There are various performance appraisal systems which exist and used by the different organization. When an organization wants to link the performance of the employee directly with the reward, generally bell curve performance appraisal system is utilized. In this system, the employees are categorized based on the ranking given to their performance.
The system uses three categories namely, top performer, average performer and low performer employees based on the performance. The bell curve performance appraisal system provides a systematic way to identify the star performers and to link their performance with appropriate reward. It also helps the HR department to identify the low performing employees and further help them to improve their performances. Some people may argue that the bell curve performance appraisal system is a forced ranking system and it is not fair to relatively rank the performance of employees. However many companies support the use of bell curve performance appraisal system due to its accuracy and utility in terms of improvement of productivity in the organization.
Disclaimer: The bell curve performance appraisal system mentioned in this article is shaped to provide an epigrammatic idea about the concurrent bell curve performance appraisal process accepted in the organization. The structure is designed for the enrichment of understanding and to clear the perception regarding the bell curve performance appraisal system. The site hrhelpboard.com is not responsible for the semblance or correctness of the system. It is important to professionally verify the suitability of policy before using the content given in the sample system.
Define what is a normal Bell Curve – Meaning & Definition
Normal distribution curve is also known as the Bell curve. The fact that the curve looks exactly like a bell it is been named as Bell curve. In statistics and social science, the term bell curve is usually used. It is also called a normal distribution in physics, however, it all refers to a probability distribution which has specific characteristics one of such characteristic is the bell shape.
Characteristics of the Bell curve
When a company uses a bell curve for their performance appraisal management system it means the performance grading of all the employees is distributed along the bell curve. Here the bell curve is used to characterize the employees and divide them into a top performer, average performer, and poor performer. In order to identify the caliber of employee bell curve performance appraisal management system is often used in the different organization. The bell curve process makes it easy for HR to provide rewards to the top performer and put an extra effort for the average performance. The low performers are identified quite easily and the action plan can be implemented to improve the performance.
It is important to understand that a star performer should be identified properly in order to motivate them to achieve organizational goal. However, many a time the error in performance appraisal system leads to the identification of wrong star performer. The Bell curve performance appraisal system works on the fact that star performers are limited and very few people can exceed the performance above the standard expectation of the organization. This performance appraisal system also helps to identify the weaker link in the organization and HR can take a decision of layoffs based on the results. Below is the process which is followed to implement the bell curve appraisal system
1. The pattern should be followed
It is assumed that company talent follows a normal distribution. In a statistical term, this means there is an equal number of employees which fall on each side of the curve. A very small number of employees is high achievers while the rest of the employees fall on the right side which is an average performance. When the bell curve is applied it means employee follows the pattern and fall in average or worst performance ranking.
2. Ranking should be restricted
A lot of limitations are rigorously applied to the ratings of an employee when the Bell curve is applied. Most of the cases the HR have to restrict that one out of every 10 employees receives the lowest possible ranking while very fewer employees get the highest possible rating. In larger companies, the bell curve is mostly used at division level, which means the employees who are working in a team has to fight against the manager in order to be a star for the performer.
3. Standards have to be set
Make sure that the expectation and standards are properly conveyed to the employee who is been ranked under the bell curve performance appraisal system. For example of the sales force can be ranked based on the revenue generated while a relationship manager can be judged based on the client assessment. If the company rank their employee based on multiple areas the main ranking of the bell curve is used by aggregating the numbers. It does help the HR to know where the employers fell short and up to date improvement plan can be designed.
Bell curve appraisal uses the compiling method in order to conclude on performance appraisal scores and generate a relevant report. The compiled scores are plotted on a graph which shapes like a bell. Here, the best performing employees are marked over the top part of the bell while the average employee is marked in the middle and low performing employees are put in the last part of the bell.
Most generally it is observed that the bell curve places employees on various levels of performance as described under –
The employees who are marked on the top 20% of the bell curve are given rewards in terms of bonus which boost their moral and naturally these employees are considered for future leadership positions in the company. Employees which are marked in the middle of the bell are the relatively low performer, however, they are on the average level. Hence, they receive some monetary rewards and guidance plan is generated for their further performance development. The employees who are marked at the end of the bell curve receive no financial reward or sometimes very minimal financial rewards. In order to improve their performance, an action plan is designed and strictly implemented. Sometimes companies layoffs of the employees who are marked at the end of the bell curve.
