A few months ago, a lot has been debated about the utility of bell curves in appraising performance. Last Friday, I had the opportunity to discuss this with a panel of business leaders and HR leaders on this subject. While a few organizations have junked this tool already, most others do find this tool to be useful. So, what’s the hullabaloo about?
Bell curves are statistical phenomena and do take place. There is no doubt that the performance outcome of individuals will follow the shape of a bell curve. Similarly, the potential of people in an rganization will follow the bell curve too. Hence, there is no harm in knowing when the outcome is at par and when it is above par or under par. And similarly, it is for potential. Problem starts cropping up when we use these curves as the only yardstick to determine the pay and promotion of people in an organization.
Organizations are living entities and they grow up, face challenges along the way, win or lose on various days. As the context is very unique for each organization, the benchmarks of performance keep changing. Especially in the current times of express driveways that organizations have to race on, annual cycles of performance measurements and rewards are too far and few between. Organizations have started measuring and reporting performance each day and each week like an index of a stock market. Since cycle times are getting crunched for many things, so must be for the appraisal and rewards.
Secondly, the benchmarks need to be verified and confirmed frequently so that the organization is in pace with the reality that it faces. Some managers set ambitious goals which involve a stretch in efforts. Many people in their teams might not meet the goals 100% while their counterparts could reach 100% of the targets without a stretch. In such situations, the achievement of the team with ambitious goals will look muted in comparison with the other team. Such situations aren’t rare in organizations. Hence, the normalisation of targets is a very critical step. Else, the results of the performance evaluation do not look good and people blame the bell curves.
Last but not the least, performance evaluation process in many organizations is overtly focused on the final outcomes and hence, the quality of efforts put in, the methods adopted to achieve the results, the context or the backdrop in which the role was played and the market developments are not considered by managers. In such cases, luck becomes an important element in the overall scheme of things and bell curves become the victim.
One needs to apply the bell curves with a high periodicity, normalize the targets in the context of the role and the organization; also, one has to ensure that the means of achieving the results are evaluated as much as the results are. And rewards such as pay and promotion should not be determined mechanically based on the performance scores. One can at best use the performance scores to calculate one-time pay elements such as variable pay or performance bonus.
I think, bell curves are not passe! These need to be used right!