Performance Normalization: An Unnecessary Evil?
For decades now, organizations have been using “Bell Curve” to differentiate its employees on their performance. If I go back to classical theories, an employee’s performance is a simple logical output of their abilities and motivation. Therefore, going by fundamental principles, any performance management process should serve to enhance performance by fueling the motivation level of employees.
The most widespread outcome of performance normalization is a sense of disengagement amongst employees for not being rated as per their perception. It also develops a sense of insecurity amongst managers who fear attrition from employees who missed the “top 20%” mark by a whisker. Let’s not forget the incredible amount of time invested by the HR team due to administrative overload.
One of the reasons why this model of performance differentiation and enhancement has let us down is because it’s a comparative mechanism. Employees are invariably compared against one another and their relative contribution is measured in order to distribute rewards. Needless to say this leads to lot of angst in the minds of employees who are at the receiving end of this process, especially the ones who are just about at the border of “star” and “solid” performers. Many times, top performers are rated as average for lack of “quota” which leads to detachment and resentment. More often than not, people observe bias in this process as it encourages the “survival of the fittest” and top performers are often perceived to be “well connected” with the decision makers. This process also to some extent dehumanizes performance management as an employee’s contribution and value are being reduced to just a few numbers. If I flip the lens and review the process from a Manager’s perspective, they also feel limited by this process of forced ranking.
So does the normalization process achieve the original goal of performance enhancement and motivation? No, it is rather limiting in its outlook and causes a high dissonance in the minds of people. While it does incentivize high performers, the larger 60% people are left disappointed and disillusioned.
Is HR happy administering this process? Most of us would agree that it is the most cumbersome process with high administrative overload. HR is also at the receiving end of multiple grievances. In today’s knowledge driven economy and fluid communication where people work as teams, this process hampers the very core of team spirit.
Off late, there has been a paradigm shift in approach to managing performance. Organizations have taken a strong stance of scrapping off the normal curve. We are already noticing a shift from an annual 'performance management' process to a new 'performance achievement' approach. The 'performance achievement' approach will focus on the achievements and talents of each employee. It will result in a holistic view of performance and potential. Leaders and employees will invest in real-time, forward-looking conversations about setting priorities, and creating rewarding career opportunities.
The aim of any good performance management system is to identify, reward and customize skill development in top performers, high performers, potentially high performers, and so on. It is easier to become complacent in the broad middle segment than strive to become one of the top performers. I believe that we all want to be great at something, so why not we create a system where every single person has the opportunity to become a star performer?
A classic example would be the way we manage performance at Directi. We trust the intelligence of managers who can intrinsically comprehend the performance of every team member. Managers take prudent calls on who truly are the stars, who created maximum impact in the ecosystem and therefore deserve the highest rewards.
This new trend gives more power to individuals. One can now be accountable for their growth and chart their own career trajectory. The power dynamics in an employee – manager relationship are now equitably divided between them.
My only advice for new age HR Managers would be to uphold the process in its true spirit and philosophy and guard against the tendency to go back to previous method of performance normalization. I strongly believe that HR should be the forerunner by executing the new evaluation process within their teams and this will also aid them in getting strong support from the top leadership.