For a long time, Bell curve or Normal Distribution was embedded in many business practices— performance appraisals, compensation models, etc. Today, more and more organizations are changing their performance management systems. There are various reasons for this, including ineffective performance management. Moreover, effective talent management is becoming exceedingly central and effective performance management can play a vital role in it.
However, over the past few years, there has been a considerable amount of criticism of performance management is doing rounds. Most companies have already or eliminated the Bell Curve as a performance management tool to determine pay increases and promotions.
Recently, People Matters in partnership with SAP SuccessFactors hosted a webcast, “What after rejecting the bell curve?” where our speakers Gajendra Chandel, President-HR at Tata Motors and Anindya Shee, Head Organizational Development, Talent, Technology, HR Shared Services, and Governance shared touched upon:
- Has discarding the Bell Curve worked?
- What is an alternative answer to the Bell Curve?
- How are organizations determining pay and promotions after rejecting the rating system?
- What is the way forward for the performance management system?
Here are the key insights from the webcast:
Bringing Objectivity and eliminating Subjectivity
Tata Motors reinvented their performance management strategy two years back by rejecting Bell Curve. The company felt there was a need to bring in a lot more objectivity and to eliminate subjectivity in the performance evaluation of an individual. This led company in defining a new performance strategy that included defining individual’s target more focused and in line with the organizational balance scorecard.
Earlier employees were rated according to performance, and the approach included measuring performance relative to other employees’ performance.
Individual goal achievement = Organizational goal achievement
Looking for an alternative to Bell Curve? Reject or not, our experts in the webcast strongly felt that irrespective of any performance management system you adopt, the performance of individuals reflect the performance of the organization. Hence, the aggregate of the individual targets achieved vis-à-vis the organizational target achieved should be synchronized.
Distributing rewards in the absence of Bell Curve
How to reward people remains a hot debate in a no bell curve environment and the most significant concern employees have regarding moving away from bell curve is that they feel this will create more bias.
In bell curve method, all the top performers are distributed an equal percentage of increments. However, a no bell curve environment provides the flexibility to be able to distribute higher increase and differential increase to top performers. Leaders can take into account the industry benchmarking, peer group comparison and potential of the individual apart from performance to the top performers by redistributing the budget vis-a-vis low performers. Tata Motors adopted a similar strategy.
Chandel shared that there were three categories of performance management:
- Increment for sustained performance
- Annual Bonus
- Development Plan
Individuals were rewarded on the basis of merit and two other dimensions:
- Their current compensation w.r.t the market standards
- The performance level of the individuals
Tata Motors developed a framework which distributed the bonus in a way where individuals with a lower level of compensation and a higher level of performance received the higher rewards.
Technology: Accelerating the performance management
How about the scenario where your employees check in their work performance as often as they check Facebook?
Technology makes it possible for managers and helps them to explain how they are assessing employees’ performance in simple, real, human terms. It also allows supervisors can provide focused feedback, and people can analyze and manage their own performance.
Through analytics and machine learning, a new generation of workforce technologies is helping leaders guide workers in a timelier way—and supporting the future workforce take a more active role in managing their own performance and careers.
Want to know how organizations are dealing with rejecting Bell Curve? Click here to watch the full webcast here.