The Bell Curve Method of Performance Management and Analysis

Every company has a system of managing and analyzing employee’s performance and their contribution in taking the company forward. It is essential for the business leaders to know how each of their teammates has performed. It is important to know their strengths, their weaknesses, and their overall potential, and having a performance appraisal and management process helps them in these aspects.

However a critical question is, how do we analyze and act on the various performance levels in the organization?

If you have been a part of any big corporation, you might be familiar with the concept of the bell curve method of analyzing performance appraisals results.

This method compiles the performance appraisal scores of employees. The scores are then plotted on a graph shaped like a bell, where the best performing employees are marked over the top part, the average ones marked in the middle, and the low performing ones on the part of the bell below.

Most generally it is observed that the bell curve places employees on various levels of performance as described under –

Top 20% – High performers
Middle 70% – Average/Satisfactory performers
Bottom 10% – Non performers

Generally, the employees marked on the top 20% of the bell curve are given more monetary rewards, a morale boost, and are naturally kept under consideration for a future leadership positions in the company. The ones marked on the middle of the bell are given relatively lower monetary rewards, more development oriented guidance. Whereas employees marked at the end of the bell curve, are offered minimal or no financial rewards, given deadlines for improvement and they may also be laid off if the business leaders don’t see them making any worthwhile contribution to the company goals.

This method of grading impels managers to take a decisive stance in ranking employees and putting them in to a definite performance slot. The matter of bell curve is the controversial one in the corporates and is often a cause of heated debates. While some business leaders believe that this is the best method of identifying the top and bottom level performers, some strongly resist it because the method compels a manager/appraiser to use a forced rating instead of the fair one.

Though on one hand this system gives organization an opportunity to periodically identify and remove the non- performers thereby fostering a result driven culture, on the other hand it also concentrates the power of putting people in the forced ranks at the managers/appraisers hands.

Below are a few advantages and disadvantages of using the bell curve method for performance appraisal management.

Advantages:

It prevents managers in falling pray to leniency while grading. People Managers, especially in Asian cultures find it difficult to give extreme scores. This is because as a manager if you slot someone in high performance category, organization holds you responsible for motivation and retention of such talent in future. On the other hand, when a manager slots someone as a non- performer he/she becomes responsible to handle the associated unpleasant actions in dealing with such non-performer. Hence managers may choose to stick to the middle scores for all their employees. Bell curve can break this habit.
It helps managers send a clear signal to employees who have not shown any initiative or improvement in performance in spite of several indications. It is often observed that managers are pushed into supporting non-performers through out the performance period for several reasons. At times there is an urgency, or sometimes they wish to offer more learning time to the employee, in some cases they also observe that employees fail to take suggestions seriously in spite of sincere efforts by managers. In such a case slotting out such employees for the bottom 10% of performance score sends a loud and clear signal. This also triggers a sense of urgency towards improvements in the non-performers.
This method is very useful when you have large of number of employees and you wish to zero down on the top and bottom performers. Organizations that have large of number of employees may sometimes need to have clear information about the top performers that they, need to retain and groom as future leaders. Similarly in bigger organizations non-performers sometimes don’t get noticed and if this continues for long, can result in spreading lethargy and culture of non-performance. Hence a method that points out the non- performers in the system in an austere manner is sometimes respected by task driven leaders.
Easier to link with rewards and talent management initiatives for best performers- The bell curve provides a definite count of employees that make it to the top scores of performance. This clarity helps in planning, budgeting and designing the appropriate rewards and talent management projects.

Disadvantages:

Doesn’t give performance feedback: The major disadvantages, as pointed out by some of the MNCs who have recently scrapped this method of appraisal, (Infosys, CISCO, Microsoft, Adobe etc.) are that this appraisal management method doesn’t give immediate feedback for an employee’s improvement. Many organizations have noticed that with the emergence of new organization structures and ways of working, there is a need for more informal and unstructured discussions between employees and managers to reach performance goals in synergy. Corrections need to be immediate in order to improve on the next output. Some companies have even seen a rise in the productivity of their employees after dropping this method, and by adopting a more casual and friendly timely approach to feedback. Dropping the bell curve method is gradually proving to be of great advantage, as employees are invaluable to companies.
May create unhealthy competition – The bell curve generally induces huge amount of jealousy towards those in top 20%. It also creates a great demotivation and passive aggression in those at the bottom points of the score. Rates may create divide and disrupt the team culture in organizations. Managers who are good leaders and may have a great team would end up feeling frustrated because they will have to stamp some of their good performers in the bottom slot just of meet the framework of bell curve.
Middle position is hardly motivating – The most amusing part of bell curve is that, the employees falling in the middle range of performance score would hardly find their position motivating. They would end up feeling happy that they are not at the bottom level of scores and may silently grudge that they are not at the top group of scores.
Prone to manipulation by unscrupulous appraisers/managers– The bell curve can end up being a highly destructive weapon if some unscrupulous managers decide to use it as means to manipulate employees. This can create a catastrophic impact on the moral and motivation of deserving employees.

The discussion on this topic brings us to the next and more important question.

“Is there a method of appraisal which will ensure merits of the bell curve while reducing various ill effects that are described above?”

“How do we use performance scores of employees for multiple decision processes such as increments, promotions, rewards, employee development and performance coaching?.”

Please reach us! We have all the answers!

We are a team of highly qualified and experienced strategic HR and OD consultants who specialize in performance management and appraisal systems. We would help you build an integrated and comprehensive performance management process with its linkages to all the other HR and Talent Management Systems.