Utilizing Bell Curve for Performance Appraisal- A Research ... - HR Era

Utilizing Bell Curve for
Performance Appraisal-
A Research Study
B. Prashanth
(Published in HR Era, Issue # 63, August 1, 2009)
About the Topic:
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Forced ranking is a procedure that requires managers to assign employees into predetermined groups
according to their performance and potential. The best known company following this procedure is
General Electric. They sort the employees into three groups. A top 20% on whom rewards, promotions
and stock options are showered; a high performing middle 70% with good futures; and a bottom 10%.
The bottom 10% is unlikely to stay. Some other Companies are Microsoft, Cisco Systems, HP, EDS, Pepsi
Co and Sun Microsystems.
Research Objective:
Primary Objective:
To study the positive and negative effects of using forced appraisal system with reference to systems
practiced in other organizations.
Secondary Objectives:
To identify and ascertain the prevalence of forced appraisal system in organizations (sector wise
and size wise existence)
To find if the attrition level of an organization is affected by existence of bell curve
To find if the employee satisfaction level of an organization is affected by existence of bell curve

To find out the most prevalent ratio followed in organizations
To identify the industry specific grievances with bell curve application(most prevalent
To identify the most commonly followed model of bell curve in companies which are
benchmarks
To enlist the various modifications done in the system by organizations so as to reduce its ill
effects
Need and Scope of the Study:-
Why do we need to study the utility value of forced appraisal system? The answer is based on the fact
that, although Forced Distribution Method is quite popular in western countries, it does not ensure its
success in our country. It is severely criticized for being unethical, subjective, and unsuitable for small
teams and creating a dysfunctional work environment. These pitfalls far outweigh its contribution in
terms of minimizing the errors of central tendency and facilitating comparative ranking. Bell curve
method is highly subjective. Since the bell curve is applied, not across all the employees, but to
individual department / team / function, there is a good chance that the worst in the high performing
group may be better than the best in an average performing group. Finally, the company may be left
with low performers, while losing some good performers.
However it comparatively bias free system if handled properly where in the chance of organizational
politics is minimized in such cases. Few other surveys do prove that 360 degree is more prone to bias
and have more chances of being prone to errors. Also it is not always comfortable to involve everyone in
the appraisal process in case huge organizations. Most often the criterion of judgment of performance is
based on the kind of jobs that are specific to the industry. Thus the following factors decide the success
of the system
1. Criterion or areas on which employees are rated
2. Transparency level of the system
3. Post appraisal activities.
Thus a survey was conducted amongst organizations to find the prevalence of forced appraisal system
both Sector wise and based on the size of the organization in terms of employee number. The motive of
the study was to find the advantages and disadvantages of following the above mentioned system of
Performance appraisal.

STATEMENT OF THE PROBLEM:
Most of the Human resource management processes aim at keeping the employees satisfied and to
keep their performance at the right pace. In other words proper utilization of the human resources
available to an organization is one of the main aims of HRM. However an improper judgment of the
performance of an employee and an inappropriate reinforcement to such performance would not only
pose the risk of non-performance, but would also bring in great level of stress and dissatisfaction
amongst employees and sometimes may even lead to higher level of attrition in the organization. Thus
bell curve system of performance appraisal, though very popular is also criticized to a larger extent.
Hence it is essential to find the pros and cons of the system to modify it to suit the organization.
Methodology
Research Design- Descriptive
Sampling Design-judgment sampling technique
Tools of Data Collection/ Questionnaire:
1. Open ended Structure
2. Approximately 10-15 questions for the final survey.
Pilot Survey:
A sample of four organizations from four different sectors (BPO, IT, manufacturing, and finance) was
taken for pilot study, based on the response of employees; Questionnaire was structured and modified.
Sample Size:
Sample size is the number of items drawn from the universe to constitute a sample. The sample size for
the study is 50 organizations. (20-Manufacturing, 10-IT, 10-BPO/ITES, 10-Finance)
Sampling Tool:
Questionnaire is used as a Sampling method, where primary data is collected based on the information
gathered from the questionnaire.

