Source | Forbes : By Josh Bersin
There is a long standing belief in business that people performance follows the Bell Curve (also called the Normal Distribution). This belief has been embedded in many business practices: performance appraisals, compensation models, and even how we get graded in school. (Remember “grading by the curve?”)
Research shows that this statistical model, while easy to understand, does not accurately reflect the way people perform. As a result, HR departments and business leaders inadvertently create agonizing problems with employee performance and happiness.
Witness Microsoft’s recent decision to disband its performance management process – after decades of use the company realized it was encouraging many of its top people to leave. I recently talked with the HR leader of a well known public company and she told me her engineer-CEO insists on implementing a forced ranking system. I explained the statistical models to her and it really helped him think differently.
Does human performance follow the bell curve? Research says no.
Let’s look at the characteristics of the Bell Curve, and I think you’ll quickly understand why the model doesn’t fit.
The Bell Curve represents what statisticians call a “normal distribution.” A normal distribution is a sample with an arithmetic average and an equal distribution above and below average like the curve below. This model assumes we have an equivalent number of people above and below average, and that there will be a very small number of people two standard deviations above and below the average (mean).
As you can see from the curve, in the area of people management the model essentially says that “we will have a small number of very high performers and an equivalent number of very low performers” with the bulk of our people clustered near the average. So if your “average sales per employee” was $1M per year, you could plot your sales force and it would spread out like the blue curve above.
In the area of performance management, this curve results in what we call “rank and yank.” We force the company to distribute raises and performance ratings by this curve (which essentially assumes that real performance is distributed this way). To avoid “grade inflation” companies force managers to have a certain percentage at the top, certain percentage at the bottom, and a large swath in the middle.