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A Question From India On Rating Distributions

Like many web sites, our Grote Consulting Corporation website invites browsers to send in questions.

I love getting questions: Its a great way to find out whats on peoples minds so I can cover the issue thats been raised in my writings on performance management or in my Making Performance Appraisal Work seminar.

This morning, the Contact Us link at www.GroteConsulting.com delivered a polite question that asked why I argued in favor of something that in fact I dont believe in at all: a normal distribution of performance appraisal ratings. Heres precisely how Rajiv from the Indian Institute of Management put it:

Mr. Grote,

I am curious about this argument you have put forth. My question is: what is the basis for you to think that employee performance in companies follows a normal distribution?

Id be grateful for your views on my question.

Regards,

You know what a normal distribution is. Its the classic bell-shaped curve that applies to almost everything in life. I think mathematicians call it a Gaussian curve. Applied to performance appraisal, a normal distribution means that most employees will get whatever the forms middle rating is (maybe Fully Successful or Meets Expectations.) A significantly smaller number will get the rating just higher than the middle (Superior or Exceeds Expectations). And exactly the same smaller number will get the rating just lower than the middle (Needs Improvement or Meets Some Expectations.) Finally, a tiny number of employees will get the absolute top rating (like Distinguished or Greatly Exceeds Expectations) while the exact same tiny number will get the lowest rating the form offers (perhaps Unacceptable or Fails to Meet Expectations). Convert those numbers to a graph and youve got your classic normal distribution curve.

But that normal distribution curve in bogus in organizations.

Heres how I responded to Rajivs question:

Greetings, Rajiv!

Thanks for raising the question about distributions.

But Im puzzled. I dont think I have ever argued that the distributions of performance appraisal ratings should follow a normal, bell-shaped, Gaussian distribution curve.

As you know, for a normal distribution curve to be valid, there must be two pre-conditions. First, there must be a sufficiently large population. In most companies there are enough employees for that condition to be met.

The other condition is that there be random distribution. But in companies, you dont have random distribution. Companies dont hire people at random (for example, every 14th applicant) or promote people at random (for example, on an alphabetical basis). And companies provide training and coaching to help people improve their performance.

Therefore, in a well-managed company with good supervisors and tough performance standards, you should NOT expect a random, bell-shaped curve distribution of appraisal ratings. You should expect a slight positive skew.

Heres how I explained it in my book, Forced Ranking: Making Performance Management Work (Harvard Business School Press, 2005, page 148):

Allow some flexibility in the distribution expectations. In GroteApproach, the web-based performance management system my company has developed, clients can determine whether they want to show a recommended distribution and what that distribution should be. But heres our default recommendation:

Distinguished Up to 10%

Superior About 20 30%

Fully Successful About 60% or more

Needs Improvement About 10 15%

Unsatisfactory Less than 5%

This set of guidelines provides for twice as many people to be rated in the Distinguished and Superior category than in the Needs Improvement and Unsatisfactory categories. It provides a range and not a fixed requirement at every rating level. It provides for a reasonably normal distribution but one with an appropriate positive skew. And finally, as the heading indicates, the distributions displayed are not rigid requirements but instead represent the likely percentage of employees that will end up in each area.

I hope this helps. Thanks for writing.

I sent my email off to Rajiv. I dont know whether Ill be successful in convincing him that you shouldnt expect a normal distribution of appraisal ratings. But if the systems working right, there should be around twice as many people getting higher ratings than lower ones, with most employees in the middle.


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