The Normal Distribution Creates an Abnormal Work Culture

Forced bell curve systems are a statistician’s way of looking at the organization. Much like everything else that statisticians do, the forced bell curve is also a mere hypothesis. However, this hypothesis has been largely romanticized and adopted by many companies. In fact about a decade ago, forced bell curve was the norm and companies that did not follow this system were considered to be primitive and off base with reality.

In this article, we will look at the forced bell curve or the normal distribution approach to performance appraisal. We will also see some of the pitfalls that have resulted from blindly following this approach.

What Are Forced Ranking Systems

Statisticians believe that everything in the world follows a similar pattern. Well, if not everything, then most of the things do! In fact this pattern is so ubiquitous that they call it the normal distribution.

Statisticians observed variables like height, weight, income and even attractiveness of individuals. They realized that there are 5% of people at both ends that have exceptionally high and low scores compared to the average. Then there are 10% people at both ends that have significantly high and low scores compared to the average. The other 70% of the people are very close to average. Their scores and the average are virtually interchangeable!

This same assumption is put to use when a forced ranking system is put into place. It is believed that the workplace performance as a whole fits the normal distribution. Performance management therefore simply becomes a task of identifying which person is the best fit for which category.

The Reality

Part of the assumptions on which forced ranking systems are based is true. People do fall into three categories i.e. exceptional performers, average performers and below average performers. However, their percentages are not the same!

In fact if the percentages were the same across all organizations, then there would be very little to differentiate the performance of two organizations, isn’t it! Better organizations are better because they excel at attracting and retaining large amounts of high performers. The number of high performers at a company like General Electric will be much higher as compared to an average business.

The idea that performance necessarily follows a bell curve in all organizations is therefore flawed. Each organization has varying mix of these three kinds of performers. This is a fact that should be acknowledged if performance appraisals are to be better managed.

It is for this reason that stalwarts like Microsoft have started deviating from forced ranking systems. Also, other companies like world famous IT services giant Infosys have also been following suit.

The Problem with Forced Rankings

Forced ranking simply isn’t a system that can be ignored. Its effects on the company are not neutral. Instead, companies that tend to follow it face certain detrimental effects. These have been listed down below.

• Ranking and Yanking: Forced ranking system force terminating a certain number of employees each year. Consider the case of Enron where 15% of their workforce was fired each year. This process created needless politics in the organizations. People who are under constant threat of survival cannot produce the best result. As such, forced ranking unleashes terror and brings down the productivity of the entire organization.

• Mid Level Motivation: The forced bell curve assumes that majority of the people in any organization fall into the mediocre zone. The problem is there if no way to identify if the mediocre people are tending towards excellence or towards bad performance. The middle 70% are all looked upon in the same way. It is for this reason that the middle 70% have no reason to perform. Since the majority of the people in the organization are going to be branded as average, they start behaving like average people. Surveys have shown that motivation levels are at rock bottom in organizations where forced bell curve is implemented.

• Incentives to Grow are Limited: A direct corollary of the above point is that people who fall in the middle 70% have no real reason to grow. They face neither the threat of job loss nor the possibility of huge gains. Instead they are locked into a comfort zone wherein they can safely stay forever. The likelihood of reaching the level of exceptional performance is very low. This is because a glass ceiling had been imposed on the possible number of high performers that a company can have.

  As such people have no incentives to grow and organizations that do not thwart this growing culture of mediocrity, fall prey to it within no time!

• Reward Distribution: The rewards distribution in these organizations is very unfair. High performers drive companies. However, since only 5% of the people can be high performers. If 10% of the employees have been working really hard then only 5% can be rewarded. The balance 5% is likely to get highly de-motivated. Consider this alongside the fact that a lot of people are going to be classified as average performers and will get a decent pay hike, even though they may not deserve it.

  This ends u being rationing of funds from high performers to average workers. No company that has done that over extended periods of time has ever succeeded.

The bell curve based performance management systems are the relic of an era gone by. Companies that follow such systems would be better off if they abandoned these systems and moved on to a system that better reflects the realities of organizational life.