Data Analysis & Interpretation:
The collected data are scientifically codified, tabulated, arranged by using some statistical techniques
such as percentages.
Parameters/ dimensions based on which the study was conducted
o Sector to which the organization belongs to
o Size of the organization
o Performance appraisal system/systems practiced in the organization
o Number of times appraisal is carried out
o Post appraisal activities
o Employee satisfaction level in the organization
o Employee involvement level in appraisal process
o Attrition rate in the organization
o HR involvement in the appraisal process in the organization
o The criterion of Judgment(either quantitative or qualitative)
o The ratio followed and company benchmarked with
Questionnaire was distributed in English.
In certain conditions, even scheduled Interviews were conducted.
Tools of Data Analysis:
Information and Interpretation is furnished using Charts, Pie diagrams and Tables.

LIMITATIONS OF THE STUDY
The study is done with utmost care but some of the major constraints which could not be avoided
during the survey are described below:
Judgment is made only on the basis of questionnaire, which is subject to personal bias of the
respondents.
The study is subject to sampling error.
This report /project cannot be used in future (except for reference) as the data collected and other
variables are subject to change
The HR executive’s point of view from whom mostly the information was collected may not have
given the right picture.
The fear of the pact of confidentiality may also have lead to errors in the answers.
The lack of complete understanding on the subject in some cases also has an impact on the accuracy
of the results.
RESEARCH FINDINGS
TABLE 1.
SECTOR WISE PREVALENCE OF FORCED APPRAISAL SYSTEM
SECTOR MANUFACTURING
(total sample-20)
IT
(total sample-
10)
BPO
(total sample-
10)
FINANCE
(total sample-
10)
Prevalence
in Number
15 7 7 6
Percentage 75% 70% 70% 60%

80
60
40
20
0
Inference: From the above Table it is clear that in Manufacturing Sector bell curve system of
Appraisal is most Prevalent, it is nearly equally popular in other sectors.
Size Above 1500
(total samples-
20)
Prevalence
in Number
SECTOR WISE PREVALENCE OF
FORCED APPRAISAL SYSTEM
MANF. IT BPO FINANCE
TABLE 2.
SIZE WISE PREVALENCE OF BELL CURVE
1000-1500
(total samples-
10)
500-1000
(total samples-
10)
Below 500
(total samples-
10)
18 7 6 5
Percentage 90% 70% 60% 50%
100
50
0
SIZE WISE PREVALENCE OF
BELL CURVE
Above
1500
1000-
1500
500-
1000
Below
500
Percentage
Inference: From the above Table it is clear that in large sized companies Bell curve system of
appraisal is most prevalent in small sized companies its usage is comparatively lower.

TABLE 3.
NUMBER OF TIMES PERFORMANCE APPRAISAL IS CARRIED OUT
Number of times
appraisal is carried
out in an year
Annual Half-Yearly Quarterly
Manufacturing 17 2 1
IT 5 3 2
BPO 6 2 2
Finance 7 2 1
Number of times
appraisal is carried
out in an year
(percentage)
Annual Half- Yearly Quarterly
Manufacturing 85% 10% 5%
IT 50% 30% 20%
BPO 60% 20% 20%
Finance 70% 20% 10%
100
50
0
Number of times performance
appraisal is carried out
Manf.
IT
BPO
Finance
Annual
Biannual
Quarterly
Inference: From the above Table it is clear that in Manufacturing sector the number of times
appraisal occurs is mostly once a year and in general too annual appraisal is the mostly
practiced system.

