Understanding the Bell Curve in Performance Appraisals: How Does It Affect Employee Ratings?

Hi All,

1. Does anybody have any idea about the Bell Curve in Performance Appraisal? If anyone is working within an organization where this bell curve method is applied for performance appraisal, please share some information.

2. What is the Forced Ranking method in Performance Appraisal?

3. How do employees know that the rating has changed because of forced ranking in the bell curve regarding their performance appraisal? Please reply. I need support from experienced HR professionals as I don't have much practical knowledge.

Regards,
Prativa

Hi,

Forced ranking is a procedure that requires managers to assign employees into predetermined groups according to their performance, potential, and promotability.

The best-known company following this procedure is General Electric. They sort the employees into three groups: the top 20% on whom rewards, promotions, and stock options are showered; a high-performing middle 70% with good futures; and a bottom 10%. The bottom 10% is unlikely to stay.

Some other companies that implement forced ranking include Microsoft, Cisco Systems, HP, EDS, PepsiCo, and Sun Microsystems.

What all these systems have in common is the requirement of comparing people in addition to conventional performance appraisal. Managers must place each person into one of a limited number of categories with a fixed percentage assigned to each one.

In India, the pioneers to introduce forced ranking were the Murugappa Group in the late 1980s.

Understanding this concept can help clarify doubts on the Bell Curve. After the performance appraisal, the numbers should fall in a bell curve, with the top 20% at one end, 70% in the middle, and the bottom 10% at the other end of the curve, creating a bell shape.

It is incorrect to say that any adjustments are made. In reality, no adjustments are made. Managers may rate all their employees in category A to please everyone. How do we correct this? The principle to correct this is derived from the concept of forced ranking based on a well-known statistical maxim: Uniform Distribution or Normal Distribution.

I hope this makes some sense. I have been a part of the Murugappa Group, where I learned about this practice. I also tried to implement it in one or two companies, but without much success. The failure was mainly due to the very small numbers I had in different companies. This approach works well when you have a large number of employees to be rated. In small numbers, say for 50 to 100 or even 200, this may not work perfectly as you may not get a perfect bell curve.

I hope this clarifies things.

Siva

Hi,

Thank you for sharing the information. As you mentioned, it is applicable at GE, which I am aware of. I have been working with GE for the past 3 years and only recently learned about the Bell curve strategy in this year's performance appraisal.

How can an individual know the rating given by the manager and how HR personnel adjust the rating to maintain the bell curve shape? Do HR personnel discuss this with the manager or do they handle it independently?

Managers should communicate any rating changes to employees, especially those affected by forced ranking. There are four ratings: Outstanding, Superior, Meet Expectations, and Need Improvement. The distribution percentages are as follows:
- Outstanding: 20%
- Superior: 30%
- Meet Expectations: 40%
- Need Improvement: 10%

How do these percentages create a bell curve? This issue seems very unrealistic. Could you please provide a transparent explanation?

Thanks & Regards,
Prativa

Hi,

There are two questions you have asked:

1. How does this % form a Bell Curve?

2. Whether HR does this on their own or whether Managers are involved?

Question 1

Look at 40% and 30% - Meets expectations and Superior. Together, they form 70% - Outstanding. The remaining 20% outstanding and 10% lower performance make up the other two sides of the curve. This creates a decent bell curve.

You may ask, why these two midpoints? Retention and sourcing are major issues today. The supply of these professionals is less than the actual demand. Hence, some adjustments need to be made. Consider a situation where supply and demand are equal; then organizations will follow this percentage perfectly. If the supply is more and demand is less, adjustments will be made accordingly.

Question 2

It is a major policy issue in any organization, and HR cannot, will not, and should not do it on their own. Normally, a steering committee decides on the percentage. If the ratings are skewed, HR shall return all forms for reconsideration. They will highlight the percentage norms and request the Managers to correct and send them back. If the variation is minimal, they will sit and resolve. HR's role is to highlight the policy and ensure that the policy is maintained. If some variation is to be done, it is referred to the steering committee. I firmly believe that we should not tell the employees that the rating is reduced because of the Forced Ranking. It is reality. Any alternative step taken to communicate with the employee will only lead to confusion, and employees will lose confidence in your appraisal system. For example, one year, we can tell an employee that this method has brought him down. But for how many employees will you tell this reason? If this is repeated the next year, what will you tell him?

To sum up:

1. Market position will decide the percentage, but 20/70/10 will remain more or less constant. Some adjustments will be made on this 70%, which is dependent on market conditions.

2. HR certainly will not do it on their own and will consult the managers. HR's role is not about individuals here but implementing the policy correctly.

Am I clarifying a little better this time?

Siva

Hello Prativa,

A normal curve, i.e., bell curve, is not useful for performance appraisals. Employees need to know if they exceed expectations, meet expectations, or fail to meet expectations and then they need to know how to exceed expectations. If all employees exceed expectations, the employer should be very pleased. However, an arbitrary bell curve will assign some successful employees to the bottom category, which is misleading, counterproductive, and useless. Where there are unsuccessful employees, we need not look beyond management for the reason.

Bob Gately
gately@csi.com

Hi Shiv,

Can I get your email ID? I have certain clarifications on Industrial Trainee and Management Trainee. I would like to clarify as I'm going through the process and procedures.

Regards,
Manjula.

Hello Shiv,

Warm wishes.

I read the explanation you provided for the Bell curve. Honestly, it is quite well-written. It seems you have a good number of years of experience in the same. Thanks for sharing your knowledge base.

