Relevance Of Bell Curve In Today’s Business

Posted in Human Resources Articles, Total Reads: 453 , Published on 04 February 2017
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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.


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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.


The context in which bell curve was introduced was very different. The generation of employees working in organizations was different as compared to the employees working in today’s times. Times have changed when employees were considered as factors of production to the times when employees are hired and made realize their full potential so that they can grow with the organization. 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.


Merits

The bell curve system started with the idea of pushing the employees to excel in their performance and achieve more and more. It is always very important for an organization to retain the high performers and suitably reward them. The bell curve identifies the top performers of the organization and clearly segregates them from the rest of the employees working in the organization. This helps both the employee and the organization in growing. This method of performance appraisal helps in managing the lenient and strict ratings of the managers. The unbalanced ratings might prove a hindrance to the high performers of the organization. Suitability of an employee to a particular job can also be gauged from this method and employees can be placed in those jobs where their strengths and competencies lie. Bell curve also helps in knowing the training needs of an employee.


Demerits

It is true that forced distribution in performance appraisal is too rigid. According to many organizations, bell curve was representative of human performance and behaviour but researches have shown that human performance does not follow bell curve because the sample which the organization used to take was very small and highly skewed. Similarly a survey was conducted on some entertainers, politicians, collegiate, professional athletes and it was found that the star performers of the relative industries contributed very small amount when put in a different simulation environment. It forces the employees to be fitted in that particular bracket even though their performance might not be so. This leads to loss of morale among the employees of the organization. For example an employee might be performing 100% of his task but if another employee is performing 120% of his task, then the former employee would be given a lower rating. This depicts that the employees are compared to other employees performing the same type of task; they are not evaluated on the basis of their own Key Result Areas. This leads to unhealthy competition in the organization where the employees do not believe in collaborative work. Everyone focuses towards achieving their targets without helping their colleagues. The implementation of bell curve in organizations promotes mediocrity. As the majority of employees of the organization fit in the segment of average performers, there is a latent satisfaction of employees to remain in that segment. One of the disadvantages of the bell curve is that this system is dependent on the supervisor or the senior of the employees. The seniors have to keep a record of the routine performance of the employees. This is a time consuming task but many supervisors do it just before the appraisal process and that is where the whole process goes ambiguous and erroneous. Paucity of time and sincerity on the part of the seniors lead to the failure of the bell curve in some of the organizations. In small organizations, there are already very few employees and the use of bell curve in appraisal leads to forceful fitment of employees performing satisfactorily into the category of poor performers. Moreover bell curve also adds to the company’s expenses both in terms of time and money in case the lower rating employees are not allowed to continue with the company. The company might not be able to recruit employees with the required skill set after laying off the poor performers. There is always a possibility of getting poor performers among the new hires. High attrition rates affect the reputation and the brand image of the company.


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.


Way Ahead

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 article has been authored by Suvayan Roy from IMI New Delhi

 

References

https://www.linkedin.com/pulse/relevance-bell-curve-method-performance-appraisal-sivaram-subramaniam

http://www.businesstoday.in/magazine/trends/debate-is-it-time-to-bid-adieu-to-the-bell-curve/story/222563.html

https://www.peoplematters.in/article/2013/02/04/talent-acquisition/from-whom-the-bell-curves/2493


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