Someone once remarked that the bell curve approach used in performance ratings is probably as confounding as the Duckworth Lewis method in cricket. Many of you would have probably heard comparisons along similar lines. Over the last few years, the use of the bell curve has come under criticism. Companies like Microsoft and Cisco, among others, have even gone so far to stop using this tool.

We have also heard some apprehensions about this approach at Godrej and how and why we are using this tool at our company. Since we have initiated the performance review process for this year, this is also when the bell curve will become the focus of many a debate. So, I have requested Rahul Gama to set the record straight and share why we continue to use the bell curve as part of normalisation at GCPL and what is different about our approach.

Please read on…

May, not April is the cruelest month, as T. S. Eliot put it. For many of us who are managers, it is the month of discussions around normalisation, ratings and the bell curve, which can cause some angst.

In recent times, there has been a lot of debate around the bell curve. Rightfully so too, for no other HR process so captures the fancy and the bane of managers, team members, business leaders and HR thinkers alike. Jack Welch’s creation has received its fair share of bashing over the last couple of years, with organisations who once swore by it now talking about junking it.

Quite simply, the bell curve or normalisation is really just a tool to drive differentiation. Like with any tool, if used judiciously, it will have the desired impact. But use it as a standard formula, without adapting to the nuances of your organisation, and its effects will be rather poor.

Let’s start with a basic question —  Why do we even differentiate in the first place?

1. Each of us and our team members bring different levels of contribution to the table. Most bring a fair share, which results in good performance. But some bring that extra bit, which really makes a difference. Whether it is intellect, capability or possibly stretch capacity, it often translates into extraordinary results. And of course, there will always be the few proverbial passengers, trudging along as the engine drags them forward. So, the question is — should we not place a premium on and reward individuals and teams who bring much more to the table? Should we not excite and spur them on further? In doing so, not only do we reinforce the belief in excellence, but more importantly, we are being JUST to such team members. To me, the crux of the matter is not a ‘good-to-do’ practice, but the matter of being just. This is why our people philosophy of Tough Love promises that we will differentiate and reward basis performance and potential.

2. No matter where you go (and Google seems to be the exception currently), resources will always be limited. With limited rewards to share, we need to remember that we operate in an open talent market, where good people come at a premium and are tough to find.The principles of demand and supply will play out. The normalisation process just helps provide an objective way for differentiation.

3. The performance bar internally, like the external world, is always relative. That’s just how the world operates. Your consumers will always shift to superior products, investors will invest in assets which are likely to give higher returns and so on. More importantly, the bar will keep getting higher and so will a healthy competitive environment. In that case, should our internal measurement system not be geared to align with this reality?

That said, there are of course, issues with the bell curve approach that critics have pointed out. And not without reason. For example, there have been concerns around how this tool can come in the way of fostering collaboration. If rigidly applied, the outcomes from this approach can also be de-motivating to some individuals.

As I mentioned earlier, the real question as I see it, lies in how we use and implement this tool.

Let me share with you, our approach at GCPL — what we have done differently and what, we believe, has allowed us to create a more balanced approach overall.

• Flexibility in viewing performance: A quick look at the data over the past years will show you that we have been flexible while implementing this tool. We are not formulaic in our approach. Instead, we use a lot of judgment. And wherever merit demands, we have made allowances. This is, however, at the aggregate company level, to ensure uniformity of approach. At the team and function levels, we do expect managers to be able to rate and differentiate performance.

• Broad based reward process: Normalised ratings are an input for our rewards or increment process. But they are not the only determinant of it. The market competitiveness of the individual, market pay at job value and growth potential are some of the other factors, which also impact our rewards system overall.

• Premium on collective performance: One common problem associated with the bell curve and the competitive internal environment it creates, is the possible impact on collaboration. Our Performance Linked Variable Remuneration (variable pay) programme, not only rewards individuals differently basis performance, but also places a very distinct premium on collective performance. Here, collective performance would result in significantly enhanced rewards for all team members.

Now, without a doubt, all performance processes are inherently evaluative and not easy to deal with. Especially because the stakes are the highest here. But whether it is the bell curve or any other performance process, the issues will always be the same, unless we are socialistic in our approach. The best way to handle this, is by communicating our principles and approach, as honestly and frequently as possible, to our people.

And in order to make this truly effective and a reflection of our beliefs as a company, we need to agree on a common approach. During your performance evaluation discussions with your team, I would strongly urge you to:

• Make it clear to your team members that performance will always be relative, both internally and externally. Our philosophy is that those who contribute more and deliver higher results, will be rewarded so.

• Don’t look at and communicate normalisation as a necessary evilthat is decided on by someone else. Reason it out and explain the rationale and philosophy of our approach.

• Differentiate performance in your team first. However good the overall performance of the team may be; and however hard you may find it, differentiation starts from you. A good way to begin, is by honesty evaluating your team members.

• Last of all, use this as a way to coach towards stronger performancein the future.

Here’s to a productive 2016!

A big thanks to Rahul for tackling a fairly controversial topic. As Rahul has pointed out, as with any tool, much lies in how you interpret, adapt and apply it. There will always be good and bad ways to do this. So, the answer doesn’t necessarily have to be, as the cliché goes, to ‘throw the baby out with the bathwater’.

The bell curve and normalisation are just one part of a larger, integrated performance management and talent development process. Rigorous goal setting, frequent feedback, authentic conversations and the like are, in fact, much more important aspects that we need to truly champion and work on enhancing, to be able to drive stronger performance and better engaged teams.

As managers, it is critical that we own the performance management process. Many times, I hear managers telling their team members that, “I gave you a high rating, but HR brought it down in the normalisation process”. Please don’t use this as an excuse to shy away from honest, direct feedback. You are an integral part of our performance management process, so don’t write off your say in it. We really need you to walk the talk on this.

We would welcome your thoughts and suggestions on what we can do to make our performance review process more effective for you and your team members. For those of you with years of experience managing performance discussions, please share examples and tips that you have learned from. Let’s work together to make this a truly meaningful process this year.

As always, I look forward to hearing from you.