Regards,
Nishtha

Dear Nishta,

Thank you for your comments. Honestly, I have been working on this for the past 7 years but could not succeed completely. I can give many reasons, but I was working with fewer than 150 employees, and this did not work well. These employees are known and have experience of more than 10 years in that company.

Anyway, I am looking for an opportunity to work on a similar project as it is one of my favorite subjects.

Siva

Hello, friends.

It is a pity that the so-called great companies claiming they are world-class and, in fact, care nothing for their employees. One such process is this bell curve by GE. Actually, it is done to eliminate people from their organization, and for that, they do all these forced rankings. In the end, you have to find a scapegoat for all the failures. As Edward Deming rightly said, America is the country that misuses/abuses the entire gamut of HR.

Siva,

You mentioned that it is difficult to implement a bell curve for a small number of people, such as 50, 100, or 200. In our organization, each team is responsible for creating its own bell curve. Is this approach incorrect?

The bell curve is designed for each team, process, project, vertical, and the organization as a whole. My perspective is that when dealing with more than 200 individuals, we should assess based on each process (if the headcount exceeds 200) rather than dividing it by teams. This division may result in an imperfect bell curve. I have observed cases where two individuals scored the same points, for example, 3.25, but one falls in the higher range and the other in the lower range.

Additionally, I would appreciate your insights on how to classify individuals for bell curve ratings. Should we consider seniority or process expertise?

Thank you.

Hi Naveen,

When I said it is difficult, I did not mean forming a bell curve. Even with three people, we can form a bell curve, can't we? But applications of certain principles like remuneration will be difficult to follow as the risk involved is higher.

Say there are 10 marketing people in a company; you may not like to lose 2 people just below the average person. If you have many such groups of a hundred, losing two persons in each department or each area will not be an issue.

Moreover, in a very small setup, some seniority will also be considered. The bell curve will not be beneficially implemented.

Take a typical marketing setup.

Take 4 regions,

and every region having, say, 200 salespeople.

If you apply this logic, you will get, say, 20 people to be eliminated.

It may be a big number, and here the top policy-making body should interfere and say 10 people to be out or 30 people to be out or 20 to go out.

But in a small organization with just 200 people, making this decision will be tough.

Do you want more clarification?

Siva

Naveen,

To answer your second question, neither seniority nor expertise is taken into consideration in the initial formation of the Curve. You just take the actual performance and distribute people in the curve. Once this is done, we examine who are the people in the elimination list. This needs to be examined carefully. Then a policy decision for the year needs to be pronounced. The company can have a policy stating that any employee with more than 10 years needs to be cleared only by the steering committee.

Siva

That was a good explanation, Siva.

By the way, we have completed the appraisal for 2007, and it was a real cumbersome thing as it was not organized properly. What are the things to be done (like PMS or KRAs) on a monthly basis so that we can have a better appraisal process in 2008?

Dear Naveen,

Don't do anything on a monthly basis. It generates unpleasantness, and we spend more time resolving this. A monthly business review is good as it indicates personal performance.

We used to follow the steps as outlined below (Assuming the year starts in April):

1. Finalise KRAs and KPAs in Feb and March.
2. Document these KRAs and KPAs and hand over a copy to individuals.
3. Freeze these KRAs and KPAs at the time of Performance Counselling in June.
4. Have a review and course-correct during Performance Counselling. This helps a lot as we focus on the future, not just the past. Motivation for those who haven't performed well can come from future prospects.
5. Review/appraise in July. This should be conducted by the Operational Incharge/HR and Business Head. It's crucial that at least one level above the immediate boss participates in this exercise.
6. Ninth-month review to be done only by the operational head and document the outcome. Any revisions of KRAs and targets need to be documented.
7. HR to start policy formulation activities for the year by January involving all Operational Heads/Business Heads. This will determine the percentage in different ratings and define ratings.

For example, if the target is selling 100 crore goods and the market has already taken 100 crores due to demand, then Marketing efforts are not great. Everyone might have done more than 100%, so rating all of them as 'A' may not be appropriate. Similarly, if the market has slumped and you've achieved only 50% in January due to market conditions, not all employees are necessarily performing poorly. Internal considerations need to be made to define ratings for the year. This exercise is crucial for using the Bell Curve and must involve a professional approach.

8. After defining ratings, send out Appraisal forms (hard copy or soft copy) with clear definitions to all. Transparency is crucial, and all employees to be rated should understand the process.
9. Receive the appraisals back in April.
10. Unit HR should help consolidate data and point out deviations to Business Heads. Corrections should be made to ensure a reasonable Bell curve.
11. Recommendations should reach the Corporate HR Committee comprising all Business Heads, CEO, HR, and Finance Head. They should review the numbers, discuss high and low ratings, and compare results across different units to ensure uniformity in the ratings. Rewards for specific businesses should be decided based on contributions.

In summary, three critical stages need to be carried out:

1. Use Performance Counselling to finalize KRAs and KPAs.
2. Define ratings annually based on company, industry, and national performance.
3. Top-level committee decides the final percentage in various functions based on their performance compared to other functions/business units.

I am writing everything as I recollect from what I did. This requires some language and flow corrections.

Siva

Hi Siva,

I was just browsing through the answers given by you on the bell curve. It's very interesting. Can you help me with more inputs on the bell curve? How is it formed? I don't have the exact way of doing it. I used it last month but didn't really know how to go about it. Are the ratings in the performance appraisal told to employees? Is the bell curve shown to employees? And how much percentage hike do you think is fine based on the score? Sorry if I'm confusing you too. I'm 1 year old in HR generalist, but in all 4 years of experience, I don't know much about HR functions. Your help will be highly appreciated.

