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Companies move away from 'Bell Curve' appraisal system

Opt for reviews at regular intervals form the yearly review system followed earlier
M Saraswathy  |  Mumbai April 29, 2016 Last Updated at 11:55 IST

Indian companies are now increasingly moving away from the ‘Bell curve system’ of appraisal and looking at a more holistic appraisal process based on individual performances.

India’s largest IT services company Tata Consultancy Services (TCS) has done away with the Bell Curve Model of employee appraisal. This was following other global tech giants like IBM and Accenture who have done away with this model. 

In a recent interaction with Business Standard, N Chandrasekaran, chief executive officer & managing director, TCS said the recent appraisals did not follow the Bell Curve model.  “We are appraising employees on individual performances, and appraisals will be more regular than an annual or quarterly feature,” he added.

Yearly reviews are now giving way to continuous process of feedback to employees at regular intervals. 

For instance, IBM has revamped its yearly appraisal process by doing away with annual appraisals and bringing out a new system called Checkpoint. Unlike annual mechanisms where a yearly review of the performance is done, this system looks into continuous feedback. 

DP Singh, Vice President and Head - HR, IBM India/ South Asia said that Checkpoint is their new employee-designed performance measurement program.

"This mechanism was designed keeping in mind the rigorous feedback and deliberation on the part of thousands of employees who were invited to co-create it. The idea behind its genesis was to have a transparent, merit based assessment of work which was employee friendly," he added.

The new system, Checkpoint, considers different dimensions of an employee's performance - business results, impact on client success, innovation, personal responsibility to others, and skills. This has replaced IBM's traditional performance evaluation system Personal Business Commitments.

Typically, the Bell Curve segregates all employees into distinct baskets — top, average and bottom performers — with the vast majority being treated as average performers. 

Compensation or hikes are also based on the rating given for any financial year.

Apart from these companies, Infosys, towards the end of 2015, had also announced its decision to do away with the model. Infosys now periodically reviews the goals for employees. In March this year, Wipro announced its new feedback-based evaluation system. 

Retaining talent is one of the major goals for moving to a new appraisal mechanism, said human resource experts.

Sunil Goel, MD of human resource firm GlobalHunt India said that in the current scenario wherein talent poaching is on high stream so the appraisal has become one of the tool to retain the top performers in the organization. He said that the bell curve system was more on categorization of the performance on annual basis. “Now companies have started following monthly & quarterly evaluations for not to have a shocking situation for the individual and organization at the end of the year,” he explained.

Also, technology is being more effectively. Goel added that there has been rise in use of technology and digitizing the evaluations which is giving better results as compared to bell curve system and helping to align the individual and the organization at real time and creates a win-win situation where both sides are happy with the clear expectations.

It is not just IT/ITeS firms which are seeing a change. Axis Bank, the country's third-largest private sector lender, has decided to follow a new method of assessment called "Acelerate" and will not follow the old system from this financial year onwards.

Rajesh K Dahiya, group executive, Axis Bank told Business Standard earlier that they have been looking at their internal process and decided that without losing focus on meritocracy, productivity how could they look at a slightly more inclusive approach than say bell curve. 

He added that Axis Bank has changed the entire performance management system to look at capability that we will build and what that capability would deliver to them (Bank). 

According to the new system, the lender would focus more on learning and development and use that too as a tool to measure performance.

Will the whole of India Inc move to this system in the near future? HR experts said that this will be a gradual process.

Rituparna Chakraborty, senior VP, TeamLease Services explained that while there are companies which have been early adopters to the a more real-time performance appraisal mechanism, others will take time to gradually get there.

However, she added that there is a need in companies to have personal feedback that is not only real-time but also based on instant ratings which are task based and task driven. This, she explained, would also lead to rewards being given real-time for good performers but also help others to better their performance on a constant basis.

Companies have also seen complaints by employees about single ratings being given and constant comparisons with a certain set of performers. HR executives in companies said that the aim is to look at individual performance and what they have been able to achieve among their set goals in a given time-frame, making it more realistic.

While firms are moving away from it, there have been some benefits seen in this system as well. Kamal Karanth, Managing Director, Kelly Services & KellyOCG India explained that bell curve system came into place to positively differentiate top, average and poor performers based on performance.  

 “Appraisals are also linked to increments where companies have their own limits. Bell curve has helped companies to work within the budget,” he said. Karanth said that hence this will take time for other companies to take it up and for them to believe that this is the right thing to do.

But, does this mean that it will become even tougher for under-performers in organisations? The industry has mixed views on it.

Karanth said that since about 10-20 per cent of employees in organisations are underperformers, the new system will ensure that the signals or feedback of their low performers will reach them early. “They could see early exits too,” he said.

But some feel that with more regular feedback, under-achievers will get more time to improve their performance and motivate them to try and meet targets regularly. 

Goel said that since the shift is been done to improve the performance, so non-performers if will get regular feedback in most of the cases things will improve.

Though it varies from company to company, Goel also explained that generally companies do give minimum of six months’ time to a non-performer to improve. Only post that are decisions taken for separation.