The ability and need to differentiate should be an integral part of the performance management philosophy of an organization
A technology-enabled performance process not only makes it more convenient but also enables analysis and governance
The Bell Curve has been the elephant in the room for quite a while now in most organizations. It is the easy scapegoat that’s been used by the management, HR, and the managers to tell an employee as to why their rating is not what they feel it should be. It frustrates everyone and yet most organizations are still struggling to find a way to live with or without it.
Let’s look at what the Bell is and isn’t and how organizations are now relooking at performance management philosophies to make them more effective.
What is the Bell Curve or Normal Distribution?
To put it simply, it is the phenomenon that says that if you take any reasonable sized population sample, say a classroom of 60 kids, a bulk of them would be of average height, a few who are relatively taller or shorter and one odd who are very tall or very short. This is what the Bell tells you;however, what it does not tell you is whether you have the ability or need to differentiate the given population. For example, unless you need to form a basketball team you don’t need to really care what the height of the students is and even then you’d probably create two categories only, students tall enough for Basketball and others.
Now suppose you decide that everyone who is 5’5” and above is tall enough for basketball, but the scale you have has only feet markings which means you know for sure if someone is 5’ or 6’ but not whether someone is 5’4” or 5’6”. The ability and need to differentiate should form an integral part of the performance management philosophy of an organization. This is where organizations often go wrong by simply implementing a 4 or 5 point scale with fixed percentages rather than developing their own thought and philosophy. So then if not for defining fixed population percentages, how does the Bell actually prove useful and what is it that organizations can do to make their performance processes effective?
1. Focus on the goals: If you’re not using fixed percentages, the organization’s ability to differentiate comes into focus. Quite often it is observed that employees come out of performance appraisal discussions frustrated, where they feel the manager has taken a biased view. The root of this dissatisfaction often lies in poor quality of goals setting. While everyone talks about SMART goals, not all manage to get it right. In organizations still in the early stages of the maturity curve, what is required of HR is to get involved in the goal setting process to ensure that SMART goals are not just talked about but also created. Goals that can’t be measured on pure quantitative basis have good qualitative or quasi-quantitative parameters defined. Also that managers while setting the goals and targets also think about how they will define a picture of success. This ensures that at the time of appraisal there is clarity around whether that picture of success was achieved or not.
2. Empower the managers: Instead of using the Bell curve to force managers to segment employees in a particular proportion, give them helpful guidelines to make the right appraisal decisions. One of the helping guidelines can be that the average rating of the team should broadly be aligned to the rating of the department or the Manager i.e. if a Manager is rated say 4 it’s not possible that the team’s average rating is 2.2. The only way the manager could’ve performed is when his/her team performed and vice-versa. The other guiding input that acts as a counter force and helps bring equilibrium is that the pay pool should be predefined — the higher the number of top raters the lesser value of additional increment they’d be able to give them. This gives managers a need to differentiate rather than differentiation be imposed on them. Without a fixed percentage cut-off, the appraisal process often becomes an iterative discussion and the Bell Curve then becomes a helpful analytical tool to help have better probing of appraisal decisions. This is just one of the possible ways of empowering decisions. Some other methods frequently used are providing discretionary flexibility to managers for increments, de-linking partially or completely the performance discussion from the increment process, etc.
3. Leverage the power of technology: One of the more important HR systems that an organization should think about investing in is the performance management systems. A good tool will help link organization goals to individual goals by allowing individuals to see goals at organization/departmental levels and cascade them whole or as sub-goals into their own goal sheet. This provides individuals a linkage to overall organization strategy. In addition, provide dashboards for managers to be able to see at a macro level. Managers often get handicapped since they are making decisions on an individual basis. Ability to calibrate one’s own decisions is an important ingredient of making fair decisions. A technology-enabled performance process not only makes the process more convenient but also enables analysis and governance.
4. Communicate: The success of a performance management process lies as much in execution as in the design. While a lot of thought goes into designing, the execution part often has a lot of variation not only across but within departments. One of the more effective ways was to use videos during awareness sessions. These videos were a portrayal of good and bad appraisal discussions. With today’s high definition cellphones, creating these videos is actually fun, watching these amateur videos is entertaining and most importantly in a light vein very important messages get imbibed.
5. Analyze, experiment and loopback: Coming back to the point around need and ability to differentiate, it also implies what works for one will not work for another. Companies are experimenting with multiple appraisal cycles during the year keeping in line with their business dynamics. Others are delinking long term career growth, variable and/or increment from performance appraisals to reinforce focus on performance rather than on compensation. Some are dabbling with doing away with “appraisal discussions” entirely and instead making managers respond to questions that reveal the rating based on how valuable they find the employee’s contribution, desire to keep the person on the team, readiness for promotion or risk of low performance. Finding out what works or doesn’t would require a few iterations and experiments. An important pre-requisite to be able to do that is to collect data. From goals to appraisal ratings, to employee and manager feedback, if analyzed together in various combinations, can generate good insights which can act as inputs to improve the process further with the end goal in mind that it is a process to both determine as well as improve organization performance.