TABLE 4.
POST APPRAISAL ACTIVITIES ON THE POOR PERFORMERS IN ORGANIZATIONS WITH BELL CURVE
RESULT OF
APPRAISAL
LAY OFF
INTERNAL
TRANSFER
RETRAINING
FURTHER
CHANCES ARE
PROVIDED
NUMBER 5 13 12 5
PERCENTAGE 14.3% 37.1% 34.3% 14.3%
Post appraisal activities on the
poor performers in organizations
with bell curve system
LAY OFF
TRANSFER
RETRAINING
FURTHER
CHANCES
Inference: From the above Table it is clear that in post appraisal period retraining the poor
performer is the most sorts after option.

Employee
satisfaction
level in the
organization
organizations
with Bell curve
organizations
without Bell
curve
Employee
satisfaction
level in the
organization
organizations
without Bell
curve
organizations
with Bell curve
TABLE 5.
EMPLOYEE SATISFACTION LEVEL IN THE ORGANIZATIONS IN NUMBER
50-60% 60-70% 70-80% Above 80%
2 5 24 7
5 3 4 3
EMPLOYEE SATISFACTION LEVEL IN THE ORGANIZATIONS IN PERCENTAGE
80
60
40
20
0
50-60% 60-70% 70-80% Above 80%
33.4%
20% 26.6% 20%
5.7% 14.2% 68.5% 20%
Employee satisfaction level in
the organizations in percentage
50-
60%
60-
70%
70-
80%
Above
80%
organizations
without Bell
curve
organizations
with Bell curve
Inference: From the above Table it is clear that the employee satisfaction levels are
comparatively higher in organizations that practice bell curve.

TABLE 6.
EMPLOYEE INVOLVEMENT LEVEL IN APPRAISAL PROCESS WITH ORGANIZATIONS FOLLOWING
BELL CURVE
Employee
Involvement
Yes To some extent Rarely Never
NUMBER 12 15 4 4
PERCENTAGE 34.3% 42.8% 11.4% 11.4%
Employee involvement level in
appraisal process with
organizations following forced
appraisal system
Inference: It is inferred from the above pie diagram that the level of employee involvement in
the appraisal process (process of self appraisal) is higher in most of the organizations.
TABLE 7.
HR INVOLVEMENT IN THE PROCESS OF APPRAISAL IN ORGANIZATIONS USING BELL CURVE
Employee
involvement
Yes To some extent Rarely Never
NUMBER 20 10 3 2
PERCENTAGE 57.1% 28.5% 8.5% 5.7%
Yes
To some extent
Rarely
Never

Inference: It is inferred from the above chart that the HR involvement in the appraisal
discussion is highly prevalent in organizations using bell curve.
TABLE 8.
ATTRITION RATE IN ORGANIZATIONS USING BELL CURVE VERSUS THOSE WHICH DO NOT USE
BELL CURVE SYSTEM
IN NUMBERS
Attrition rate 5-10% 10-20% Above 20%
Organizations
with Bell curve
Organizations
without Bell
curve
20 12 3
6 7 2
IN PERCENTAGE
Attrition rate 5-10% 10-20% Above 20%
Organizations
with Bell curve
Organizations
without Bell
curve
HR involvement in the process
of appraisal in organizations
using Bell curve system of
performance appraisal
Yes
To some extent
Rarely
Never
57.1% 34.2% 8.5%
40% 14% 17.14%

Inference: It is clear from the above data that the Attrition rate is higher in organizations that
do not follow bell curve system of appraisal.
Appraisal
criterion
Organizations
with Bell curve
Organizations
without Bell
curve
Appraisal
criterion
Organizations
with Bell curve
Organizations
without Bell
curve
60
50
40
30
20
10
0
Attrition rate in organizations
using bell curve versus those
which do not use Bell curve
system
5-10% 10-20% Above
20%
TABLE 9.
CRITERION OF APPRAISAL IN ORGANIZATIONS
IN NUMBERS
Quantitative Qualitative
Manager’s
Decision
12 14 9
5 7 3
IN PERCENTAGE
Organizations
with Bell curve
Organizations
without Bell
curve
Quantitative Qualitative
Manager’s
Decision
34.2% 40% 25.7%
33.3% 46.6% 20%

