Bell curve appraisal


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Bell curve appraisal

  1. 1. Bell Curve Appraisal By Ranjita Brahma 1 A bell curve, or more specifically, a Gaussian Distribution, is a symmetric curve that is pronounced in the middle, and tapered off at the edges (it really does look like a bell). As such, the middle portion under the curve contains more area than either of the ends. The Bell Curve appraisal system is better known as the Forced Ranking Appraisal Systems of a company’s employees. Forced ranking has been defined as “a workforce management tool based on the premise that in order to develop and thrive, a company must identify its best and worst performers, then nurture the former and rehabilitate and/ or discard the latter”. It categorizes people based on their performance, rewards or penalizes them accordingly. Ranking employees is everyday practice at companies like General Electric (GE), Microsoft, Cisco Systems, Hewlett-Packard, and Sun Microsystems. The entire workforce is segregated as the top performers, medium performers and the poor performers. The percentage varies with the company policy; it could be the top 10%, middle 80% and the bottom 10%. Benefits : • The workers, who are high performers, are motivated to keep improving themselves with the incentive of stock options, higher pay etc. • The majority of the workers, who are classified as average performers, are provided with opportunities to enhance themselves with various training modules and other tools of improvement. This increases the company’s competence level as a whole. • The low performers are warned that they need to get their act together and thus, the productivity of the organization slowly improves • Accountability, which is the purpose of performance appraisals, is enforced across the organization by using Bell Curve. Flaws : • The problem with Bell Curve methodology begins with its application. The distribution curve can only be applied to an organization with certain number of employees as a threshold. With small number of employees, the categorization of resources becomes too constrained, and more often, erroneous. • Bell Curve method for performance appraisal always creates a doubt about the fairness of the classification system. Many times employees show increased activity in the time period approaching appraisals. Hence, the bias towards visible performance as against actual performance may overshadow fair categorization. • Distributing incentives based on Bell curve methodology cannot guarantee an increase in the company’s overall performance. It happens only over a long period of time.
  2. 2. Bell Curve Appraisal By Ranjita Brahma 2 • The Bell Curve system is too rigid a model to be followed, especially in a country like India, where the work culture is dominated by an emotional approach. • Often, a manager is forced to classify people in the last gradient of the Bell Curve, but, it might not reflect the manager’s actual perception about the worker. • In certain circumstances, a high performer gets slotted as a mid-level performer in order to normalize the distribution curve, which defeats the purpose of performance appraisals. • The Bell Curve has a cost to it – attrition. The bottom percent of people may be there because of statistical compulsions, rather than the fact that their managers think they deserve to be there. This ultimately leads to attrition and adds to hiring costs of a company. • The Bell Curve tries to push everyone into the best worker category, but, the truth remains that organizations are more often run on the combined efforts of the so- called ‘average’ work force. Checkpoints Before Implementation of Bell Curve : Before the implementation of the Bell Curve Appraisal System, Please ensure the following – • Use of objective parameters for the performance appraisal system. • Determine the reason for poor performance of the employee if there is any. • Let the employee take responsibility for improved and only offer your assistance if needed. • Document all the performance related discussions with the employee because generally the bell curve system attracts a lot of law suits by fired employees in the west and hence it’s better to have all the discussions documented for you and your company's safety. There are nine aspects to the current system – 1. Change of nomenclature – The present system is called the developmental appraisal, not performance appraisal. This emphasizes the role of appraisal in promoting individual learning and development. 2. Planning the job for the following year – This provides role clarity and builds a common understanding between the individual and the team leader. 3. Counseling for development – Counseling is an integral part of the appraisal system emphasizing openness and disclosure. 4. Team performance – The individual's contribution to team performance is of major importance. 5. Process parameters – Process parameters with emphasis on quality, customer focus and systems form the core of the appraisal.
  3. 3. Bell Curve Appraisal By Ranjita Brahma 3 6. Training – The appraisal system is used to identify the training needs for individuals and teams. 7. Focus – The appraisal system has a single focus, namely development of individual and teams. 8. Client-centered – The developmental appraisal system is exclusively client-oriented. There is no complex web of procedures with perforated sheets and flow charts maintained by the human resource department. The forms remain with the team leaders and team members. 9. Label-free ratings – There is no overall rating with labels such as 'outstanding', 'good', and 'average'. Organization also needs to develop a system of compensation for its managers that promotes team effort. Based on the performance criteria of the business area, the team members in that particular business area receive a percentage of the basic pay and allowance as lump-sum payment. All members of the same grade receive exactly the same percentage. Performance parameters include both qualitative and quantitative indicators. Quantitative parameters include orders and profits. Qualitative indicators include factors such as on-time delivery. The company classifies individuals into three categories – Group A includes those who perform far below expectations with special counseling being provided to such individuals. Group B consists of ideal performers with performance exceeding the expectations of the organization. They are given non-financial rewards in addition to flat equal increments. Group C comprises individuals who perform strictly according to expectations. All of them receive exactly the same amount of bonus and increments. To summarize Bell curve by itself is strict no according to my opinion but a few tweaks and this should be the best solution. Application of Bell Curve for performance appraisal must be tweaked to yield better results. Few tips are – • Decoupling of lay-offs from the bell curve results. • Customizing of the bell-curve methodology to suit the organization structure & needs. • Combining other performance appraisal methods with the Bell Curve approach.
