other performance appraisal methods with the Bell Curve approach.

Conclusion is What works for Bigger companies does not work for smaller companies, but Bell Curve is ideal for mid size company if adapted in right way!!! people curse it, people appreciate it, but the methodology definitely has positive side of it…….

Question for you is what you feel about this methodology? and what is your acceptance level as an employee to be in system or process ???

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