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Performance Appraisal – Process, Compensation or Attrition Issues -BELL CURVE Dumping

Source | LinkedIn : By Rakesh seth

Research shows that this statistical model, while easy to understand, does notaccurately reflect the way people perform. As a result, HR departments and business leaders inadvertently create agonizing problems with employee performance and happiness.

Ask senior HR practitioners and employees about the least popular workplace practices, and the bell curve-based performance appraisal system will rank right up there. Yet, an estimated 75% to 80% companies in India use the system. ET spoke to talent experts, CEOs and HR pundits on whether it’s time to ring the closing bell on the bell curve. While the jury is still out, the system is here to stay despite some of the most admired companies across the world scrapping it.

This has been validated by the decisions many large world renowned organisations have taken to abandon this tool when they found that it is difficult to cope with difficult situation in a globally stagnating environment. 

My analyses are that after being in HR function for over 3 decades and having seen so many appraisal cycles in many different industries and companies under different bosses, I can conclude with certain degree of conviction that forced rankings or curve fitting is a tool to downsize/rightsize the manpower and not really a tool to effectively appraise and reward people through communication and motivation.  

Over a period of time companies have realised that in this ranking and forced distribution method companies have lost very good talent and also it creates more stress and humiliation to employees.  Because it is difficult for most of employees to perform at the top of the curve through out the career tenure the moment they fall in the bottom of the curve they start looking for exit routes rather then getting themselves categorised as low achievers. 

To me this concept of Bell Curve to the extent of identifying Top 10% of the population I have always supported.  But to weed out bottom 10 percent  I have never supported If a person is not performing why wait for a year you observe him for three to six months and allow him to go else where.  

Historically, in India, annual rating means increments whereas European countries they question why increase in salaries every year when business growth has not taken place, job contents have not changed and salary levels already much beyond minimum levels then why increase.  Moreover, nature of work has changed drastically.  Technology interface is very high in routine jobs and no special expertise are needed. 

I feel decision of bell curve etc is driven by the cost factor.  In Manufacturing Sector manpower cost is 6% to 15% and in the services sector the manpower cost is anywhere between 35% to 50%.  Hence,  salary increase factor in a bell curve format comes in cluster ( for example give flat increase of 15% , 10% and 7% on a CTC) with which many large companies are not comfortable with.  These large MNCs they make/prepare  manpower costs models for next 5 to 7 years which give them very uncomfortable figures vis a vis the growth in the business scenario as European economies and American economies are growing at very marginal levels.  Hence bell curve has been dumped. 


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