  4. 4. Bell Curve Appraisal By Ranjita Brahma 4 How to Create a Bell Curve Chart in Excel A bell curve is a plot of normal distribution of a given data set. In the following example you can create a bell curve of data generated by Excel using the Random Number Generation tool in the Analysis Toolbar. After Microsoft Excel generates a set of random numbers, you can create a histogram using those random numbers and the Histogram tool from the Analysis Toolbar. From the histogram, you can create a chart to represent a bell curve. To create a sample bell curve, follow these STEPS : 1. Start Excel. 2. Enter the following column headings in a new worksheet – A1:Original B1:Average C1:Bin D1:Random E1:Histogram G1:Histogram 3. Enter the following data in the same worksheet – A2: 23 B2: A3: 25 B3: STDEV A4: 12 B4: A5: 24 A6: 27 A7: 57 A8: 45 A9: 19 4. Enter the following formulas in the same worksheet – B2: =AVERAGE(A2:A9) B3: B4: =STDEV(A2:A9) These formulas will generate the average (mean) and standard deviation of the original data, respectively. 5. Enter the following formulas to generate the bin range for the histogram – C2: =$B$2-3*$B4 This generates the lower limit of the bin range. This number represents three standard deviations less than the average. C3: =C2+$B$4 This formula adds one standard deviation to the number calculated in the cell above.
  5. 5. Bell Curve Appraisal By Ranjita Brahma 5 6. Select Cell C3, grab the fill handle, and then fill the formula down from cell C3 to cell C8. 7. To generate the random data that will form the basis for the bell curve, follow these steps – a. On the Tools menu, click Data Analysis. b. c. In the Analysis Tools box, click Random Number Generation, and then click OK. In the Number of Variables box, type 1. d. In the Number of Random Numbers box, type 2000. NOTE : Varying this number will increase or decrease the accuracy of the bell curve. e. In the Distribution box, select Normal. f. In the Parameters pane, enter the number calculated in cell B2 (29 in the example) in the Mean box. g. In the Standard Deviation box enter the number calculated in cell B4 (14.68722). h. Leave the Random Seed box blank. i. In the Output Options pane, click Output Range. j. Type D2 in the Output Range box. This will generate 2,000 random numbers that fit in a normal distribution. k. Click OK. 8. To create a histogram for the random data, follow these steps – a. On the Tools menu, click Data Analysis. b. c. In the Analysis Tools box, select Histogram, and then click OK. In the Input Range box, type D2:D2001. d. In the Bin Range box, type C2:C8. e. In the Output Options pane, click Output Range. f. Type E2 in the Output Range box. g. Click OK. 9. To create a histogram for the original data, follow these steps – a. On the Tools menu, click Data Analysis. b. Click Histogram, and then click OK.
  6. 6. Bell Curve Appraisal By Ranjita Brahma 6 c. In the Input Range box, type A2:A9. d. In the Bin Range box, type C2:C8. e. In the Output Options pane, click Output Range. f. Type G2 in the Output Range box. g. Click OK. 10. Create labels for the legend in the chart by entering the following – E14: =G1&"-"&G2 E15: =E1&"-"&F2 E16: =G1&"-"&H2 11. Select the range of cells, E2:H10, on the worksheet. 12. On the Insert menu, click Chart. 13. Under Chart type, click XY (Scatter). 14. Under Chart sub-type, in the middle row, click the chart on the right. NOTE : Just below these 5 sub-types, the description will say "Scatter with data points connected by smoothed lines without markers." 15. Click Next. 16. Click the Series tab. 17. In the Name box, delete the cell reference, and then select cell E15. 18. In the X Values box, delete the range reference, and then select the range E3:E10. 19. In the Y Values box, delete the range reference, and then select the range F3:F10. 20. Click Add to add another series. 21. Click the Name box, and then select cell E14. 22. Click the X Values box, and then select the range E3:E10. 23. In the Y Values box, delete the value that's there, and then select the range G3:G10. 24. Click Add to add another series. 25. Click the Name box, and then select cell E16. 26. Click the X Values box, and then select the range E3:E10. 27. Click the Y Values box, delete the value that's there, and then select the range H3:H10. 28. Click Finish. The chart will have two curved series and a flat series along the x-axis.
  7. 7. Bell Curve Appraisal By Ranjita Brahma 7 29. Double-click the second series; it should be labeled "- Bin" in the legend. 30. In the Format Data Series dialog box, click the Axis tab. 31. Click Secondary Axis, and then click OK. You now have a chart that compares a given data set to a bell curve.