50
40
30
20
10
0
Quantitativ
e
Appraisal criterion
Qualitative
Manager’s
Decision
Organizations
with Bell curve
Organizations
without Bell
curve
Inference: It is clear from the above diagram that both Organizations using bell curve as well as those
that have different systems stress more on qualitative parameters. However the stress on such factors is
more in case of Organizations that do not practice forced appraisal system.
TABLE 10.
THE RATIO FOLLOWED IN ORGANIZATIONS PRACTICING BELL CURVE SYSTEM OF APPRAISAL
Note: only 25 out of 35 organizations revealed the ratio
RATIO 10,20,40,20,10 10,70,20 20,25,25,20,5 5,15,40,15,5
IN NUMBER 3 7 5 10
PERCENTAGE 12% 28% 20% 40%

45
40
35
30
25
20
15
10
5
0
10,20,40,20,10
The ratio followed in
organizations practicing Bell
curve system of Appraisal
10,70,20
20,25,25,20,5
5,15,40,15,5
Inference: The most commonly practiced Model of Bell curve is 5,15,40,15,5
TABLE 11.
PERCENTAGE
THE MOST COMMONLY BENCHMARKED ORGANIZATION FOR BELL CURVE SYSTEM
Note: Only 17 out of 35 organizations had such Bench Marking
RATIO G.E TVS Tata Group
IN NUMBER 8 6 3
PERCENTAGE 47 35.2 17.64

60
40
20
Inference: It is inferred from the above data that the most sort after company for Benchmarking on the
model of Bell curve to be practiced is G.E. Closely followed by TVS.
SUMMARY AND FINDINGS:
0
The Most Commonly
Benchmarked Organization for
Bell curve system
G.E TVS Tata
Group
PERCENTAGE
The present research was carried out to study the utility value of Forced appraisal system in
organizations, amongst a sample size of 50 organizations with 20 of them belonging to manufacturing
sector, 10 to IT sector, and 10 to BPO and with 10 of them from Finance and Insurance sector.
While 75% of the Organizations belonging to Manufacturing sector use forced appraisal
system, the percentage of prevalence of this system in IT, BPO and Insurance sectors are
70%, 70% and 60% respectively.
90% of the companies with a size above 1500 employees have Bell curve system of
appraisal, with 50% prevalence amongst companies having less than 500 employees.
While 85% of the manufacturing process based organizations appraise their employees
only once in a year, the percentage of annual appraisal in other sectors (IT, BPO and
Finance) are 50%, 60% and 70% respectively.
While 37% of the organizations using Bell curve prefer internal transfers as the best
option to deal with the poor performers the second most practiced option is retraining.
69% of organizations having Bell curve system have employee satisfaction level in the
range of 70-80% with organizations following other systems falling marginally higher in
the range of 50-60% alone (33.4%)
Though the percentage of organizations having Bell curve system that involves the
employees in the process is sizably large with 34.28% the number of organizations that
allows employee participation only partially is much more higher with 42.85%
While 57.4% of organizations using Bell curve system have a great deal of HR
involvement in the process 6% of the sample organizations with bell curve in practice do
not have Hr involvement in the process
Only 46% Of organizations using bell curve stress more on qualitative parameters with
quantitative parameters given more stress in 33.3% of such organizations
While 40% of the Organizations with such system adapt a ratio of 5,15,40 ,15,5, the
least sort ratio is 10,20,40,20,10.

While G.E is the most preferred organization to be benchmarked with in this regard with
47% of the organizations opting it the second most preferred option is TVS group with
35.2% choosing the same
Copyright : HR Era
About the Author : B. Prashanth
He is doing his Post Graduation in HRM in, Madras
School of Social Work (MSSW) Chennai, India.
Contact – prashanth@hrera.com
This research was guided by Jayanthi Peter, HOD
MHRM, MSSW, Chennai, India.
Reference : http://idealworldofhappiness.blogspot.com