Decisive stance can be taken with the help of the bell curve appraisal system. As a definite performance slot is defined and employees are included in such performance slot it is easy to make firm decisions. The business leader believes that this is the best method to identify the top and bottom level performer and take a strong stand. Many companies periodically use this bell curve appraisal system in order to check the performance level of the employee. This performance appraisal system also motivates performers to go ahead and give their best at their level. It fosters the performance-driven culture in the organization.
Every system has some pros and cons. Use of bell curve in performance management system provides some positive points to the HR department, however, there are some drawbacks of the system as well. Let us look into the advantage and disadvantage of bell curve performance management system.
Advantages of the Bell curve in the performance management system
1. Top performers can be identified easily
Here the forced ranking compels the manager to make decisions and differentiate between different employees. The one who is identified as a high performer is awarded and motivated to work hard for their growth. The career plan and growth plan for these employees are suitably designed. Initiatives are taken to retain high performing employees in the company this further helps in succession planning and to retain the top talent in the organization.
2. Strict and lenient ratings of manager can be managed
This is the only method which organization can use in order to restrict the leniency and stiffness of the managers rating. The lenient score is defined as a large cluster of employees were getting all high rating while the strict score leads to a large number of employees getting low ratings. The unbalanced scoring can be removed and the proper rating can be provided to the employee. This helps to avoid the mistakes and de-motivate true high performers or retention of mediocre employees.
3. The suitability of the employee for a particular job position can be identified
The underperformer employee may be suitable for some another position in the company. With the help of bell curve, performance appraisal system adequate analysis and HR intervention can be done in order to provide proper job position to the employees. Deeper analysis can be done for the competency, strength and career plan of employees who are currently low performing.
4. Training needs can be managed
The bell curve performance management system helps to create proper training management in the organization. Correct allocation of training to the employee can be done using this system. The bell curve graph helps to identify the training needs and applicable training plan can be designed for a particular category of employees.
Disadvantages of the Bell curve in performance appraisal
1. The system is too rigid
The bell curve model for performance management is considered as a very rigid approach to rating the performance of employees. Sometimes just for the sake of the bell curve, managers put employees in a particular category; which is not the true case. This mistake can happen when the manager has a very small team.
2. Loss of morale
The bell curve performance appraisal system leads to doubts in the mind of both employees. There is a possibility that employee may get de-motivated; it can lead to loss of morale and the disorientation of job performance.
3. It is not suitable for small companies
As the number of employees is less than 300 bell-curve performance review is not suitable. For fever employees, it is difficult to categorize employees in the top performer, average performer, and low performer level.
It is estimated that 75% to 80% of companies in India are currently using the bell curve for the performance appraisal of their employees. The forced ranking system compares the employees performance on a relative score and managers plot the performance of their team members along a normal distribution curve. In the performance-based market, the bell curve system is found to be appropriate for performance analysis. As the absolute rating for employees are difficult to manage, the relative rating system is quite suitable for organizations with a big number of employees. The bell curve system maintains the fairness between the employees by using the relative ratings.
As per a leader working in the banking sector, every employee will be happy if the performance is directly linked with the rewards. Thus, the bell curve performance appraisal system is very much appreciated by the employees. The companies like Wipro, Infosys, ICICI Bank, and Aditya Birla Group are using the bell curve appraisal system to evaluate the performance of their employees. The bell curve provides an exact graphical representation of the performance of the employees and thus it is effectively identified that some employees are performing outstandingly while some are worst-performers.
In the IT-enabled services industry, the supply of the workforce is outstripped by demand. The focus of appraisal in such an industry is based on the ability to clearly differentiate between the individual performances. HCL is looking forward to reinforcing commitment among the employees using the bell curve performance appraisal system. It upgrades the quality of talent and also ensures the outstanding contributions from the employees to uplift the performance benchmarks.