Bell curve performance appraisal is a method used in Human Resources to evaluate employee performance. This system groups employees into different performance levels based on a distribution that resembles a bell-shaped curve. The bell curve performance appraisal method was made famous and widely adopted by Jack Welch, the former CEO of General Electric (GE), in the 1980s. Although the concept of the bell curve as a statistical distribution predates Welch’s use of it, his implementation at GE popularized its application in performance management. 

Many large organizations, particularly in the IT and banking sectors, have conventionally used bell curve-based performance appraisal systems. Examples include Infosys, Wipro, and ICICI Bank. Some public sector undertakings in India such as ONGC and SAIL, also use this method. In the Bell Curve system, a small percentage of employees are classified as top performers, the majority fall into the average category, and a small percentage are identified as nonachievers. The bell curve appraisal in HR helps organizations to systematically assess and rank their employees, ensuring that the distribution of performance ratings aligns with the expected parameters of mission and vision of the organization.

The bell curve is used to categorize employee performance and differentiate between top, average, and underperforming individuals. This system aims to ensure that a certain percentage of employees are in each category, which helps with reward systems, and performance improvement. HR departments use the bell curve performance appraisal to identify and compensate top performers, provide additional training and development for average performers, address ssues with underperformers through feedback and improvement plans. Therefore, this method is preferred by HR departments, promoting a culture of high performance and continuous improvement within the organization.

The bell curve was widely adopted, but now a days, several companies have moved away from it, including Google, Microsoft, and Adobe. These organizations have adopted more flexible performance management systems, focusing on individual strengths and development rather than strict groupings.  The bell curve adapts to strict parameters by maintaining a consistent shape and statistical properties when applied to various data sets. This means that regardless of the specific data being analysed, the bell curve will always be centred around the statistical mean, with most data points bundled around the central value and fewer points at the extremes. 

Employee performance distributions often resemble a bell-shaped curve due to several factors, including the inherent nature of human capabilities and the way performance is assessed. The bell curve, also known as a normal distribution, suggests that most individuals will fall within a certain range of performance, with fewer people at the extreme ends

Why does the Bell Curve Work in Performance Management?

Bell curve performance appraisal is a structured method used in performance management to categorize employees based on their performance. Managers assess the performance of their team members over a specific period. This evaluation is based on predefined criteria, such as meeting targets, demonstrating key competencies, and contributing to team objectives. Employees are then ranked from highest to lowest performance. This ranking is typically done by comparing individual performances relative to each other rather than against an absolute standard.

Distribution

The ranked employees are divided into different performance categories following the bell curve distribution: Top Performers (Top 10-20%): These employees exceed expectations and deliver exceptional results. Average Performers (Middle 60-80%): These employees meet the expected performance standards. Low Performers (Bottom 10-20%): These employees fall below expectations and need improvement.

Feedback and Development

Based on their ranking, employees receive feedback. Top performers may receive rewards and recognition, average performers get constructive feedback to maintain their performance, and low performers are given specific training and reskilling plans as additional support.

Objective Evaluation

The bell curve provides a structured and objective approach to evaluating employee performance by categorizing employees into predefined performance levels, it reduces biases and ensures fairness in assessments. This method helps in clearly distinguishing between top performers, average performers, and low performers. This differentiation is crucial for making notified decisions about promotions, rewards, and development needs. 

Motivation and Competition

By recognizing top performers, the bell curve fosters a competitive environment that motivates employees to excel. Knowing that outstanding performance will be rewarded encourages employees to strive for higher achievement. 

Resource Allocation

The bell curve helps organizations allocate resources effectively. Top performers can be given challenging projects and leadership roles, while underperformers can be provided with targeted training and support to improve. 

Consistency in Appraisals

Using a standardized method like the bell curve ensures consistency across departments and teams. This uniformity helps maintain a cohesive performance management in organization. For example, General Electric (GE) famously used the bell curve performance appraisal system to rank employees and drive performance improvements. By identifying the top 20% of performers, rewarding them, and addressing the bottom 10% through improvement plans or other measures, GE was able to maintain high standards of performance across the company. 

GE’s growth and success are often linked to the implementation of a performance management system that utilizes the bell curve, also known as a forced ranking or vitality curve. This system was championed by former CEO Jack Welch who assumed that employee performance must follow a normal distribution. A small percentage being high performers, the majority being average, and a smaller percentage being underperformers. By identifying and often removing underperformers, GE aimed to create a more efficient and high-performing workforce. These advantages make the bell curve performance appraisal a valuable tool for organizations seeking to enhance their performance management processes, ensuring that they recognize and nurture talent effectively. 

