HR's brave new world after the death of "Bell curves"

“Bell Curves” – the almost default option which Managers and HR  practitioners  have been using  to assess employee performance, and consequently decisions on performance, promotion, and in many cases, to trim workforces  - are finally in their death throes.

Companies like Microsoft, Cisco, and even the early adopter – GE where Jack Welch had made this his mantra for people management, have all done away or are doing away with this practice, which has long crossed its use-by date. The new generation companies, Valley start-ups (and indeed start-ups who have now matured into the bulge bracket valuation league) have all contributed to hastening the demise of the infamous Bell curve.

Here are 3 reasons why the Bell curve is a fundamentally flawed and antiquated idea today, and 3 alternatives proposed  on how today’s employees can be treated /evaluated/retained/rewarded in a manner that makes sense to them and plays to their employer objectives as well.

 3 Factors striking a body blow to the Bell curve:

 1. Human behavior, and indeed performance does not mimic the neat symmetry of a statistical normal distribution curve – where there are equivalent number of people above and below the average, the greatest cluster around the mean, and a small number of outliers 2 standard deviations above and below the average. We know that real life is a lot more chaotic. And inherently more multi-dimensional and nuanced. And attempts to force fit workforce populations along the shape of the bell curve has had sustained unintended consequences in people management for a while now. Usage of bell curves, and its tyrannical offshoot – the forced ranking, mean that each employee’s performance is not so much measured vs her goals as much as how better/worse it is compared to peer groups. Think about this for a moment. Let’s say all employees met greater than or equal to 90% of their goals. Despite this, you can theoretically create deciles within the top 10% and have a population that is “below average”. Huh? Further, this has caused opacity, arbitrary decisioning, a syndrome of ranking employees on “critical incidents” and based on who has more savvy, communication or chest-thumping skills as opposed to a fair and transparent performance-linked outcome. And this whole Welch-initiated business of a perpetual weeding out of the so called “bottom ten percent” has rarely worked in practice. And if practiced has had often disastrous consequences on employee hiring and retention and workforce stability.

 2. New Age companies have forced this change. They have quickly realized that what worked (at least in theory!) for the erstwhile Fortune 500 leviathans is certainly not fit for purpose for the digitally driven Social/Mobile/Analytics/Cloud (SMAC) crop. The underlying pillar of their HR strategy is to have a bunch of driven, hyper-motivated subject matter experts, and then a solid phalanx of folks with deep domain/process knowledge who fail fast, drive speed to market and build scale. Conceptually therefore, to back to the statistics parlance, there are less people centred around the average. And arguably less on the left side of the curve as well.

 3. The new employee generation has challenged this paradigm. We have all by now consumed reams of data on how to handle the millennial workforce generation and what their drivers, motivators and the key differences in their attitudes to work and life are versus the baby boomers and the Gen X’ers . Empowerment, enablement , transparency, and the requirement for more instant gratification and relevant rewards and recognition are all common themes. And the whole notion of slotting this population into bell curves is completely out of synch with these core employee value propositions which resonate with the millennials.

 So here are 3 alternatives to the “if not bell curves then what” and “where to from here” questions , which now logically become the issues to solve for.

 1. The days of long range 5 year business plans and annual budgets are rapidly following Bell curves into the realm of extinction. Today’s disruption filled, first to market emphasis means that rewards and recognition in turn, will need to be much more based on crisp, short deadline initiatives, projects and delivery outcomes. So step 1 is to have specific outcome based remuneration and rewards , based on project, delivery and client outcomes – as frequently as needed – and definitely more than once a year

 2. Annual compensation should be based on simple and transparent practical aspects – how much the skill under review is worth in the market, what is the cost of replacement is , and most importantly, is it fair and defensible if the whole shroud of secrecy is lifted. Many of you would’ve seen the recent hullabaloo at Google where an enterprising Googler, Erika Baker, through her social media /Twitter handle, encouraged employees to share their pay increases on a common spreadsheet. And a bunch of them indeed did. I can hear the HR heads and Managers gasping with horror – “how can salaries be shared and made public”! It may be worth gently pointing out that though employers have historically, zealously emphasized  to employees the requirement to zip their lips as regards their pay raises, there is absolutely no way that this is legal or can be legally enforced. And in today’s hyper connected world where fingers twitch to post details for the world to see on who one is dating, where one is traveling  and what one is eating, it’s cuckoo to expect salary details to stay confidential! Employers must expect that all their salary decisions will be commonly and routinely known to a large part of, if not all the employee population and so must answer the question of “if everyone knows every pay/promotion decision, can I reasonably justify the “why” of it. Moral – the simpler and more widely understood the metric of measurement and what the consequent reward will be, the better off the Firm is.  A corollary of course is that the days of entitlement are over. There is and should not be rewards or bonuses for “showing up to work” or based on “seniority of experience”.

1. Focus on measurable development agendas and plans for the majority of employees who are “good” but not ‘walking on water’. Learning and development is fast becoming the item most talked about and least actioned on, and the area which can perhaps cause the most shift in performance. Upskilling, keeping skills contemporary , and most importantly, recognizing that corporations can win with employees by focusing on enhancing their employability will rapidly become center of plate items.

Yes these 3 proposals seem counter-intuitive and outside most of our comfort zones. But rather than retreat into the familiar ( but sub optimal) there is no option but to venture out into the brave new world prepared to test and learn and induct new muscle memories into all of our HR processes. To all the people managers out there, “ask not for whom the bells toll; it tolls for thee”!