The HR Professional’s Love-Hate Equation with the Bell Curve

Abhinaya Chakkirala
22/1/2013

The normal curve or the Bell curve is one of the most widely used, abused, talked about, revered and exhaustively applied concepts with reference to performance management. Bell curve, if anything, has been both controversial and popular for the same set of reasons since its origin and ready espousal by the corporate world. Today, HR professionals, despite a decade long reign of the Bell curve in the sphere of performance management cannot seem to decide whether to love or to hate it given its implications and impact on several variables.

Loren Gary, in his article titled ‘For Whom the Bell Curve Tolls’, in the Harvard Management Update attempts to reason the noise around the concept, stating as follows. “During the boom years of the 1990s, performance appraisals were often seen as the basis for determining the size of employees' bonuses. But in the emotionally charged atmosphere of the current slowdown, employees fear that a poor performance review means they're about to be shown the door. Forced ranking, a practice that has been around for decades, has become a lightning rod for all this anxiety.”

Origin and Rise of the Bell Curve

The Bell Curve has been in dominant existence for over two decades now. Having originated in the form of forced ranking, the concept has risen to popularity only to face legal wrangling with a rash of lawsuits on grounds of bias that led HR practitioners speculate if the concept of normalization is not intrinsically discriminatory. The iconic former chairman of General Electric (GE), Jack Welch rallied for the concept while executing his turnaround strategy of building GE to be a ‘People Factory’ and reasoned that forced ranking creates a true meritocracy.

The theory of normalization in measuring employee performance in organizations involves dividing employees into three major buckets – few over achievers, few under performers and everyone else. Over-achievers are at the beginning of the Bell curve, underperformers at the far end and everyone else in the middle are considered average performers. The success of Jack Welch’s practice of firing the bottom quartile of under-performers year-on-year to be replaced with new employees inspired other organizations to replicate, in order to achieve the state where only high performers comprise the organization, pushing the bar on the organizational performance.

Perspectives, Points and Counterpoints

“Forced ranking may be the electrified third rail of human resource management,” declares Dick Grote, a renowned global management consultant. In his book Forced Ranking: Making Performance Management Work Dick agrees that the procedure is not right for all the companies, nor is something that should be done every year. “But in the right company at the right time,” says author Dick Grote, “forced ranking creates a more productive workforce where top talent is appreciated, rewarded, and retained.”

“When the distributable outcome (money) is limited, this is a necessary evil” rationalizes Vijayan Pankajakshan of WE School, Mumbai, in a webinar by SHRM India on the topic ‘Designing an Effective Performance Management System’ with reference to the usage of normal curves.

Other reasons for implementing the Bell curve include identification of top talent who are the differentiators. Normal distribution helps focus efforts on the high performers, seeks to reward and recognize them, offer opportunities for a faster paced growth and channel resources into investing in them to drive higher results in an organization’s performance. The same applies for culling out non-performers by raising standards continuously, keeping the top performers challenged while churning out those who cannot keep with the renewed standards each year. This practice also helps leadership identify employees who rank first amongst equals.

Despite its current status of being deeply rooted in the performance and talent management philosophies of most organizations, HR professionals who implement the concept of the Bell curve concede that the flaws are at par with its benefits or sometimes outweigh them. Some of them are as follows.

• Creates a sense of perceived bias and raises questions related to the fairness of the process.
• Leads to lack of focus on the overall development of employees, and efforts being restricted only to the top few.
• May have a disengaging effect on the team by shifting the individual’s focus on their own ranking.
• Can be erroneous with small data samples and does not have a universal applicability when rigid.
• Prone to incorrect plugging of employees into the buckets due to the subjective nature of forced ranking by various managers.
• Results in a high performer being slotted as a mid-level performer in certain situations to normalize the distribution curve, defeating the very purpose of performance appraisals.
• Has a built-in cost of attrition. High performers, slotted as average performers and average performers slotted, as bottom performers end up feeling cheated by the system and elect to quit.
• Bell curve’s long term influence on increasing organizational performance lacks clear and sustained evidence.

Other Approaches to Performance Management

Most approaches to performance management, other than the Bell curve have serious limitations with respect to the complexity involved in the implementation process and their impact on truly grading performance levels.

• 360 Degrees focuses on feedback gathering mechanism from all the stakeholders. This may not paint a true picture of performance as the stakeholders can be handpicked by the employees to influence a favorable outcome.
• Balanced scorecard approach to performance management is complex and is relevant to the extent it should be, in organizations that practice balanced scorecard in the day-to-day functioning of the business.
• Absolute ranking as opposed to forced ranking may not present a picture of the high performers at an organizational level and cannot be applied without tweaking where budgets are limited. 

Bell Curve and Organizational Performance

In a white paper titled ‘Punishing by Rewards: When the Performance Bell-curve Stops Working for You’ presented at the Massachusetts Institute of Technology (MIT), it was noted that Bell curve may not necessarily yield positive organizational performance. The research proposes that pressure, if maintained below a certain level, can lead to higher performance. However, with lay-offs, constant pressure demoralizes employees, leading to a drop in performance. As the company shrinks, the rigid distribution of the Bell-curve forces managers to label a high performer as a mediocre. A high performer, unmotivated by such artificial demotion, behaves like a mediocre. Further, managers begin to reward visible performance over the actual. Finally, the erosion of social capital could cripple the company.

A right approach to ensuring that the Bell does not toll is to combine other instruments of performance measurement to validate the results of the Bell curve. For leadership roles, instruments like 180 or 360 degrees feedback mechanisms can be used. For all the other roles, a semi-Bell curve or one with a reasonable amount of flexibility, minus a rigid percentage split of the top and underperformer buckets that managers have to adhere to and force-fit employees, can be explored.

Another innovative approach to using this concept is to identify a certain percentage of projects that are complex or critical in nature and provide a skewed curve to meet such that bottom performers in such high complexity projects are equated with average performers of other low complexity projects and rewarded accordingly.

Bell curve is a necessity and organizations have come to acknowledge that. It is the most effective approach to distributing budgets according to priority of performance of employees. Forced ranking is the antidote to the problems of inflated rating and subjectivity in the performance management process. By implementing a forced ranking procedure, organizations guarantee that managers will differentiate talent. The normalization process, hence, takes more a prime seat as the market today is banking more and more on talent to yield business success.

Abhinaya Chakkirala is a Human Resources professional based in Chennai. Her experience spans across Employee Engagement, Talent Management, Organization Development and HR transformational initiatives in Technology industries.