When you are told “do as I tell you”, “you are not up to mark,” without listening to you, without understanding your predicament it lets down your morale. When this happens, you lose enthusiasm and goodwill among the staff. It drains energy of people, it disappoints people. Poor leaders suck all good energy of their teammates.

A leadership style refers to a leader’s characteristic: his behavior while directing, motivation style, guiding, and managing their group. Great leaders can inspire positive thinking, innovation, positive movements and social change. They can also motivate others to perform, create, and innovate.

The way Southwest handled 9/11: Southwest is known for its impeccable customer service. In the aviation industry it enjoys its position because of good customer service, Southwest always has put customer service first; no matter what the situation. On the dreadful September 11, 2001, airlines were forced to shut down for days for avoiding more problems. The passengers were shattered and they trying to recover from the abrupt shock. Since all airlines were shut, all airline passengers, flight attendants and pilots were stranded with the planes across the United States. Instead of simply sitting and waiting, Southwest employees were encouraged to take passengers for bowling, sightseeing, for movies to pass the time.

During these tough times, many airlines started cutting jobs in the months following 9/11, because the airline industry had been badly affected, and many airlines were forced to cut their workforce by up to 20 percent. During such tough time, instead of following the trend, Southwest announced within three days after 9/11 that it would keep all of their employees and start a $179.8 million profit-sharing program for employees. Southwest CEO James Parker felt that the foundation of the airlines was built on integrity and sound principles for the past few decades, and at such crucial time he felt that his airline must support the passengers.  Parker’s timely decision and action has become a case study.

As you start observing some people whom you consider as great leaders, you at once see that there are immense differences in how each person leads. Natural leaders inspire individuals to do well, contribute to the success of the organization. Born leaders use feedback and role modeling, not as a control mechanism, but to inspire others.

No matter what the situation is, something that mars organization is practicing double standards; witnessing people say one thing, and do something else. This betrays and demoralizes all stakeholders. Deceit is very destructive. It might work for few days, but it soon evaporates peace of mind. If you are in a leadership position, you must be prepared to take responsibility of your team. You cannot run from result of your team whether good or bad.

Why did Chatrapati Shivaji Maharaj’s soldiers fought so hard for him? What if he sat on top of a hill, safe from the battle? Probably he wouldn’t conquer so many battles. He would have been just another average general in our history books, instead of the example of a successful leader that we know today.

Nelson Mandela was the first democratically elected President of South Africa. He was the face and leader of the Anti-Apartheid movement, relentlessly fighting against racial discrimination all through his life. He was sentenced to life imprisonment for conspiring to overthrow the state following the Rivonia Trial. His tremendous focus, determination, and will dismantled the apartheid, making him come out as a hero and lead his country into having an equal and free future.

Jack Welch of General Electric (GE) pushed GE to new heights; he had to turn everything upside down. Everything changed in the organization. He developed the idea of a “boundary-less” organization. This means that everyone is free to brainstorm and think of ideas. Instead of employees waiting for the nod of some higher up and wasting time, they could meet Welch anytime to discuss about their ideas. He wanted his team to turn loose, but he ensured that performance comes first. Everyone from the lowest line worker to senior manager got Jack’s equal attention; if they had something to say about a new idea that could make the company better, Welch would give the person credit. Jack Welch walked his talk. He stayed true to his passions. As a result, GE became an incredibly successful company under his able leadership. His team was always willing to follow his direction, because the people within organization knew that he always kept his word.

Your team enthusiastically works for you if you do what you say. They observe you; they keenly pursue your actions. If you only order things and don’t get involved in the operation, they might not follow you enthusiastically. And, if your actions don’t follow your words, they will suspiciously look at you for everything you tell them. If trust is not present in your group relationships, you may struggle to make meaningful connections. As a leader, avoid damaging trust because once lost, it is difficult to rebuild. Walk your talk.

In the 20 years that Jack Welch led GE, its revenues rose from $30 to $130 billion and company value went from $14 to $410 billion. Isn’t this sort of miracle? Not surprisingly, each of us would like to be the next god of corporate improvement, but little do we know what it takes to follow in Jack Welch’s footsteps.

Jack Welch joined GE in 1960; he worked in the initial years on restructuring plan, which included retrenching, positioning the SBUs, planning proper segmentation and positioning of the products and most importantly selling off the unsuccessful SBUs of GE. He was named CEO of GE in 1981. “You can’t grow long-term if you can’t eat short-term,” is the philosophy practiced by Jack Welch. Balancing long-term and short-term goals is a tricky job. Many long term goals will have short term goals that lead to them. Not only does this make practical sense but it helps managers grounded and not to lose sight of them. He turned around GE with by utilizing human process. According to him respecting individual worker is most important for any organization.