Thanks,
Geeta

Dear Geeta,

I hope you are well. The annual appraisal process is underway, and I wanted to emphasize the importance of training in this regard. It is crucial to finalize the targets, Key Result Areas (KRAs), and Key Performance Indicators (KPIs) at the outset.

If you have already received the appraisals for this year, kindly share the list without names but categorized department-wise and level-wise. This will enable me to provide my inputs effectively. You can forward the information to my private email address.

Looking forward to your prompt response.

Siva

"The time has come to broaden our notion of the spectrum of talents. The single most important contribution education can make to a child's development is to help him toward a field where his talents best suit him, where he will be satisfied and competent. We have completely lost sight of that. Instead, we subject everyone to an education where, if you succeed, you will be best suited to be a manager. And we evaluate everyone along the way according to whether they meet the narrow standard of success. We should spend less time ranking the people and more time helping them to identify their natural competencies and gifts and cultivate those."

These are the words of legendary Howard Gardner.

Hello all HR OFFICERS/MANAGERS/GMs/VPs...

Are we doing this since this is what is expected when we say HR... But we concentrate more on axing the people and judging them for their poor performance.

Hi!

Let me just add and clarify some points on the explanation of Siva on the Bell Curve and Forced Ranking.

The Bell Curve usually refers to the "normal distribution curve." The word "bell" was derived from the actual appearance of the curve. Indeed, when all statistical quantities are correctly distributed within the curve, its appearance will look like a "bell."

The quantities allocated by Siva in his example (20-70-10) would never result in a normal curve. Such a statistical configuration is a "skewed" curve even when viewed from any direction or angle. The normal distribution curve used by many multinational organizations would normally have five (5) or six (6) segments, with both the right and the left having the same quantities assigned. The middle right and left segments of the curve have almost the same quantities too. Hence, the actual perfect or normal curve would have the following quantities: 5-10-35-35-10-5.

Many organizations like GE, Toyota, etc., would normally reward the top 5% and 10% on the right side of the curve. Those 5% on the left side of the curve are usually "managed-out" when they fail to improve their performance after one or two (2) more appraisals—depending on internal policy and labor law.

I also disagree with Siva's point that the ratings will just have to be inserted into the curve and it will find its place there. This view is not correct.

The reason why this method is called "forced ranking" is that all concerned employees evaluated are compared with each other and ranked to determine the best among the group. Hence, when a group is composed of 100 employees, these employees will be ranked from 100 to 1 and distributed according to the percentage I mentioned above.

We must all understand that the Bell Curve or Forced Ranking is not an appraisal or performance management tool.

An appraisal refers to the evaluation of performance (or outputs) vis-a-vis agreed targets or goals. What the Bell Curve can do is simply to identify the best performer among those who were rated as "Outstanding" via comparison and ranking. This is usually done to determine who deserves promotion/rewards or sanction for every performance period.

Best wishes.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

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

Hi Llrena,

Thanks for the comments.

I was giving a few examples of what is happening in the initial stages. I did mention that the Bell curve is not a performance appraisal system; it is a tool.

I do agree that ranking is critical.

I was consciously mentioning about three ratings. From my experience in India, there is a tendency to add plus and minus on their own by the raters. Especially the organization starting PMS will face this issue in India. The management will specify 5 ratings say A, B, C, D, and E.

HR will receive the following ratings:

A+, A, A-, B+, B, B-, C+, C, C-, D+, D, D-, E+, E, and E-. I may be exaggerating a bit, but many HR professionals in India will agree with me. In fact, in an organization where I was working, it took two years to educate the raters on this alone. Ultimately, it required a firm stand by the Top management; any plus or minus rating will be treated the same.

Seven to nine categories will be alright after ranking the employees. There were some personal queries to me, and I clarified these issues.

Thanks once again.

Siva

I have drawn a bell curve with ten ranges, often called a STEN Graph. Each * represents one employee if there are 200 employees to be assigned to a bell curve.

01 (2.5%) *
02 (4.5%) *
03 (9.0%) **
04 (15.0%) **
05 (19.0%) **

---------- 50th percentile -----------

06 (19.0%) **
07 (15.0%) **
08 (9.0%) **
09 (4.5%) *
10 (2.5%) *

Hi Bob,

Nice. But what I understood from the initial question is how we actually relate the Bell Curve to PMS. The Bell curve is not a tool for PMS; it is a major tool for linking the performance appraisal system to rewards. In reality, let us admit, this is where it has its maximum use. If the ratings fall in a bell curve and the rewards do not, then the purpose of the Bell Curve is defeated.

Siva

Hello Siva:

Nice.

Thanks.

But what I understood from the initial question is how we actually relate the Bell Curve to PMS.

We don't.

Bell curve is not a tool for PMS; it is a major tool for linking Performance Appraisal System to Rewards. In reality, let us admit, this is where it has its maximum use.

It has little to no use in performance management, but it does give poor managers something to hide behind.

If the ratings fall in a bell curve and the rewards do not, then the purpose of the Bell Curve is defeated.

There is no purpose to using a Bell Curve other than it looks good and it is easy. Reward employees as individual contributors as well as members of their immediate work group and overall organization. Employees need to know if they exceed, meet, or fail to meet expectations and why. Employees then need to know how to meet and exceed expectations, and they'll need to be coached, trained, mentored, and managed well to become successful. The bell curve does not help at all. Using a bell curve is all about making life easy for managers who do not know how to manage effectively. If all employees exceed expectations, then the bell curve is a waste of time and misleading. If all employees meet expectations, then the bell curve is a waste of time and misleading. If all employees fail to meet expectations, then the bell curve is a waste of time and very misleading since the problem is with management, not the employees. Come to think of it, when there are employees who are less successful than expected, we need to look at the employees' supervisors, managers, and the executive team.

