Futility of Forced Ranking

Chirag Shah 2012PGPM009 IIM Indore Mumbai Campus

Introduction
Many organizations today use a bell-curve for performance evaluation process. They reward a small percentage of top performers, encourage a large majority in the middle to improve, and lay-off the bottom performers. Companies believe that such pay-for-performance system encourages employees to perform better. The question to explore is: Does the system increase the overall performance of the company over time? We observe that pressure, if maintained below a certain level, can lead to higher performance. However, with lay-offs, constant pressure de moralizes employees, leading to drop in performance. As the company shrinks, the rigid distribution of bell-curve forces managers to label a high performer as a mediocre. A high performer, unmotivated by such artificial demotion, behaves like a mediocre. Further, managers begin to reward visible performance over the actual. Finally, the erosion of social capital could cripple the company.

Raising The Bar The Bell Curve Way

For over a decade, bell curves have been used in various organizations. People, experts or not have wondered on efficacy of this in making the organization better. It is not always easy to implement the bell curve. If the organization or team has a largely good workforce, one has to look at certain other parameters to moderate the curve so that one can distribute them under the given distribution. During these moderations, while theoretically everyone is equal; there is a possibility that some are more equal than others. At times we see the bell curve being implemented in small teams of excellent people and wonder how this can work. Many a times it has been observed that those high performance people who have been pushed down because of perceived attributes, feel de-motivated or feel victimized. The basic premise of bell curves is to raise the performance bar in the organization. While organizations that follow the bell curve think that by eliminating the lower end of the curve, they are raising the bar; in practice attrition happens on the other end as well. There are two ends of bell curve over performers and under performers. Those who are outliers at the lower end find their way out; those who are smart outliers at the other end find themselves culturally not in sync of the rest of organization and these results in their attrition. Attrition of high performers who feel they have been pushed down also takes place. The bell curve creates pressure on individuals to perform in isolation and can also cause concern for team excellence, engagement and trust. The attrition of over performers far undermines the benefit of eliminating under performers and if we sum it all, the net result is lowering the bar.

To test this understanding, one can refer to a variety of research. As per one of the researches, pay for performance will work to certain extent only but not a solution as you cannot continuously raise bar. Unfortunately, the herd of organizations continues with mindless copying of so called good practice or best practice.

Potential Vs Performance
The experience of various experts in engaging with people at both professional and personal levels has given important insights into behavior patterns which are correlated and can be best used in the professional life. They found that their discussions on personal attributes yielded more results then professional attributes of individuals. They found people are generally happy when aspirations and passions are combined with performance. A cocktail of passion with performance creates a deadly result in terms of organization value. Organizations often mix performance and potential which are separate. Even if they do separate the two, they use the performance appraisal as a tool to measure performance, but mostly they do not know how to measure potential of individuals. While KRAs only represent a very small percentage of capabilities, experts observe that largely the potential remains untapped and ignored. This is one big reason why people leave as they do not see they are leveraged properly due to ignorance or otherwise. Understanding of potential can happen through open engagement at personal and professional levels. This can also happen through social analytics as well. While we talk about analytics for business and customers, one would like to draw attention of IT Chiefs towards analytics of human capital. The footprint in social and professional networks or elsewhere in Google is one additional aspect of knowing what people are capable of doing today. If we have some kind of search and analytics based on available platforms, we can generate meaningful information about our people and align them towards goals based on their capabilities. If it starts happening, in my view the bell curve will become redundant exercise. In my opinion, equal weight should be given to performance and meaningful social impact and influence. The future of employment will be towards impact and influence and people who create it are future leaders and should also be able to impact the business positively. In place of bell curve, we can raise the bar by aligning passion towards the organizational goals using the appraisal system more positively to engage people more with business. In conclusion, we need to understand our people better to raise the bar and conventional wisdom to work with bell curve may prove to be futile. Technology today is fully capable of delivering this and CIOs have greater responsibility to focus on people and empower HR chiefs and people managers to take right decisions on potential and performance and decide on the right strategy.

References:
1. Vaibhav Chintan, Khakifirooz Ali, Devos Martine; Punishing by Rewards: When the Performance Bell-curve Stops Working for You. 2. D. D. Mishra; Tackling The Bell Curve Conundrum