The concept of bell curve was introduced in 1970s by Jack Welch, General Electric’s former executive to know the relative performance of employees working in his organization and it identified the four measuring standards to rate its employees like high level of energy, synching the employees goals towards the organisational goals, ability to take the decision, and the determination to take up and deliver the responsibilities within a stipulated time. It uses the law of averages or standard deviation.
The centre of the curve depicts the majority of employees of the organization that fall under the category of average performers. The tail of the curve represents the underperformers and the top performers.
Thus a bell curve divides its employees majorly into three categories dreadful competitors, stars or the hyper performers of the organisation and the rump the major lot of the organisation which lies in the middle.
According to the theory the high performers which consists of the top 20% of the employees contributes 80% of the profits in a business and others just contribute the rest 20% in the revenue generation.
This segregation is done by comparing the performance of employees doing similar type of jobs.
The percentage distribution of these employees depends from company to company.
For example, in an organization which uses bell curve, there might be a constraint to have 80% average performers and 10% best and worst performers. The employees are compared with other employees rather than analysing their own key result areas. The organizations then nurture the best employees and rehabilitate or let go the worst category of employees.
#The best performers of the organization contribute significantly to its objectives.
#The average performing employees are very high in an organization and their presence ensures uninterrupted work flow. Their weakness is taken care with the help of training interventions to enrich their skills and improve their efficiency.
#The bottom performers are the ones whose performance is unsatisfactory and who require significant improvement in performance with respect to their peers. These bottom performers are at times given an opportunity to improve or are let go the other times.
It is estimated that by 2020, about 50% of the employees working in the organizations would be millennial. Organizations using bell curve are of the view that pay for performance encourages the employees to work harder and strive for excellence. Pressure up to a certain limit can lead to improvement in performance but constant pressure on employees adds to demoralizing them.
Bell curve would be relevant in organizations where the employees doing more than required are given a good rating, employees meeting their requirements are given an average rating and the employees not meeting their requirements are given a poor rating. This does not happen in businesses which have over achieved their business targets. The organizations over achieving their business targets find it difficult to rate the employees who have achieved their targets because there are employees who have over achieved their targets and because of them the average performing employees are forced downwards in the curve.
Performance management in VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) has shifted its focus to development and performance enhancement of the employees.
Many technology organizations have done away with this type of performance assessment lately. Some of the big names include KPMG, Google, Microsoft, Accenture and Infosys. Some of the organizations like HCL Technologies are doing away with bell curve in phases.
Some other organizations like Tata Consultancy Services, Yahoo, Tech Mahindra and Wipro are still using bell curve for performance appraisal. Some of the industry experts believe that many organizations would gradually move away from bell curve as they might be analysing the first movers after about two appraisal cycles. There has been a report by Hay Group that says that 80% of its technology clients are looking at feasibility of ending the bell curve in their organizations. They have moved towards more feedback based performance appraisal process.
The organizations have redesigned their processes with a better emphasis on goal setting and continuous and timely feedback by the managers to their employees. There has been a focus on innovation and collaboration by the employees working in organizations in today’s times. The use of bell curve and increased unhealthy competition among the employees would disrupt this very purpose and in turn lead to them working in silos.
Also, the younger people who form a significant part of the current workforce require a quick feedback rather than waiting for a formal year end process of appraisal.
The bell curve has caused more problems than easing out the process when it comes to measuring performance of the employees. The companies will continue to reward their top performers when it comes to differentiating performance but now it won’t be constrained by a number. The managers will have to become more accountable for the appraisal process. Time has come when there needs to be more than the existing three categories in terms of performance- top, average and bottom performers.
This Original article has been authored by Suvayan Roy from IMI New Delhi and it is been edited by me for the blog