Organizations often use performance appraisal reports to evaluate their employees’ job performance. These reports are used to assess the employees’ achievements and shortcomings and provide feedback to ensure that their performance remains at par with the company’s expectations.
The employees get promotions, bonuses, payroll hikes, and other benefits, based on their appraisal reports. They are even terminated from companies with the help of robust performance management practices, after providing them with adequate time to improve their performance.
Hence, companies follow several appraisal methods to ensure company growth. Among these methods, one of the oldest is the Bell Curve method in performance appraisals.
What is Bell Curve in Performance Appraisal?
The Bell Curve is basically a method of distributing the employees in a company in a graph, based on their performance figures. Since this graph looks like a bell, it was named the ‘Bell Curve’.
Only a small number of people (including the worst performers, lying on the left edge and top performers on the right edge) will be plotted near the outliers of this curve; while most of the employees will be placed towards the middle of the curve, creating the shape of a bell.
Using this appraisal method, companies can easily identify the underperformers and overachievers, helping them to understand their relative position in terms of the company’s performance.
Why is the Bell Curve Used?
The Bell Curve appraisal is commonly used to compare employees. It helps the HR teams separate the overachievers from the underperformers. It also helps them understand the impact of their staff training software as they can create a benchmark using the Bell Curve, impart training, and use the Bell Curve again after a certain period to understand the progress made by their employees.
What are the Features of the Bell Curve?
There are certain characteristics of the Bell Curve, which make this kind of graph unique for performance analytics. Some of the major features of the Bell Curve appraisal are:
- The average or mean value of a Bell Curve will always be located towards its middle section.
- It will have a predictable standard deviation, which can be easily computed.
- It will always have a single peak, which will be indicated by the concentration of the performers.
- It will be symmetric as half of your employees will fall exactly into either side of the ‘bell’ based on their performance.
History of the Bell Curve in Performance Appraisal
While the productivity of employees has been measured since the start of the Industrial Revolution, the idea of utilizing the Bell Curve in performance appraisal became popular when Jack Welch, the CEO of GE started using it in the 1980s, for grading the performance of his employees.
Over the years, it has been referred to by multiple names such as Vitality Curve, Stack Ranking, Forced Ranking, Rank and Yank, and more. In the case of GE, it was known as the ’20-70-10’ system, since they understood that 20% of the staff would be most productive, 70% of them would be average, and the remaining 10% would be underperformers.
How to use the Bell Curve for Performance Management?
The Bell Curve appraisal process begins with the compiling of the performance data of the employees. Once the data is compiled, it is plotted on a graph, which forms the shape of a bell.
Since the graph consists of all employees undergoing the performance analysis, you can categorize them into three sections: high performers, satisfactory, and under-performers.
Once you have set the parameters, you can understand who is falling behind and work with them to take corrective measures. You can provide different options for individual cases such as Performance Improvement Plans (PIP), training sessions, etc.
Similarly, you can recognize the efforts of hardworking staff and reward them with promotions, additional benefits, and more. The Bell Curve simply makes the process of identifying these employees easier.
How Significant is the Bell Curve in Today’s Hyper-Growth Business Environment?
While the Bell Curve helps classify the workforce into excellent performers, average performers, and under-performers, it has increasingly become obsolete for companies that work in hyper-growth business environments.
The Bell Curve was significant in legacy organizations where one could classify their staff based on their performance. However, in hyper-growth environments, almost all the staff would be undertaking important aspects of the daily business processes. Hence, they are required to perform to the best of their performance levels.
In this scenario, a Bell Curve will not be able to classify the performers since the low performers are still performing to the best of their levels. Hence, if we classify them as under-performers, it will be a hit to their morale, which will be a deterrent to their company growth.
Advantages of Bell Curve Performance Management
There are several advantages of deploying Bell Curve performance management in companies, which result in accurate quick classification of performers and under-performers.
These advantages justify the time and cost put into strategizing and deploying the Bell Curve in companies. While the Bell Curve does entail some cost, its effective usage ensures the classification of the staff members based on their performance, resulting in streamlined performance management on an individual level.
1. Performers’ Identification
With the help of Bell Curve appraisal, the management can easily identify the top-performing employees in your organization. These employees can be provided with added incentives or robust rewards, helping with their recognition within the organization.
Such initiatives will also help the employees understand their significance within their company, enhancing the employee retention rate and improving their motivation for work.
2. Impartial Evaluations
The Bell Curve method also provides an impartial solution to evaluate your staff, enhancing the fairness of the performance management process.
In the absence of this process, managers can misjudge their teammates based on their own unconscious biases and prejudices, which will result in a bad experience for the employees being evaluated.
3. Tracking Growth
The Bell Curve method also helps track the growth of the staff members over a period which helps you understand whether their track record is getting better or worse.
Having this data at hand helps HR and management analyze whether they are doing everything right. They can also take corrective measures, if required, based on the historical records of the employee.
4. Resources Allocation
Similarly, if you have complete data about your employees’ performance, you will be able to understand whether your staff’s performance is being hampered due to resource allocation inadequacies.
Based on the data collected, you will be able to understand whether your staff require better tools and allocate resources for the same.
5. Building Motivation
Having regular performance management with the help of Bell Curve helps the company identify better-performing employees.
By recognizing and rewarding their work, you can keep your staff motivated to work for longer for your company. Hence, Bell Curve results in motivated staff who understand that their company rewards the staff who contribute to the company.
Disadvantages of Bell Curve Performance Management
While the Bell Curve has its advantages in performance management within organizations, it has specific disadvantages too, which results in its reduced deployment in modern companies.
These disadvantages are sometimes a result of the nature of specific business sectors, while it can be due to other factors such as the changing corporate norms.
