|
BELL CURVE IS OUT ?
Till recently the most popular employment
assessment tool globally, the bell curve is slowly but surely being given
short shrift at New Age companies
Its detractors dismiss it as a ‘rank and yank’
practice — a reference to the forced method of distributing salary hikes
and performance ratings by aligning a small set of hyper-performers on one
side and an equally small set of ultra low performers on the other. Decades
after General Electric (GE) pioneered the bell curve, with virtually every
global corporation that mattered subsequently latching onto it, today this
employee assessment tool is slowly but surely losing its popularity and is
set for an overhaul.
After a clutch of global giants, including
Microsoft and Adobe, decided to kiss the bell curve goodbye over the past
year, back home Infosys, the country’s second largest technology services
company, too is rethinking this statistical model as a tool to rate its
150,000-plus employees. Says Srikantan Moorthy, senior vice-president,
group HR, Infosys: “Performance rating will evolve in the next 1-2 years.
What it will transform into is difficult to say. The industry needs tools
that take into account individual contribution rather than just relative
performance. The bell curve creates dissonance as it limits the number of
high performers.”
Even as Infosys dwells on what curve best reflects performance, last week
Bangalorebased technology services company Mindtree abandoned its
decade-old employee assessment process, replacing the bell curve with the
performance curve. The latter assumes that most employees are high
performers, some are average and very few perform poorly. That’s quite
unlike the bell curve, which ranks a select few as high performers and most
as average, which is not always a fair reflection as a few high performers
get pushed out of the top bracket simply because there’s no space for them.
Says Ravi Shankar, executive vice-president and
chief people officer, Mindtree: “The performance curve takes the shape of
the third phase of the moon rather than a bell.” Think of it as a bell with
more room at the top. Shape apart, it focuses on teamwork and collaboration
and makes more employees happy, quite unlike the bell which ostensibly
fosters unhealthy competition.
In Pune, another services company KPIT is toying
with the idea of abandoning the bell curve. Says Pankaj Sathe, chief people
and operations officer, KPIT: “Employees kill each other to get to the top.
And there’s lack of collaboration in a bell curve appraisal.”
Internet companies Google, Twitter and LinkedIn do
not use the bell curve and a bunch of Indian start-ups has taken a leaf out
of their book. For instance, online fashion retailer Yepme.com, IT firm Capillary Technologies, and radio-taxi
operator Olacabs shun the bell curve.
Of course a large number of the bigger corporations still go by the bell
curve. These include Tech Mahindra, Accenture, Fortis Healthcare, Oxigen
Services India (a payments solution provider). But some do agree that it
isn’t totally fair. Says Sucharita Palepu, global head, people, policies
and practices, Tech Mahindra: “The bell curve is rigid — the percentage of
high performers is fixed. That’s the down- side. But we are flexible, so
instead of 5% high performers, we can tweak it to include 6.5%.” Tech
Mahindra with 87,000 employees has used the fixed ranking curve for more
than a decade.
Adds Rajiv Kapoor, chief people officer, Fortis
Healthcare (16,000 employees), “There’s no perfect tool to do appraisals. A
top athlete in a country might be ranked 30th globally. The bell curve
constantly raises the bar and helps managers think on those lines.” Kapoor
adds that the curve is more relevant for large companies.
Old Tool in a High Tech Era
The bell curve of course has its merits, and works on the basis of a
few assumptions. Explains Nishchae Suri, partner and country head, people
and change practices, KPMG India, an audit and consultancy firm: “The bell
curve has talent development and performance assessment integrated. It
assumes that most people have continuous ability to grow if they are
stretched, challenged and developed. Every year the bar is raised as
employees compete with themselves to get top rating.”
However, GE, the pioneer of the bell curve, has
loosened its hold on the curve, being more liberal in how it assesses
employees. And Microsoft and Adobe Systems decided to end all ratings and
put in place a system that focuses on teamwork, collaboration, timely
feedback, giving more flexibility to managers to hand out rewards as they
see fit. Their move away from the bell curve was for reasons spanning too
much focus on individual performance (rather than team effort), unwanted
internal competition, office politics and its propensity to discourage employees
from sharing resources and information with peers.
Many internet era companies see the curve as less
relevant to meet demands of the knowledge workers. Says Rajiv Krishnan,
partner and India leader, people and organizations, Ernst and Young, a
consultancy: “Next generation companies are moving away from the bell
curve. They want to create a more collegial environment, giving an absolute
rating rather than a relative performance rating. That’s also because the
bell curve sends out a message that some people are unwanted. The long-term
problem with this is even good performers stick to safe havens and don’t
take tough assignments.”
Adds Narayan R Thammaiah, vice-president, people
practice, Capillary Technologies: “The bell curve is a good HR tool for
numbers and data, but does not reflect value of talent. You want the
organization to be successful, not HR. Forced ratings treat people as a
commodity, and fail to capture value of employee effort.”