Jack Welch developed 4 E model of leadership. The four Es are Energy, Energizers, Edge and Execute. People with energy possess boundless vigour and get up every day ready to attack the job at hand. High energy people drive the creativity in organization. Energizers outline a vision and get people to carry it out. Energizers know how to get people excited about a cause or a campaign. They are selfless in giving others the credit when things go right, but quick to accept responsibility when things go wrong. Those with edge are competitive types. They don’t shy away from making really difficult decisions; decisions such as hiring, firing and promoting. They are confident of decisions taken. Welch says that the key to successful leadership is implementation of plans. Without measurable executions, the other “E’s” are useless. Smart executers recognize that activity and productivity are not the same and are capable of converting energy and edge into execution and action which lead to constructive results.

Under Welch’s leadership, managers had wide autonomy in building their GE units in entrepreneurial fashion. Determined to connect the collective power of GE employees, Jack Welch redefined also relationships between boss and subordinates. He wrote: “The individual is the fountainhead of creativity and innovation, and we are struggling to get all of our people to accept the countercultural truth that often the best way to manage people is just to get out of their way. Only by releasing the energy and fire of our employees can we achieve the decisive, continuous productivity advantages that will give us the freedom to compete and win in any business anywhere on the globe.”

Do not manage: Welch doesn’t like the term ‘manage’. To him, it invokes negative image, such as ‘keeping people in the dark’ and ‘controlling and oppressing people’. Welch’s goal was to lead, create a vision and make people passionate about their work. Leadership, according to Welch, anyone who contributes, comes up with good ideas and can energize, excite and inspire other people rather than weaken, depress and control is a good leader.

Bureaucracy really cripples organizations. Conversely, working in a smaller firm can mean negotiating and then developing new policies and practices every time a new situation arises. Clearly, Welch dealt with an advanced and deep-rooted bureaucracy when he joined GE. Lifting this constraint was a key to his strategy. When Jack Welch took over GE when it had more than 400,000 employees spread around the world; that meant a lot of confusing and contradictory regulations and rules were floated. The first thing he did was writing policy, training staff, measuring adherence to standards, establishing gatekeepers, and installing controls.

Welch never feared change; he insisted that his managers, from senior level on down, must embrace change. Everything is constantly changing, says Welch. Right from market conditions, the business environment, consumer spending habits habits, advances in technology, new products, competition everything keeps changing.

He always acknowledged the facts so that the company could exploit it.
According to Welch, CEOs and all managers who deliberately ignore the facts of their business, the business environment, and general market and economic conditions are doomed to fail.

In 2009, Welch founded the Jack Welch Management Institute (JWMI), a program at Chancellor University that offered an online executive MBA. The institute was acquired by Strayer University in 2011. Welch has been very actively involved with the curriculum, faculty and students since the beginning of the institution. JWMI’s MBA program was recently named the number one most influential education brand on Linkedin and one of the top business schools to watch in 2016.

 At GE, Welch became known for his teaching and growing leaders. He has taught at MIT’s Sloan School of Management and teaches seminars to CEOs all over the globe. More than 35 CEOs at today’s top companies are trained under Jack Welch. He demonstrates his passion for the institute by being highly involved with the students, faculty, and the development of the curriculum. JWMI students have direct access to Jack Welch, and he hosts quarterly video conferences with his students.

Jack Welch is a long-time Republican Party supporter; in an interview on CNBC he backed Donald Trump because he likes the real estate mogul’s policies on tax reform, government regulations and national security more than those of Hillary Clinton. Welch is candid about his views and opinions for the forthcoming US Presidential Elections taking place on November 8^th 2016.

In 1906, Italian Economist Vilfredo Pareto observed that the 80% of land in Italy was owned by 20% of population. Pareto also observed that 20% of the pea pods in his garden contained 80% of the peas. He went ahead and carried out surveys on distribution of wealth in different countries and found to his surprise that a similar distribution applied; 20% population in a country owned 80% of wealth.

The distribution is claimed to appear in several different aspects relevant to entrepreneurs and business managers. For example, 80% of a company’s profits come from 20% of its customers, 80% of a company’s complaints come from 20% of its customers, 80% of a company’s profits come from 20% of the time its staff spend, 80% of a company’s sales come from 20% of its products, 80% of a company’s sales are made by 20% of its sales staff. I add here, 80% of taxes are collected from 20% taxpayers in a country.

Quality Management pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s recognized a universal principle which he called the “vital few and trivial many”. While Juran decided to make notes on the principle, in an early work, a lack of exactness on Juran’s part made it appear that he was applying Pareto’s observations about economics to a broader body of work. Hence the name Pareto’s Principle stuck, probably because it sounded better than Juran’s Principle.