Bob Gately
gately@csi.com

Siva, Bob, et al.

If the Bell Curve has no better use other than what you guys are trying to say in your posts, organizations would have dropped them a long time ago.

But the fact that they are still with us despite its worldwide criticisms, then there must be something in it that some of us don't see and understand.

Siva's concept of performance ratings falling along with the Bell Curve is wrong and is part of a very old misconception. This thing happens only in organizations that make the curve an appraisal tool.

Organizations continue to use the Bell Curve because it is an effective tool in rationalizing and justifying budget limitations in dispensing rewards to top performers within the organization, and justifying immediate or future disciplinary actions to poor performers.

As Bob mentioned, in a mature and highly motivated organization, it is possible that the majority of the employees can perform "outstandingly" (O). Without the Bell Curve, the expected management action for an outstanding promotion is either a promotion and/or cash award or both.

In the same manner, without the Bell Curve, everyone that performs badly must be given the appropriate sanction.

But because the reality in almost all organizations (anywhere in the world) is that they operate based on budget and use the principle of "operational convenience", not everyone can be promoted and/or given cash reward. Not everyone can also be punished because when so many perform badly, any drastic disciplinary action (DA) implemented can seriously affect business operations.

As such, organizations must find a way to justify why only a certain quantity of the outstanding performers at a given time will have to be promoted and why not all poor performers will have to be punished.

The Bell Curve is the best tool that provides the scientific, logical, and legal justification. Why? The reasons are as follows:

1) The Bell Curve is considered scientific because it uses the assumptions of statistical science;

2) The Bell Curve is logical because it is correct to assert that the best among the best can still be identified by simply comparing them and ranking them;

3) The Bell Curve is generally legal because it provides a clear methodology and shows a fair procedure adapted for the management action taken.

Of course, the Bell Curve (and top management) will never say that the bottom line for the use of the tool is that it is able to implement things within the allocated budget for the given performance period.

Best wishes.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

Hello Ed:

>If the Bell Curve has no better use other than what you guys are trying to say in your posts, organizations would have dropped them long time ago.<

I would hope so but ineffective practices are all too frequently still used by managers. For instance some hiring managers use the MBTI for employee selection but the MBTI publisher says the MBTI should not be used for employee selection.

>But the fact that they are still with us despite its worldwide criticisms, then there must be something in it that some of us don't see and understand.<

It is easy and it is fast and it takes no thought what so ever. I think that is why it is still used by those who don¡¦t really want to do the work of managing.

>Organizations continue to use the Bell Curve because it is an effective tool in:

1) rationalizing and justifying budget limitations in dispensing rewards to top performers within the organization; and<

Like I said it is easy to use a Bell Curve to ¡§rationalizing and justifying budget limitations in dispensing rewards to top performers¡¨ but that does not make it an effective management tool unless by effective we mean it minimizes the work of managers.

>2) justifying immediate or future disciplinary actions to poor performers.<

If supervisors wait until the annual bell curve is developed to justify corrective actions, then that is an indictment of the supervisors, the managers and the executives.



>¡K without the Bell Curve, everyone that performs badly must be given the appropriate sanction.<

In that case the managers need appropriate sanctions rather than the employees.

>But because the reality ¡K is that they operate based on budget and uses the principle of "operational convenience", not everyone can be promoted and/ or given cash reward.<

Yes, of course, but employees don¡¦t need to be told that they are in the bottom 75% to justify their not getting promoted or a big bonus. Unless an employee knows where they are on the Bell Curve the Bell Curve is irrelevant to them.

>Not everyone can also be punished because when so many perform badly, any drastic disciplinary action (DA) implemented can seriously affect business operations.<

Yes and the DA needs to be applied to management not the employees. Managers either hire problem employees and/or tolerate problem employees. Management creates the problems or tolerates the problems therefore management gets the employee behaviors they create or tolerate, i.e., they deserve the employee behaviors they get.



>As such, organizations must find a way to justify why only a certain quantity of the outstanding performers at a given time will have to be promoted and why not all poor performers will have to be punished.<

The answer to that problem is a word That All Leaders Know--TALK .

And the talk must occur when it is needed not on a schedule such as annual reviews.

Supervisors must talk with their staff so that the employees know what they are doing right and what they are doing wrong and how to correct their mistakes. Using a Bell Curve prevents TALK.

>The Bell Curve is the best tool that provides the scientific, logical, and legal justification. Why? The reasons are as follows:<

But it is misused. Why do employers use the MBTI for employee selection? It is fast, it is cheap and it is gives the impression of scientific accuracy, it appears to be logical, and users presume it is legally justifiable.

>1) The Bell Curve is considered scientific because it uses the assumptions of statistical science;<

There is no science involved in using the Bell Curve but scientists do use statistics.

>2) The Bell Curve is logical because it is correct to assert that the best among the best can still be identified by simply comparing them and ranking them;<

It is not logical to me since it does not help managers improve the job performance of their direct reports.

Employers may train many employees at one time but employees need to be managed one at a time.

>3) The Bell Curve is generally legal because it provides a clear methodology and shows a fair procedure adapted for the management action taken.<

Where do the numbers come from? Who decides the numbers? How fair and accurate are the numbers?

>Of course the Bell Curve (and top management) will never say that the bottom line for the use of the tool is that it is able to implement things within the allocated budget for the given performance period.<

You mean it makes it easier for management? :wink:

Thanks for a thoughtful reply and your position is far more common and acceptable than mine.