Thammaiah believes the value of his 270-people
startup is best captured via a talent collaboration tool, which will be
implemented in Capillary Technologies in August. The tool puts an emphasis
on teamwork.
At Olacabs, which employs 500 people, absolute
performance and peer rating are used. Says Bhavish Aggarwal, co-founder and
CEO, Olacabs: “In a fast growing company the bell curve sends a wrong
signal — employees are not competing with each other when a company is
growing four to five times a year. They are all helping build it.”
Sandeep Sharma, co-founder, Yepme.com, echoes the
sentiment. “I don’t have faith in the bell curve. In an
entrepreneurial-driven company the curve doesn’t fit. In our company 25-30%
are very high performers; where do we fit them on the bell curve? Besides,
if an employee is not performing, it’s a joint failure — of HR, the
department head and the employee — but only the employee gets penalized.”
Sharma who has worked across companies like Accenture, Sapient, HCL and SBI
Caps believes budget constraints is the reason behind the bell curve. “It’s
an easy tool to justify low ranks — tell performers, you are good, but
don’t fit in the curve. Also, large companies cannot invest too much time
in individual people conversations and the bell curve is a convenient way
out.”
Yepme.com, which has 130 employees, does
qualitative and quantitative assessment based on key result areas (KRAs)
and then comes out with an absolute rating rather than a relative one.
In companies like Google the process of selection
is itself rigorous — multiple interviews with different division heads —
ensuring the employee is a right fit and does not see the merit of using
the bell curve. When Google was less than a year old, John Doerr, one of
its investors, insisted on using a system called objectives and key
results, or OKRs. Also used by professional networking site LinkedIn, OKRs
are a way to create a structure for companies, teams, and individuals.
Under OKR, the company sets up an objective; and then a number of ‘key
results’ that are quantifiable and will help the worker hit her objective.
The objectives are definitive and measurable. So rather than saying ‘I want
to make my website prettier,’ it helps to say ‘I want to make the website
30% faster,’ or ‘I want to increase engagement by 15%.’ Says Infosys’
Moorthy: “In sales jobs you can do it clearly. As companies mature they are
looking at absolute performance of an employee rather than relative
performance, in whatever job he or she does.”
Misusing the Bell Curve
KPMG’s Suri believes that the flaw does not lie in the bell curve, but
in how managers use it. “The bell curve is an outcome of performance
differentiation. But when managers start with the curve and then try and
fit employees on it, there will be problems. The issue is that performance
is not viewed as a critical business process, but as a check in the box. To
put that check in the box managers end up doing a mechanical exercise
rather than look at raising the performance bar.”
For a large number of companies the bell curve is
still the best reflection of performance. Says Meher Sarid, HR head and
president corporate affairs, Oxigen Services: “The bell curve helps in
identifying stars and grooming successors.” The payment solutions provider
has 444 employees and has used the bell curve since inception about a
decade back. Kapoor of Fortis Healthcare believes the bell curve helps
retain top talent.
Even as HR managers debate on what’s the best way
to measure employee effort they do agree it works better with a large number
of employees than small teams. Says Padmaja Alaganandan, people and change
practice leader, PricewaterhouseCoopers (PwC) India, “While a bell curve
helps to normalise performance and drives some measure of governance across
large headcounts, it has limited applicability in small, homogenous teams.”
Alaganandan believes as companies mature,
performance management should evolve as a self-governing system. “Forcing a
bell curve is an admission that there was an inefficiency — in hiring, in
role fitment or in training. If these were done well, there should not be
an issue. Having said that, while hiring is done in large numbers there is
a need for some systems and the bell curve helps. Though teams with a high
degree of maturity and self governance can dispense with it .”
But it’s mostly the subordinates who tend to be at
the receiving end rather than the department head for not getting things
right. Besides, getting the right performance measurement system is a skill
in itself, believes Krishnan of E&Y. “Companies are now veering towards
giving an absolute rating rather than a relative one. Time will tell
whether new tools are good enough.” For now the bell curve looks like it’s
running out of time.
What is the Bell Curve?
An employee assessment tool
pioneered by General Electric in the late 1980s and is
now in use by 29% of global corporations. The bell curve represents what
statisticians call a ‘normal distribution’, which is a sample with an
arithmetic average and an equal distribution above and below average,
resulting in a bell-shaped curve. This model assumes that most employees
are good to average performers and a very small number of workers are above
(top performers) and below (poor performers) the average
Merits
Differentiates performers from the average and the laggards very
clearly
Fosters competition
Helps to gauge performance in companies with very large employee base
Demerits
Force-fits employees. High performers may get ratings below what they
deserve
Not good for small teams (less than 100 people)
Assumes most are average with very few high performers
|
No comments:
Post a Comment