In our personal lives also roughly 80% of the effects come from 20% of the cause. In business the 80-20 rule is used to help managers identify problems and determine which operating factors are most important and should receive the most attention based on an efficient use of resources. Resources should be allocated to address the input factors that have the most effect on a company’s final results. The moment, the 20% is recognized; trivial 80% can be sorted out without much fretting on it.  While Pareto observed 20 percent of the people owned 80 percent of the wealth, Juran’s initial work identified that 20 percent of the defects caus 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of time and resources. It is astonishing but, you can apply the 80/20 Rule to almost anything, from the science of management to the physical world.

If we keenly observe in our personal life, we use 20% of clothes in our wardrobe regularly and the balance 80% are rarely used by us. 20% of our friends make up 80% of our social life. 20% of our personal problems consume 80% of our energy and time. 20 percent of stocks give us 80% profits. You go to book a railway ticket, airline ticket, go to pay electricity bill go to a bank or a hospital anywhere if you observe keenly, you will see that 20% of the staff takes on 80% responsibilities. Similarly, police investigations reveal that 80% of accidents are caused by nearly 20% of drivers and that 80% of crime is committed by 20% of criminals. I want to add an interesting point here: Pareto had argued that democracy was an illusion and that a ruling class always emerged and enhanced its own interests. For him, the key question was how actively the head of states ruled. For this reason he called for a radical reduction of the state and welcomed Benito Mussolini’s rule so as to liberate the “pure” economic forces.

Jack Welch applied this theory at General Electric (GE) during his 20 years leadership span. His dynamism and vision was impeccable, GE increased in value more than 30 times to become the world’s richest corporation—and the world’s second biggest in market value. Welch had his own version of 80/20, designed to weed out the trivial many and focus on the vital few. He broke staffing down to a “vitality curve” of three segments. His A – list consisted of the top tier (20 percent) who performed best and earned the biggest bonuses. The B list (60 percent) included managers with a potential to rise to the top. The C-list consisted of people who were positioned at the bottom and were eventually dismissed (20 percent). Welch was blunt and courageous, undisturbed about being popular. Results mattered most. Here’s what he said about downsizing: “Strong managers who make tough decisions to cut jobs provide the only true job security in today’s world. Weak managers are the problem. Weak managers destroy jobs.”

At Hewlett-Packard, Google, 3M when a person is hired, he/she has to work for 80% time of what he/she is assigned to do, the rest of 20% time, the employee can work on whatever he/she likes. This provided, brings in some advancement to the company. What does this mean? It means these companies are ready to take challenges; the 20% silver lining has helped them in bringing the creativity angle in their work culture.

We see many business corporations today applying the 80-20 principle brilliantly to their advantages. They are moving towards owning information and not land and assets. Knowledge is the key. Genuine macro and micro information helps in understanding customer’s pulse, market pulse, rival’s strategy, supplier’s whims etc. Organizations are using information to build better products and deliver enhanced service to increase profits; thus paying less attention to the trivial issues.

Organizations have realized that their 80% profits come from 20% niches and it’s vital for them to recognize those niches; like Jeff Bezos did with Amazon. Closer home, companies like HDFC, Lemon Tree Hotels, Marico, Vedant and Cafe Coffee Day have indentified and focused on their own niches. Only a niche delivers an outstanding return.  It is important for organizations to choose a niche out of various niches recognized by them and invest and work successfully on the chosen niche. The idea applied by successful firms is to maximize the returns with minimum efforts, by making use of the 80/20 practices. Steve jobs, Bill Gates, Sergey Brin & Larry Page and Mark Zukerberg are people who have created wealth by focusing on the niche.

80/20 helps a business firms as well as individuals to focus on what they are good at. Once the strengths are known, by making few amendments one can start effective delivery. Identifying Top 20 Percent is very important. The first way to determine which 20 percent of work you do yields 80 percent of the results; making you think back; by applying backward integration. What were the most important projects you completed last year that pushed your company forward? Your answers will include the types of projects that belong in your top 20 percent skill and core competency. Next, would you follow the same path or you want to diversify a bit, take a call.

The second way to determine your top tasks to perform is to review your to-do list and consider the following questions when appraising each point: does that activity really add value to your company? Are you armed with the resources for performing the task? Can you see someone else doing the job better than you do? Do you need to refurbish your abilities? Finally, a great way to determine which tasks are not in your top 20 percent is to keep a running list of low-value tasks. To begin with, you cannot be performing tasks that can be valued low. The next step in the process is to delegate the lowest value uses to others.

Pareto’s Principle, the 80/20 rule, should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of you work that is really important. Don’t burn your fuel on trivial many instead concentrate on vital few. Work smart!!!