Ed Llarena, Jr.
Owner/ Managing Partner
Hr Professional
+2 Others

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I am not able to understand what is the rational for using Normal distribution curve for Performance Managment ! I feel it is quite injustice to the top performers and is a cause for major unrest in the company. Still many companies including manufacturing to software are using it !! why ?
From India, Pune

I had the same questions before, i.e. the relationship between the Bell (Normal Distribution) Curve and Performance Management System.

Now, as a PMS designer, implementor, and consultant, I am a strong advocate for the link between PMS and recognition, rewards, or sanction.

Now why do organizations use the Bell Curve or Normal Distribution Curve?

One good answer is: the normal distribution curve is the easiest to use, easy to understand, and easy to implement. It is simply arranging the rated employees from the one getting the highest rating to the one who got the lowest and distribute them by percent in the various alloted columns (in some, they use FOUR (4) while other use SIX (6)). This facilitates grouping or classification of employees in terms of amount or types of rewards/ sanctions to be given.

The problem with the use of the Bell Curve is when it is allowed to influence and "LEAD to the CHANGE" of the actual Perofrmance RATING.

As such, in our own PMS, we make it a point that the Bell Curve is used independent of the rating. It is used when the results of the PMS will be utilized to guide the distribution of the total amount of rewards budgeted by the organization for a given year.

We have a detailed discussion of this subject matter at The Policy Center a year ago. Visit the site (http://finance.groups.yahoo.com/group/policy_cener) and look for the old discussion threads on this subject.

Best wishes.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

Best wishes.

From Philippines, Parañaque
Thank you for your reply !

I am not able to reach the link that you have mentioned. Maybe there is some typing mistake in the link... I tired different combinations but all in vain....

Nyways, tell me if you are using Normal distribution curve then it says that some % let's say 10% are outstanding performers, 80% are good while remaining i.e 10% are poor performers , right ! NOW let's say there are 100 persons (Employees), and let's say that 28 person's performance was extremely good. However acc. to the curve there can be only 10 persons in the top slot. Then tell me what will happen to the other 18 (28-10) persons.

The difference between the top performers and average performer is huge, but due to normal distribution, they(top performers) are rated same with the average guys.

Moreover, in such condition, which 10 persons to choose, if there is hardly any difference amongst them. So here creeps in biases, and so injustice with 18 persons.....

And what will happen in a situation where all the employees have given outstanding performance ????

From India, Pune

It's a pity that you were not able to get to the site.

Anyway, as what I have explained in my first post, the problem with the Bell Curve is when it is used to influence the rating. As I said, the Bell Curve should only be used in the distribution of the reward.

In the Bell Curve, employees are ranked from top to bottom. The system believes that even the best performers can still be ranked. As such, if twenty (20) employees get an OUTSTANDING (O) rating, they can be ranked from 1 to 20, with the one getting "rank number one" presupposed to be the best among the "O" performers.

If the company policy sets a "10-80-10" normal distribution within the organization, then only the top TEN will go to the right side or 10% column. The next TEN outstanding performers will be "forced fit" to the middle (the 80%, but actually it is into two: 40% at middle right and another 40% to the middle left side of the curve).

If the company policy says that those who go to the right side gets promotion and an X % of bonus/ reward then only the TEN employees will be promoted and get that X bonus. The 11th to 20th employees with "O" rating will have the same faith as those who did not get an "O" (maybe "VS" or "S" only).

But definitely, the TEN poorest performers will go to the left side of the curve. And if your company policy is to manage them out, then they will be dismissed.

There will be chaos and problem within the organization when those that got an "O" will soon discover that their ratings were changed to "VS or S" just because they "slide down" the curve during the force fitting stage.

That's why our PMS system does not recommend the change in rating regardless of the outcome in the bell curve distribution.

If you are an outstanding performer, you are still outstanding even if you were the 20th among the "O" performers and were not given promotion or bonus.

Best wishes.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

From Philippines, Parañaque
Dear Ed,
how about a company in the service industry?
each employee contributes to the final result of the service... such as airlines, engineering, etc.
everyone is jumping, claiming that PMS is unfair..., and the management is just tweaking their results of PMS to a lower figure to suit the bell curve.

From Malaysia, Kuala Lumpur
Bell shape PMS system give the department/ divisional heads more burden and autocracy while distribution them in the curve. because each line manager may have one or two subordinate/s and the line manager dont have the scope to distribute them in bell shape. And two or three line managers report to head. So its the responsibility of heads to fit them is Bell shape and line dont have anything to do with tat and here is another disadvantage of this curve because head may not well aware about the details performance and development plan like line managers.

Now, if we take the example of HR department where two employee work on Recruitment and Selection ( for example) , two work training and development, three work on HR administration. in this situation how 10-80-10 will work. it may seen that one person from recruitment one from training and one from administration working excellent so how it will fit with the bell shape.

there could be a method of calibration but it may raise conflict between three line managers of HR and same will happen throughout the organization.

From Bangladesh, Dhaka

This thread was initially discussed in 2005. It's 2010 and we're still on it. Looks like the Bell Curve is still a hot topic in many organizations.

"Calibration" is a stage in the "forced ranking" system designed to "iron out" discrepancies from the initial/ raw ratings of groups/ departments whose ratings and distribution of their employees do not meet the "mandated allocation" or percentages/ quantities of employees that should fit the bell.

Calibration presumes that any inability to meet the required quantities means that there is an "error" in the rating made by the superior on some of the employees. Hence, the members of the calibration team will sit down and discuss. Then, they will "correct the rating error" by changing some of the ratings until the distribution meets the mandated allocation.

This is what I don't like in the system. As I said five (5) years ago, "why change the rating" if the purpose is simply to satisfy the mandated distribution by the organization? And, indeed, why should organizations always adopt the famous 10-70-20 allocation all their corporate life? Does it mean that employees do not improve all those years even if during its first 5-10 years operation, all the underperformers belonging to the 10% have all been managed out of the company?

I know a company who has been existing for more than 30 years now, yet their distribution system is still the 10-70-20 thing. And, amazingly their executives believe that what they do are correct --- year-in and year-out. Hence, in small departments, employees already know the rating they will get in the next appraisal, regardless of what they do!

Best regards.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

(helps improve corporate governance worldwide, esp in Asia, the Middle East, AFrica, and the Pacific Region)

From Philippines, Parañaque
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