Hence, let us understand the common disadvantages of Bell Curve performance management:
1. Teamwork Neglection
The Bell Curve method considers the contributions from individual employees only. However, modern organizations work in teams with their collective efforts resulting in the creation of a service or product. Hence, it will be detrimental to the morale of the team, if only an individual is rewarded for their efforts.
2. Increased Competition
The Bell Curve method could result in increased competition among the employees. While healthy competition is beneficial for companies, too much competition can lead to a deterioration of the quality of the products and services of the organization. Similarly, employees who have been designated as under-performers could feel inadequate to perform their duties.
3. Start-ups Incompatibility
This method is also incompatible with start-ups since it requires a huge number of employees to ensure that the graph is close to the ideal bell shape. However, start-ups often have a limited number of staff members and hence, collating and plotting their performance data becomes cumbersome for the HR.
4. Forced Rankings
Due to the very nature of the Bell Curve method, the performance values of above-average performers will be diminished, while the average performers’ performance values will be inflated. Hence, it becomes very demoralizing for the above-average performers, as they will not find any incentive to give their complete dedication to their work and company.
5. Increased Rigidity
The Bell Curve method is too rigid to accurately judge the fluid nature of modern organizations. The management is required to categorize their staff within specific rigid requirements to enable them to plot them on the graph. As a result, an eager employee could be placed within the average performer’s group, demoralizing them.
Alternatives to Bell Curve in Performance Appraisal
To overcome the numerous disadvantages of the Bell Curve performance management system, companies have started adopting better systems which cater to the flexible nature of team-centric modern organizations.
These alternatives provide the staff with a better experience, while also enabling the management to measure their performance effectively.
Some of the most common alternatives to the Bell Curve method are:
➔ Human Resources Accounting
The Human Resources Accounting method calculates the resources spent on an employee, which are not usually accounted for, in an organization.
It can be cross-referenced against the ‘contribution’ of the employee towards company revenue to get an idea of their performance within their domain.
➔ Assessment Centre
In the Assessment Centre method of performance management, companies identify the relevant skills of the employee under scrutiny through various kinds of exercises such as In Basket Exercise, Role Plays, Competency-based Interviews, Case Studies, Group Discussions, and more.
These exercises help HR understand the competency of their staff and understand their performance levels.
➔ Critical Incident
The Critical Incident method analyzes the employee’s performance in a certain critical situation and tries to find the direct impact of their performance on the situation’s outcome.
Using this technique, the HR teams can easily identify an employee’s skills and situational awareness, helping them understand the right learning and development programs to be deployed for these employees.
➔ 360-degree Feedback
The 360-degree Feedback method has become quite common in modern organizations thanks to its inclusive and simplified nature.
In this method an employee would be rated by themselves, their peers, superiors, and their subordinates, which helps the HR have a holistic view of their performance.
Also Read:
➔ Behaviourally Anchored Rating Scale (BARS)
The Behaviourally Anchored Rating Scale (BARS) is a performance rating method in which the employees are evaluated using a set of performance dimensions.
These evaluations are undertaken by comparing the employee’s behaviour in specific scenarios, which are anchored to a specific performance level. These performance levels are usually defined on a 5, 7 or 9-point scale.
Conclusion
While the Bell Curve in performance management is a rigid method for evaluating your staff, it has its merits since it can help you easily identify the performers and the underachievers within your organization.
However, in modern team-oriented organizational structures, Bell Curve often fall short of delivering the complete picture to HR and management. Hence, it is essential to use other systems such as the 360-degree feedback mechanism to evaluate your staff effectively.
FAQs on Bell Curve Performance Appraisal
1. Is the Bell Curve performance appraisal method good or bad for the company?
The basic motive of the Bell Curve is to classify the performers in any organization. However, its exact implementation depends on various factors such as the organizational culture and workplace ethics. Hence, it can be either good or bad depending on its implementation.
2. Are there any alternatives to the Bell Curve method?
There are multiple alternatives to the Bell Curve method such as Management by Objectives, Continuous Performance Management, Strengths-based Performance Appraisal, 360-degree Feedbacks, 540-degree Feedbacks, etc. While legacy organizations usually opt for Bell Curve method, modern companies usually choose continuous performance management mechanisms.
3. How can companies mitigate the negative effects of the Bell Curve method?
Companies can avoid the negative effects of the Bell Curve method by setting clear performance expectations and providing regular feedback. They can also train their staff and provide upskilling opportunities. They can also deploy fair and meaningful performance appraisals to ensure that their staff feel valued.
4. How to undertake performance management process in 2024?
The performance management process in 2024 has transformed into a continuous program, which helps employers measure their employee performance continuously. They share real-time feedback with their staff and help them upskill themselves with continuous training initiatives.
5. Is the Bell Curve relevant for performance and appraisals?
The Bell Curve method used to be highly relevant for performance and appraisals in traditional companies. However, with the changing organizational paradigm and workplace culture, it is losing its relevance in the modern workspace, with companies choosing continuous performance management methods over it.
6. How is the Bell Curve calculated?
The Bell Curve is calculated by plotting a graph of employee performance. It is usually observed that the top performers and the under-performers are usually 20% of the workforce each. The average performers usually comprise the remaining 60% of the workforce.
7. What is a 1-to-5 performance rating?
The 1 to 5 performance rating or a 5-Point Rating Scale is a method of measuring employee performance and tagging into 1 of the 5 options available. In this method, the 5 points are:
- Exceptional: achievers with exceptional performance level.
- Highly Effective: Desirable performance with significant contributions.
- Effective: Consistently meets expectations.
- Needs Improvement: willingness and capability to improve.
- Unacceptable: Lack of will or skills to perform better.