Trying to correcting your managers on such issues will only lead to conflict so wait until you are in a position to make the change yourself if you think using a Bell Curve is counterproductive.

Bob Gately

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I totally agree with Bob. Although I am a new manager, I do not find any logic and fairness in applying the bell curve.

According to me, if we have underperformers in the team in any organization, we should try to improve their performance by identifying their areas of opportunities. Even if after continuous coaching things do not work, in almost all organizations, we have different rating structures, which will vary from 0-30%. Mostly, underperformers will receive 0-5% based on the company's policy for a particular year and will be given a chance to improve their performance for the next year. It is not that they don't want to perform; it is that they are not able to perform even after efforts, and it is the manager's responsibility to coach them.

Also, if internal targets are set, and individuals meet them but are not able to exceed their peer group (average), we should not penalize them for it.

Forced rating is something that will create significant pressure on individuals to perform extremely well at all times, even if they are meeting their targets. This may lead to stress, health problems, and, in turn, affect performance.

In my organization, they have started applying forced ratings now, but I do not see any sense in it. Many managers are discussing monthly ratings and applying forced ratings on a monthly basis, which will create pressure on individuals from the beginning. If an individual knows that they have not been able to perform for six months, they may feel that they will not receive anything at the end of the year, leading to a lack of motivation for the next six months.

Can anyone tell me why organizations are applying forced ratings? I think it may be to:

1) increase profits or

2) because they feel that managers are not identifying real underperformers, resulting in higher increments. For example, if in a team of 15, two individuals are not performing well, they may receive 0-5% at the end of the year. If managers are not identifying them properly, they may end up giving them a higher increment of 5-15%.

I am new to this, so please explain it to me so that if given a chance at some point, I will be able to clearly explain it to my peers and higher management.

Regards,

Shiv D

Bob, please find my comments to your reactions:

I would hope so but ineffective practices are all too frequently still used by managers. For instance some hiring managers use the MBTI for employee selection but the MBTI publisher says the MBTI should not be used for employee selection.

Comment:The use of certain tools, theories, techniques, systems, etc. in managing and/ or running organizations is an entirely the prerogative of individual managers. The perception of whether they are good, bad, effective, or inefective is subjective to the individuals concerned. Some things that others may consider good or effective may not be to you. In the absence of an internationally accepted standard or matrix, whom can we beleive as having the better perspective and judgment.

>But the fact that they are still with us despite its worldwide criticisms, then there must be something in it that some of us don't see and understand.<

It is easy and it is fast and it takes no thought what so ever. I think that is why it is still used by those who don¡¦t really want to do the work of managing.

Comment: I don's agree with your perception that the Bell Curve is very easy to understand and that it can be done fast. The fact that so many inquiries are posted in this site shows that a lot of people don't know what it is, its purposes & objectives, and how to use them. As a matter of fact, in a parallel discussion of this topic, someone said they implemented the Bell Curve as a performance tool that they really determined the exact quantities of performers per rating according to the prescribed quantities or percentages assigned by their management.

>Organizations continue to use the Bell Curve because it is an effective tool in:

1) rationalizing and justifying budget limitations in dispensing rewards to top performers within the organization; and<

Like I said it is easy to use a Bell Curve to ¡§rationalizing and justifying budget limitations in dispensing rewards to top performers¡¨ but that does not make it an effective management tool unless by effective we mean it minimizes the work of managers.

Comment: I am not a supporter nor an advocate of the Bell Curve and Forced Ranking. What I said is simply my explanation of how I understood its usefulness to organizations after many years of implementing it in one of the companies that I worked for before.

>2) justifying immediate or future disciplinary actions to poor performers.<

If supervisors wait until the annual bell curve is developed to justify corrective actions, then that is an indictment of the supervisors, the managers and the executives.

Comment: The real intent of periodic/ annual appraisals, and even of PMS, is not to substitute, delay, or postpone the corrective actions of managers/ supervisors. Supervisors and Managers are expected to do their jobs daily. Their day to day jobs is tosupervise and manage people. And managing includes teaching, coaching, and implementing corrective or disciplinary action when warranted.

Periodic and/ or annual appraisals can be compared to the major or quarterly exams in many schools. While teachers are free to use short quizzes and oral exams to validate students' learning in a particular subject anytime within a semester, they are mandated by the school to let all the students undergo periodic or quarterly major examinatins.

Why? The major periodic or quarterly exams in many schools worldwide is not just a scheme to re-measure the students' learning. From the school owners' view, it is an effective tool in compelling parents to pay for the unpaid tuition fee balances of their kids.

>¡K without the Bell Curve, everyone that performs badly must be given the appropriate sanction.<

In that case the managers need appropriate sanctions rather than the employees.

>But because the reality ¡K is that they operate based on budget and uses the principle of "operational convenience", not everyone can be promoted and/ or given cash reward.<

Yes, of course, but employees don¡¦t need to be told that they are in the bottom 75% to justify their not getting promoted or a big bonus. Unless an employee knows where they are on the Bell Curve the Bell Curve is irrelevant to them.

Comment: I think you should understand the Bell Curve from the point of view of business owners. When you do, then you will gladly show the curve to every employee that will complain why they did not get their expected promotion and/ or cash reward.

Those who use the Bell Curve in such a manner that ratings are changed as a consequence of the forced ranking, they deserve to be told and be made to understand the entire process. Otherwise, those who were shown their initial high ratings by their immediate supervisor will curse and accuse their supervisors of lying if they will not be promoted and given cash rewards for the ratings they initially saw.

