Time for new performance management system?

Bell curve and forced distribution of rankings are few of the frameworks, which can put even best- of -breed managers at their wits end during performance appraisal process. It presupposes that employees can be categorized into segments as top 20% the crème de la crème, middle 70% the average performers and 10% who form bottom of the performance pyramid. It also indulges in peer comparison, where performance of an employee from one department is stacked against employee of other department, to normalize rating distribution.

It has been the mainstay of performance management of most global corporations, the bias has been more in west. It’s losing its luster off-late, as companies are realizing the futility of it, as work profiles are turning to be more unique to global geographies, a normalization will discount such job specifics resulting in demoralized workforce.

It needs to be kept in mind, these are the critical tools which influences managers to reward performance. The other grouse has been that it’s more of post facto- after the event with sufficient time lag, based on quarterly / annual performance reviews. So feedback mechanism based on past events, loses its relevance due to business dynamics, as companies have been inundated with changes in technology, business environment and geo political developments.

It promotes more intra team rivalry, as each employee wants to bolster respective performance levels to increase the odds of bagging top rating. At times, this may run counter to team goals. As corporations become more globalized, team coordination and collaboration across businesses and geographies become paramount to ensure success.

So few of forward looking companies are junking this system based on forced distribution in favor of more credible performance management system, which is dynamic and relevant. It’s based on timely feedback immediately after the event, which offers employee the opportunity to learn and unlearn to be more effective on the job. It keeps the employee and the organization at a larger level in sync with changes in competitive landscape.  The new system compares employee deliverable versus set goals without comparison to other external variables, offers a credible path forward to focus on areas that requires improvement. This prepares employees to take up more challenging roles. Companies are also pruning the number of objectives to a realistic 3-5 from dozen plus objectives, as this drives better focus and execution.  This curtails bureaucracy, drives simplicity and promotes employee engagement.

The bell curve and forced rating distributions are mostly relics of the past, any further path down this line will dilute the competitive strength of the company, as employee morale is at stake. A performance management system that doesn’t promote employee morale, collaborative spirit and brand equity of the company, calls for it's revision, as people assets are the greatest competitive advantage of an company, who can’t be left at the mercy of an archaic performance management system, which is past its sell-by date.