Performance Appraisal : Bell Curve or Absolute Performance – What’s good?

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Over the last three decades of my corporate life, I have always found that this topic has always evoked passion at all points of time. Everybody has a perspective and a logic to go along with it. My own views in the early part of my career used to be biased based on which approach left me feeling good. Of course, now I believe I have the ability to take a step back and look at them dispassionately.

So then which is the good system?

Well first let me put the two systems in perspective, before I give you my logic. Feel free to critic, add, buttress with what you believe.

Bell Curve

The Bell Curve proponents would typically cite the likes of Jack F Welch in their favour. The argument being that there has to be some one in the (say) bottom 5% who need to be regularly weeded out. This way the organization retains only those who can live up to the pressure of staying in the race. Then by the same logic (say) only the top 10% have to be rated outstanding in the relative sweepstakes. This way the organization truly recognizes the top of the pile who make a larger difference. This will ensure that everyone wants to race to the top… After all does anyone remember the participants in the Olympics sprint – only the winner is recognized, even if the victory was in a photo-finish, isn’t it.  So this model does sound good and seems to promote performance, isn’t it or does it?

So, if (say) only the top 10% are going to make it big, will there co-operation among the top 20% – 30%? Would you rather see your peer fail, and you make it to the top, than the organization succeed? Everyone is now running their own race. If the bottom 5% are going to be weeded, will the bottom 15% feel this as a place to stay or start increasing the churn more than you want? Will they all be looking at contributing to the project on hand or be worried about their future? Will this further impede their contribution to the project?

Absolute Performance

The absolute performance proponents would state that the goal setting exercise sets the expectation. So when it comes to measuring if you have performed better than the goals (how many ever in the team), everyone then deserves to be ranked an out performer. If you have missed the goals by a pre-set margin, only then you are an underperformer. Well all through our school days it was clear what would give a distinction or what would cause me to fail the exams isn’t it. This would be reinforced by the fact that in a team model – the team is not in a race amongst themselves, so everyone will be willing to help thy buddy to succeed as well, thus reinforcing the team first principle. If someone still underperforms, then it’s appropriate to let go. After all everyone feels happy when everyone around them is happily rated. So this model sounds good too to promote team performance, is it or is it not?

So, if a whole range of them outperform the targets – what does it mean? Was the manager setting the target too low? Or would we land up in the situation where even a 99.5% does not guarantee you an admission in St. Stephens College, Delhi?  Would everyone really be happy if the majority are declared to be outperforming (will the share of the cream in the cake be sufficient for all of them)? Would we start sympathizing and enabling the dead wood in the organization to some how cross the minimum threshold? Will we eventually land up with mediocrity?

How do you choose the system?

I am sure all these thoughts and many more go through the minds of the managers, the HR folks, the team, the organization leaders when they set up and run the systems. After all both systems have their own merits and have their own draw backs.

I don’t believe the systems per se are the issue. I believe it’s the implementation that’s an issue. Additionally an organization, should be keeping the system aligned with the expected behaviour from its employees. How much does team performance matter? How much does individual performance matter? Or can the organization go beyond this?

What are the real issues ?

So where do the real issues come in then, with appraisals?

First, I have seen that when I as a manager have not been giving regular feedback through the year, and helping with the development plan of my team member, I run into a problem at the end of the year. The appraisals look more like reprisals to the employee – because if they had appropriate feedback, they could have taken necessary pro-active steps to ensure their success and eventually the organization success.

Next, when the stated organizational position is absolute performance, but then an organization thru unwritten action pushes the manager to necessarily fit a bell curve – it creates invisible chaos. I have noticed many a manager then succumbs to the pressure, because after all his/ her own rating would be at stake if the unwritten expectation is not acted upon. Later when briefing the team there’s a disconnect when the team member questions the ranking. The manager cannot explicitly state he did not stick to the organization philosophy and neither state he succumbed to the chain of command’s unwritten message.

Or when in an absolute performance system, there’s an initial euphoria – with everyone knowing that they probably bettered the stated expectation. However if the organization has not outperformed – the limited goodies that come along now get split more evenly with more people. So does it now lead employees to believe that the good grading is a placebo. Should the organization have been more diligent in the level of the target being set early on in the game? Will it now start making the team not worry about the grading and encourage mediocrity?

In addition to all these, not every thing we do is easily measurable, much less comparable. So the objectivity of the manager is already subject to his/ her pre-existing perspective. So, can the manager ensure that it does not cloud the appraisal process?

In Conclusion

In conclusion, I would say that if the true strategy of the organization and its execution is aligned and well stated, it will make any system work reasonably well. Or not doing that every system will create only a set of issues.

Personally, I would like to see a system where the organization decentralizes this decision at the level at which people can make the decisions on allocation of budgets, career moves, promotions, hiring and firing – which in many ways are the outcome of this process. The closer you bring this to the place of action, the better aligned it will be to the needs of the team. The process of allocation from the corporate to these groups itself, should also be made clear up-front. That to me is true empowerment. That to me will show the ability of the corporate to create a self-managing organization.

What’s your thought? Do you think these systems can be fairly built or is it a mirage? If yes, how do you do it? If you think it’s a mirage, then how do you lead in today’s knowledge industry?

What do you think?

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