>Not everyone can also be punished because when so many perform badly, any drastic disciplinary action (DA) implemented can seriously affect business operations.<

Yes and the DA needs to be applied to management not the employees. Managers either hire problem employees and/or tolerate problem employees. Management creates the problems or tolerates the problems therefore management gets the employee behaviors they create or tolerate, i.e., they deserve the employee behaviors they get.

Comment: You have a unique way of seeing and understanding things differently in organizational environments. You are incorrect but entitled to your own negative views.

>As such, organizations must find a way to justify why only a certain quantity of the outstanding performers at a given time will have to be promoted and why not all poor performers will have to be punished.<

The answer to that problem is a word That All Leaders Know--TALK .

And the talk must occur when it is needed not on a schedule such as annual reviews.

Supervisors must talk with their staff so that the employees know what they are doing right and what they are doing wrong and how to correct their mistakes. Using a Bell Curve prevents TALK.

Comment: Same as above.

>The Bell Curve is the best tool that provides the scientific, logical, and legal justification. Why? The reasons are as follows:<

But it is misused. Why do employers use the MBTI for employee selection? It is fast, it is cheap and it is gives the impression of scientific accuracy, it appears to be logical, and users presume it is legally justifiable.

Comment: Please see my first comment.

>1) The Bell Curve is considered scientific because it uses the assumptions of statistical science;<

There is no science involved in using the Bell Curve but scientists do use statistics.

Comment: I said that "it uses the assumptions of statistical science". The Bell Curve is the "normal distribution curve" in statistics. That's why it is able to camouflage its real motives.

>2) The Bell Curve is logical because it is correct to assert that the best among the best can still be identified by simply comparing them and ranking them;<

It is not logical to me since it does not help managers improve the job performance of their direct reports.

Comment: You must study logic to improve your perception and understanding of things around you. Things are not necessarily wrong when they don't fit your mindset and/ or agree with your ways of looking at things.

Employers may train many employees at one time but employees need to be managed one at a time.

Comment: Your real exposure must have been in very small organizations whose employees do not reach thousands.

>3) The Bell Curve is generally legal because it provides a clear methodology and shows a fair procedure adapted for the management action taken.<

Where do the numbers come from? Who decides the numbers? How fair and accurate are the numbers?

Comment: There is a popular maxim in capitalist societies that runs this way: HE WHO HAS THE GOLD RULES!

>Of course the Bell Curve (and top management) will never say that the bottom line for the use of the tool is that it is able to implement things within the allocated budget for the given performance period.<

You mean it makes it easier for management?

Comment: I said that many organizations are managed using the principle of "operational convenience" or "expediency".

Thanks for a thoughtful reply and your position is far more common and acceptable than mine.

Trying to correcting your managers on such issues will only lead to conflict so wait until you are in a position to make the change yourself if you think using a Bell Curve is counterproductive.

Comment: Hired guns in organizations are simply implementors of the business owners. You are FREE to implement the mandates of the shareholders. Otherwise,you have to get out and create your own organization and manage it the way you want it. But for as long as you are employed, your only option ti to follow the rule!



Best wishes!

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

Shiv, please find my comments below:

*I totally agree with Bob. Although I am a new manager, I do not find any logic and fairness in applying the bell curve.*

Comment: I also do not agree with all the assumptions and theories behind the use of the Bell Curve. But unlike you and Bob, I can understand and see the logic of this tool from the point of view of organizations, business owners, and/or top management.

*According to me, if we have underperformers in a team in any organization, we should try to improve their performance by identifying their areas of opportunities.*

Comment: I agree with your understanding of the supervisor and manager's job. Please read my earlier comment on Bob's latest reply before your post. Try to read my comparison of periodic/annual appraisals with that of major quarterly exams in schools so you will understand better.

*And even if, after continuous coaching, things will not work, then anyway in almost all organizations, we have a different rating structure, which will vary from 0-30%. Mostly, underperformers will get 0-5% based on the company's policy for one particular year and will be given a chance to improve their performance for the next year. It is not that they don't want to perform, it is that they are not able to perform even after efforts, and it is the manager's responsibility to coach them.*

Comment: Rating structures and performance standards are essentially internal to organizations. They can be designed in any manner to suit organizational goals and objectives. All you need to do is to communicate them, explain them clearly so they will be understood, and implement them consistently so confusions and problems will be minimized.

*Also, if internal targets are set and individuals are able to meet the same, while not able to exceed their peer group (average), we should not penalize them for the same.*

Comments: The actions that managers can take within organizations depend entirely on company policy. You cannot implement something that is not within your internal rules. You cannot also implement a policy differently from how other managers are doing it just because you happen to have a different way of looking and understanding things around you.

*Forced rating is something that will create big pressure on individuals to perform extremely well at all times even though if they are meeting their targets. This may lead to stress, health problems, and in turn will affect performance.*

Comment: Any system, methodology, or tool that is not properly explained and understood will always create tension and pressure upon individuals, especially if such tools/systems will have a direct impact on monetary rewards and/or promotion.

*In my organization, they have started applying it now, but I do not feel any sense in the same. Also, many of the managers are discussing monthly ratings and applying forced ratings on a monthly basis, which will again create pressure on individuals from the beginning. Also, if an individual will come to know that he/she is not able to perform for 6 months, it means anyways they will not get anything at the end of the year, then why to perform for the next six months.*

Comments: When an organization implements a directive or mandate from top management, everyone is generally expected to comply and support. You are lucky if you will be given the option to do otherwise.

