Why is it the right time to try an alternative to bell curve grading in your organization’s performance appraisal policies?
What is Bell Curve in grading in a Performance Appraisal Policy?
Every organization monitors performance of their employees at regular intervals to ensure that they are performing on expected standards and contributing to the growth of the company as a whole with their efforts. Many companies have their own set of evaluation norms that are implemented by HR teams across offices but one of the most common lineage found in all these disparate performance appraisal systems is the adherence to forced curve grading or bell curve grading. By grading on a bell curve, an organization sets a pre-defined criterion for employee appraisal. It is commonly known as Bell Curve in Performance Appraisal. It states that irrespective of the company’s performance as a whole in the industry, a certain portion of employees would be graded with higher ranks thereby entitling them to avail higher financial and other benefits of appraisal, a good majority of employees would fall into a medium or intermediator stage where their performance is satisfactory and qualifies for a decent appraisal in terms of salary and other benefits and last and most importantly a 3rd division of employees who, irrespective of their performance, would fall into low ranking system because the employer determines that a certain portion of employees need to go or put into performance improvement plans as per industry norms. In short it is a forced ranking system which HR teams follow to maintain a pre-determined company objective for workforce evaluation.
What are the advantages and disadvantages of forced distribution method of performance appraisal?
In today’s highly competitive environment where talented folks can easily find new job opportunities, a forced ranking method of performance appraisal does not in fact have any advantage. However, if your organization is one where you value corporate budgets and set annual KPI’s that are unfazed by market trends, then Bell Curve would be an ideal tool to help companies manage large workforce and HR teams would be able to include a large portion of employees in the middle layer and avoid conflicts.
Why is Bell Curve Grading Unfair?
A careful analysis of the pros and cons of forced ranking will shed light into the fact that it is absolutely essential for companies who want to build a competent workforce for the future needs to get rid of the bell curve dictated ranking system of performance appraisal. A bell curve based grading system has a pre-determined criterion for performance evaluation which says that a certain number of employees must be poorly graded and this is a huge barrier to modern day organizational culture of collaborative work and connected workforces. Only a few people would fall into the high performance category because only so many slots would be available for pick up in that category and it is often less deserving candidates who end up for the coveted positions when deserving candidates are put into the middle or lower brackets.
The key disadvantages of forced ratings are
- It demoralizes employees because there would be scenarios where high performing team members would be labelled and rated as average only because there are no more slots left in the high performance category due to quantitative restrictions put in force by the management.
- Creates career stalls as average employees would remain content with the middle rating and they would prefer the safe zone always and never aspire for the top spots since they know the numbers up for grab in the total seats are very limited in the high performance category.
- Creates a culture of fear where employees work only to remain in the middle zone and never aspire for top spots since they know it is limited in number of seats and also there will not be any incentives to grow for high performers who are forcefully subjected to low rankings to meet management objectives for bell curve ratings.
- Going by traditional bell curve policies, the bottom 10 percent employees who may be super stars or high performers would eventually be phased out of the organization and this will prove dear to recruitment activities as you might have to shell out much more to recruit the same skills at a later point of time and it may not be a cultural fit at that time. This would put serious implications on margins and further conflicts between finance, HR and core business teams to control costs.
Why are companies moving away from bell curve?
The practice of bell curve in performance appraisal systems pitches employees of the same company against one another as they would race ahead to improve only their own ratings and care less about achieving collective goals of projects and organizational milestones. This also leads to internal politics as people selected for the top slots would depend solely on the decisions of senior managers and could create major fault lines in the company’s employee moral system. With talent shortage on the rise, several organizations are struggling to retain top talent and such inefficient performance appraisal policies will only do more harm. Major multi national companies such as Microsoft, Accenture, KPMG, CISCO, etc. to name a few have dumped the forced curve grading system and has opted for systems that foster collaborative and innovative workforce culture. Automated cloud based performance appraisal systems such as SuccessDart already have flexible employee rating models that deviate from the traditional bell curve grading system and offers employers with tons of choices to bring out the best of their workforce’s potential. Thus HR teams across enterprise levels do not have to fear about rewriting their entire policy frameworks because such automated solutions would help implement any workforce management model in a matter of days and integrate into the overall enterprise culture without any inconvenience to stakeholders involved in the performance appraisal system.
