Blog: The Curve in measuring Performance

Performance Management

The Curve in measuring Performance

Executing well-thought & need-based appraisal and developmental plans can make HR in India much more capable to manage talent.
The Curve in measuring Performance

Needless to say, Performance Management System (PMS) is a tricky process and it simply can’t be duplicated. The approach varies from company to company depending on the company’s culture, structure, technology and views of all stakeholders.

So, what’s the performance management scenario in India? Does the mix of factors such as an organization’s culture, structure, technology and views of stakeholder’s contribute in a way that the performance management systems used in India lack in some way? Well, if you ask Deloitte, the answer to this question is ‘yes.’

As per a report of Deloitte University Press, HR in India is relatively less capable to address talent related problems in contrast to its counterparts in countries such as Portugal, Kenya, Australia and U.S. This requires some serious thinking on our part and while dissatisfaction with PMS is not something new to be heard of, it is surprising to see that even globally only 8% companies believe that their systems drive high value and the majority (58%) believes that it’s simply a waste of time. A large segment (48%) believes that the existing performance processes fail to deliver optimum employee development. In other words, a large number of companies fail to derive optimum return on investment.

Recently, many companies have been complaining of fact in the pyramid and have been firing employees in large numbers. Each year companies, especially IT companies, hire lakhs of fresh graduates (which in itself is an expensive process) and then fire them later for one big reason that with time, these employees fall short of skills. Re-skilling is the key here for which most employees still depend on their employers. Automated trainings can be one solution. A career development plan is also seen missing in most cases which if in place, can make a huge difference. (Here, I would also like to say - Yes, the company will benefit but the employee will benefit the most if he grows and will lose the most if he stands still. So, if you feel that the superiors are not interested or not doing enough to help you develop, take charge of your own growth. This will help…both the parties)

Talking of performance management, how can one skip the dreadful performance appraisals! So, what is the basic purpose of having these appraisals? Coaching & development! But the entire purpose of having them in the first place can fail if the appraisal process is not right or is not conducted rightly.

Few years back, a research by Ernest O’Boyle Jr. and Herman Aguinis surprised the corporate world by stating that people performance follows power law distribution and not normal distribution or bell curve which has been long believed as fair. In bell curve, there are an equal number of people above and below the mean, whereas in the power law curve, most people fall below the mean (as the graph goes down from hyper performers to near hyper performers, high potentials, potential high potentials & low performers) and only few are hyper performers who need to be rewarded very well. This is particularly significant for talent or knowledge intensive industries where one hyper performer can be of ten times more value to the company than several average performers.

Owing to the shape of the bell curve, bulk employees will always fall in the middle/average (below expectations, meets expectations, exceeds expectations). Some will be happy maintaining the ‘average’ status quo and will not make continued efforts to improve, especially when the rating is seen as unfair, which happens at times. For example, those meeting their goals may get wrongly rated as ‘partially met or below expectations’ and those exceeding them may get rated as just ‘meets expectations’. Moreover, as rating is only relative and not absolute, rating employees against each other may lead to excessive internal competition and politics leading to end of collaboration and in case you are blessed with a team of all high performers, some will still be labeled as low performers and this may lead to lawsuits alleging discrimination, as had happened in the case of Google & some other big firms. Clearly, bell curve sees a lot of problems in implementation and where it goes wrong, a disaster follows.

So, many companies have recently reengineered their existing processes and have completely stopped using bell curve (for example, Microsoft, Adobe & Google) and some including Mindtree have now shifted to power law curve based appraisals. I do not mean to say that every firm that was once using the bell should now be using power law curve but yes, there are many options to explore. For example, most companies are now opting for a simpler target-achievement based model. Some have gone one step ahead by stopping rating & ranking their employees completely and have also noted performance improvements in result. Having said that, most companies in the country still evaluate their employees on the basis of traditional bell curve for which they have also faced quite a lot criticism.

Well, the ultimate goal is to deliver sustained high performance to the organization and if the bell allows it, fair enough. If not, welcome the change. The idea is that one should not stagnate. Brainstorm on what your particular business or team needs from time to time and accordingly design your appraisal and developmental plans. Implement- even if on only on pilot basis - but keep experimenting to be amazed with possibilities. 

Disclaimer: This is a contributed post. The statements, opinions and data contained are solely those of the individual authors and contributors and not of People Matters and the editor(s).

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Topics: Performance Management, Performance management systems

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