*Can anyone tell me why organizations are applying forced ratings? I think only to*

*1) increase profits or*

Comments: There is no concrete link between an organization's profitability and the Bell Curve. However, if you view its ability to limit cash rewards to a minimum quantity desired, despite a huge actual number of "outstanding performers" in a given period, then top management/shareholders are successful in limiting the reduction of the operational income that they will divide among themselves.

*2) maybe they feel that managers are not identifying real underperformers, which lead to giving a higher %age of increment. (for example, if in a team of 15, two individuals are not performing well, they will get at the end of the year 0-5% and if managers are not identifying properly, they end up giving them a 5-15% increment).*

Comment: Again, let me say that there is no hard and fast rule on the quantities assigned in each segment of the Bell Curve. The percentages you are mentioning are internal and unique to your own organization.

*I am really new to this, please explain to me so that if given a chance at some point in time, I will be able to explain clearly to my peers and higher management.*

Comment: I am wondering why you said your organization is already implementing it, and yet you seem to be not well informed about it. Don't you think that the right thing to do is to ask your superiors first to explain and convince you what they are implementing in your organization now?
I would just be happy to visit your organization should you feel that there is a need for your people to understand more about the Bell Curve and Forced Ranking that you are implementing now. Maybe we can even teach you a better way of doing things by implementing it together with a good PMS.

Best wishes.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

Hello Ed:

The use of certain tools, theories, techniques, systems, etc. in managing and/or running organizations is entirely the prerogative of individual managers.

But it should not be up to the individual manager to pick and choose the tools they use. Organizations that allow individual managers to make such decisions also allow each manager to put the assets of the organization at great risk.

The perception of whether they are good, bad, effective, or ineffective is subjective to the individuals concerned.

Again, individual managers are all too often ill-prepared and unable to evaluate the effectiveness of their own behavior.

Some things that others may consider good or effective may not be to you.

Then the manager should find another employer.

In the absence of an internationally accepted standard or matrix, whom can we believe as having the better perspective and judgment.

The manager's boss and the boss's boss.

I don't agree with your perception that the Bell Curve is very easy to understand and that it can be done fast.

It need not be understood to be used. PCs can do the work so it is easy to use.

... they implemented the Bell Curve as a performance tool that they really determined the exact quantities of performers per rating according to the prescribed quantities or percentages assigned by their management.

That may be but we don't need to use a Bell Curve to be an effective manager.

I am not a supporter nor an advocate of the Bell Curve and Forced Ranking.

That surprises me.

What I said is simply my explanation of how I understood its usefulness to organizations after many years of implementing it in one of the companies that I worked for before.

If it is useful, then you should advocate its use unless you have better methods and tools.

Supervisors and Managers are expected to do their jobs daily. Their day-to-day jobs are to supervise and manage people. And managing includes teaching, coaching, and implementing corrective or disciplinary action when warranted.

I agree.

Periodic and/or annual appraisals...

I agree I just don't think Bell Curves help managers manage.

I think you should understand the Bell Curve from the point of view of business owners.

Many business owners and their managers do things that are counterproductive, but that doesn't mean I have to agree or even overlook what they do.

When you do, then you will gladly show the curve to every employee that will complain why they did not get their expected promotion and/or cash reward.

Does that help the employee to work more effectively?

Those who use the Bell Curve in such a manner that ratings are changed as a consequence of the forced ranking, they deserve to be told and be made to understand the entire process. Otherwise, those who were shown their initial high ratings by their immediate supervisor will curse and accuse their supervisors of lying if they will not be promoted and given cash rewards for the ratings they initially saw.

That is a sure sign that the managers are incompetent.

You have a unique way of seeing and understanding things differently in organizational environments. You are incorrect but entitled to your own negative views.

Do you blame the employees? Who hires employees? Who assigns employees to their jobs? Who decides if employees stay on the job? Who decides what training employees receive? Who is responsible for effectively managing employees? The answer to all these questions is the employee's employer through its managers.

The Bell Curve is the "normal distribution curve" in statistics.

An employer that has its employees performing their jobs in a normal distribution should ask themselves why that is true.

That's why it is able to camouflage its real motives.

Yes, it camouflages the real motives of managers---to avoid doing the hard work of managing.

You must study logic to improve your perception and understanding of things around you.

I have studied logic, statistics, and management, and I disagree with using the Bell Curve as a substitute for managing.

Things are not necessarily wrong when they don't fit your mindset and/or agree with your ways of looking at things.

That is so true, but then again it doesn't make you wrong either.

Your real exposure must have been in very small organizations whose employees do not reach thousands.

No supervisor should supervise more people than they can effectively manage so your observation is unhelpful.

There is a popular maxim in capitalist societies that runs this way: HE WHO HAS THE GOLD RULES!

I agree, but does that mean we have to agree with them even when they do dumb things?

I said that many organizations are managed using the principle of "operational convenience" or "expediency".

I agree, managers do what is easy for them and they don't care too much about the effectiveness until the boss gets on their back about the ineffectiveness.

Hired in organizations are simply implementors of the business owners.

As outside observers, we should tell the emperor he has no clothes when he is naked. Internal observers need to be very careful, however.

You are FREE to implement the mandates of the shareholders.

Yes, even when the mandates are counterproductive I might add.

Otherwise, you have to get out and create your own organization and manage it the way you want it. But for as long as you are employed, your only option is to follow the rule!

We agree on that.

My advice to managers and wannabe managers is to get a formal education in management so that you don't learn the wrong things from your managers.

Thanks again for an interesting reply.

Bob Gately

gately@csi.com

Hi All,

If anyone has a detailed presentation to learn about the Bell Curve (step by step), it would be really helpful for many of us to understand it better. Please share the same.