So what can replace the bell curve?
You cannot take away a performance appraisal review system from an organization but you can definitely change the way it is done. If you have been following the bell curve mechanism of employee grading and wants to do away with it, then there are several alternatives to this forced ranking mechanism. Some of the most widely recognized industry practices that offer a great alternative to the traditional system of forced curve grading are
This is more like a high level manager session where managers who manage similar employee groups are given an opportunity to collaborate and review each other’s employee rating policies and methodologies. The HR teams step in to identify gaps and unfair practices that are common while managers themselves agree upon best practices based on the effect of the same. The outcome of the process is recorded as the criterion for judging employee performance till the next Calibration session. However, this system too has flaws because employees are often kept in the dark about managerial decisions and lack of transparency hampers the employees chance of having a say in his ranking or rating.
Management by Objective
This system of performance appraisal works in a structured way where an employee is rated based on set Key Performance Indices and Key Result Areas that are revised from time to time. The manager to which the employee reports too is tasked with assigning the appraisal score. But it is not a unilateral decision as the manager is required to communicate his judgment to the employee in person and the reasons as to why such a rating was given. The employee has provisions to challenge the rating assigned to them and can request intervention from the HR teams for unfair practices. Only when both the parties agree upon a score or ranking, will the appraisal be recognized by the HR teams and taken up for financial or other benefit calculations.
Peer Review can form the most critical part of almost all feedback based performance appraisal mechanisms and can even be implemented for bell curve based systems. In Peer Review, the co-workers who work with an employee are requested to rate and give feedback about the employee. It is known to everyone that peers would be the best people who would have a holistic and accurate on-job information about how a particular employee does his job and contributes to the team’s success in any task or assignment. It is easier for management stakeholders and HR teams to identify strengths and weaknesses through Peer Review systems and hence focus more on investing in the right talent development practices like trainings and mentoring sessions while rewarding recognized talents without bias. Decisions arrived for appraisal following such a peer to peer rating mechanism leaves no room for politics as only deserving employees would be ranked high with the consent of their peers.
360 Degree Feedback systems
Companies that employee 360-degree feedback systems for performance appraisal have been found to be having the most productive and satisfied workforce across the globe. Such a system puts visibility into the entire performance evaluation mechanism and it is not just a managerial feedback that decides the rankings or ratings of an employee but the feedback from all peers, managers, HR teams and other relevant stakeholders with whom a particular employee has interactions during his job. The stakeholders include even external factors such as Customers for which the employee has worked for, vendors or contractors that are associated with the company and is managed or interacted upon by the employee and much more. Because of increased visibility, this approach allows team members to collaborate effectively and work on collective goals which would have been dampened had the company followed a boring bell curve based forced grading of performance appraisal.
These 4 models are clearly pitched by global organizations as the best available alternative to bell curve grading in an enterprise. No matter the size of your workforce and irrespective of the geographies they work from, these systems have proven to be much more efficient that traditional practices. The hesitancy that many HR teams show in adopting such alternatives attributes mainly to the complex procedure of having to reshape their rule books and policies to incorporate such agile and continuous feedback based performance rating systems. This is where automated workforce appraisal systems can help make their task easier. As mentioned before cloud based performance appraisal systems such as SuccessDart has already incorporated the above alternative models in their configuration and it is only a matter of your decision as to which alternative you want to follow in your organization. The hard part of changing an organizations culture can be easily achieved through such simple solutions as stakeholders can be given a transparent system to view and comment on their ratings.
To know how SuccessDart can be a game changer in creating an efficient performance appraisal system in your organization, get in touch with us for a demo today.