Thanks, Ed, for the reply. Since it is newly implemented in our organization, not many of our managers are clear. They only know about the bell curve in general and the 70:20:10 ratio. I wanted to understand it fully so that I will be in a better position to explain it to my team and, if required, to discuss it with HR as well. I liked your reply; thanks once again for that.

Regards,
Shiv D

As most of the HR professionals feel, I too have a strong belief that the bell curve should not be used for performance appraisal as it requires direct involvement of the personnel concerned. Furthermore, many organizational heads pressure HR personnel to adhere to the bell curve. Is there any way to educate the top management on this issue?

Easy understanding of forced distribution.

Four categories of people come under the bell curve: Excellent, Good, Average, and Poor.

Here, the performance of Excellent and Good is more or less similar, like 100 and 99.5. It cannot be easily identified by the supervisor; however, they want to rank the two people, for example, A - Good and B - Excellent.

Similarly, Average and Poor, for example, C and D, have more or less the same performance, but the supervisor wants to rank both C and D.

The problem in this method arises during promotion and termination of employment. For example, B, who may be an excellent performer, is forced to be classified as a good performer and may lose out on promotion, while "A" may get the promotion.

Likewise, "D," who may be an average performer, is pushed to be terminated by categorizing them as poor, while "C" may get the job even though they are a poor performer.

Most supervisors do not like this system because they are forced to implement it.

GE was the first company to introduce this system.

I agree with MDTALHA, with some additions. There are 5 categories, rated from 1 to 5 (where 5 is the best). The distribution of manpower is mostly in the following way:

5 - 5%
4 - 10%
3 - 65%
2 - 15%
1 - 5%

The ratings are arrived at based on the individuals' performance in the last financial year. It's taken as the annualized rating.

As for the organization I work for, it does not terminate poor performers based on the ratings. However, there are no financial rewards and growth opportunities for the individuals rated 1 & 2. Employees rated 3, 4, and 5 are eligible to apply for the next level of growth. No additional benefits are given for being rated 5 in terms of growth. One has to perform and show their capabilities to advance to the next level. The only way to reward an excellent performer is by giving a salary increase, meaning those with a rating of 5 will receive a higher raise compared to those rated 4 or 3. There is another caveat: if there was any salary adjustment or raise before the Performance Management System (PMS) salary revision takes effect, it will be adjusted. The approach to PMS notes differs from company to company, and PMS typically means organizations provide employees with annual feedback on their work and conduct. Salary increases are an additional motivation for employees.

Regards,

Dear Ed,

Though I liked your views, I would also add that in a department-wise rating, every department will be asked to rate and rank their performers in a sequence. Then, as per the bell curve policy (agreed distribution), every department will form its mini bell curve, which should essentially align with the larger bell curve. Later, at the time of overall normalization, some tweaking will still be done by HR in consultation with line managers.

Hope I am making sense. If you disagree, you can email me at sunilsunil4@rediffmail.com.

Can someone provide a small practical working example of forced ranking in Excel? It will help most of us, as the philosophy of the bell curve, etc., is readily available on the internet.

Hi Shiv,

I read your posts on the concepts of forced ranking and bell curve. They made the concept very simple to understand. I am a part of a very large real estate company, and we wish to start an appraisal system here. It has never been done before in the last so many years that the company has operated for whatever reasons. The management here understands performance appraisal only as a tool for increments. So, can we introduce forced ranking here? The employee strength is good, i.e., more than 500.

Please let me know.

Thank you

To sum it up, can I say that it is a relative grading to the given context? For example, the all-India percentile of a person in a competitive exam need not be valid if you do it for a region in the context of the same examination. The words themselves say it is a forced rating to predetermined parameters, and therefore it is contextual. The issue, therefore, is whether such a methodology is universally acceptable and if it is by statistics that all cases with a larger probability fit into the bell curve even if you do not force it. I am trying to understand the applicability of this method across the board. Kindly put in your views for my understanding.

Regards,
Jayaseelan

Hi all, I have a concern as I have not done this before. Can we use the bell curve in any type of analysis? For example, in a training needs analysis. Please explain how.

Regards,
Dula

Dear Mr. Jayaseelan, I am reading your post only now, and I do not know whether a response at this juncture has any relevance. However, since the questions raised by you are valid, I thought of responding. This is contextual; hence, it invites maximum criticism. In the absence of any universally acceptable alternative, this methodology is an important tool in statistics. The pass percentage in India, in general, is accepted to be 35. Why is it fixed at 35? Why is the first class fixed as above 60%? All based on the behavioral pattern of the general public. However, when we compare a person with a family background where his/her parents are well-educated, and he scoring 35 to 40 percentage may look easier than for a person coming from a background where the parents are not educated, and the person lives in an atmosphere that is not encouraging studies. This is where intervention is required, and in India, right or wrong, we go with caste classification and reservation. The bell curve or uniform distribution seems to be a natural phenomenon, and a certain degree of forced ranking is required as the assessors have their own prejudices.

In a Nutshell:

• It is contextual.
• The bell curve is generally a natural phenomenon.
• To make it more perfect, a certain degree of forced ranking is essential.
• The top management of an organization needs to address this forced ranking very carefully.
• When considering forced ranking, educational background, experience, etc., must be carefully analyzed.

Regards

It is no surprise that appraisals are anxious times for managers and employees. While managers have to dance to the tunes of the organization, a large majority of employees feel shortchanged in the whole process. It is unfortunate that an exercise whose aim is to recognize, reward, and provide constructive feedback to employees has turned into a game of numbers.

Finally, organizations are waking up to the pitfalls and moving away from the Bell Curve methodology. This is a good sign!