Recently, we had an interesting discussion in our weekly executive meeting, says business and leadership blogger Dan Oswald. We were talking about how annual performance evaluations went this year. One colleague suggested that our evaluation system can actually hurt morale.
Oswald, CEO of BLR, offered his thoughts on performance evaluations and bell curves in a recent edition of The Oswald Letter.
Here’s my colleague’s point, Oswald continues. Our performance evaluation system includes ratings of outstanding, exceeds expectations, meets expectations, needs improvement, and unsatisfactory. As a company, we expect the distribution of the appraisals to be somewhat of a bell curve that is SLIGHTLY skewed to the top end. That is, we expect the majority of our employees meet our expectations and we have a few more who exceed the middle rating than fall below it.
The problem is that the employees see a “meets expectations” rating as a “C” or just average. If “outstanding” is an “A,” and “exceeds expectations” is a “B,” then a “meets expectations” must be a “C.” Of course, the next two ratings would be “D” and “F.” See how it all works?
But, that’s not the way this was designed. We did not intend for a “meets expectations” rating to equate to a “C.” We did not intend for any of the ratings to equate to letter grades — but then maybe we shouldn’t have the same number of categories as there are letter grades in the typical grading scale.
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And, if you consider how kids are graded in school, you can see why people might be upset. That is, people don’t aspire to be “C” students. In schools today, there are far more “A” and “B” students than there are “C” and below. A “C” student is supposed to be average, but it seems everyone is above average in today’s schools. With honors and AP classes, it’s not uncommon for kids to have a grade point above 4.0 on a 4 point system! Let me say that again, they have a grade point above 4.0 on a 4 point system. Everything in our educational grading system causes us to expect to be above average. But how can everyone be above average?
The definition of average is “a quantity, rating, or the like that represents or approximates an arithmetic mean.” Add up all the ratings and divide them by the number of people being rated and you have your mean. That’s pretty simple and being average here puts you toward the middle of the pack. Here’s the rub, average has another definition when used as an adjective. It’s definition is, “typical; common; ordinary.” Now, who wants to be common? Who wants to be ordinary? Everything in our society makes us want to be extraordinary.
Here’s my take on the ratings. As a company, we have high expectations for our people. Meeting our expectations means you’re doing well in your job. We expect you to be successful. We expect you to perform well. But not everyone can be above average. Not everyone can exceed our expectations. If they do, then our expectations must be too low!
Do I want everyone to be performing at a high level? You bet. But if everyone in our organization was doing exceedingly well by industry standards, we would have the same problem. When rated against their peers, some would be performing better than others. (Not everyone is equal despite what they tell kids in youth sports in which everyone gets a trophy, but I digress.) So even in a company in which people are performing at a very high level there will be differences in performance. And when these people are rated against their peers, even really strong performers will be average — that is, they will fall into the statistical mid-range of our rankings.
So why not rank them against an industry standard? I think there are a number of problems with that. First, there is no commonality in rating systems. And even if there was, it would be difficult to get good data. Second, everyone always has a bias toward their own people. If you didn’t think they were good, you wouldn’t have hired them. And finally, if you want your company to be better than the rest, you don’t want to settle for your people being better than some fictitious industry average.
Now let me talk about the top of the range. Our top rating is “outstanding.” The definition of which is “prominent; conspicuous; striking; marked by superiority or distinction; excellent; distinguished.” To be rated outstanding, you must do something that distinguishes you as superior to others. You must do something striking or conspicuous in your performance. If everyone were “outstanding” then those with that rating wouldn’t be conspicuous or distinct from others.
One colleague compared it to the All-Star game in Major League Baseball. There are roughly 1,500 players in the Major Leagues each year, yet only 68 are exceptional enough to be voted an All-Star. This is, they must be having an outstanding season to be an all-star. Approximately 5 percent of the best players in the world are good enough, in a given year, to be rated outstanding.
Isn’t that what we want our people to aspire to? Don’t we want our people to be the best of the best? Sure, we could rank everyone as “exceeding expectations,” but then I would tell you our expectations are too low. Sure, we could say the majority of our people are “outstanding,” but then it would lessen the honor associated with receiving our highest ranking.
I realize everyone wants to be special. I know it’s not easy to tell people their performance is not outstanding. But if everyone were outstanding then it wouldn’t be an exception, it would be the rule. Maybe our educational system has created an expectation that everyone is above average, but that’s no reason to perpetuate the myth. In what I hope is a company of strong performers, being ranked with the majority of your peers means that you’re doing pretty well. Meeting the performance expectations of a company with high standards means you’re pretty damn good. To change the rating system so that everyone could be outstanding would diminish the accomplishments of those who really performed at the highest level.
Maybe it would help morale to tell everyone they’re exceeding our expectations. Maybe people only want to hear that they’re outstanding. But to improve performance and get the most out of people you must also tell them where they can improve. For people to strive for more, they must understand there are ways they can be better. Telling everyone they’re doing better than what we expect from them only sends a message that they do not need to do anything more. In fact, they could do less and still do what we expect of them. Is that what we want? I don’t think so.
“Not everyone is equal despite what they tell kids in youth sports in which everyone gets a trophy.” So true–and this mentality that has been fostered in kids is turning into a real management headache when the “kids” get into the workplace with a sense of entitlement and inflated egos.
There are a few things that can help with this perception. First, define expectations for each and every item you are rating people on and evaluate performance against expectations not other employees. If nearly everyone exceeds those expectations, they are too low–increase them for the next period. Second, align your expectations with your organizations goals and mission. That avoids the trap of trying for an “industry standard”. Finally consider what each level really means. Meets Expectations should be obvious if you have adequately defined expectations; it’s the ones above and below that are tricky. We have only one level above–exceeding expectations is exceeding expectations–and two levels below to account for the most common reasons for not meeting expectations–won’t and can’t. Won’t meet expectations means you have the knowledge, skills and abilities and choose not to use them; can’t means you are trying and lack certain knowledge, skills or abilities to be 100% successful. This does not translate readily to A,B,C and if people try, well meeting expectations is a B.
From the ‘average’ employee’s point of view, this is all well and good – if, as managers, we also tell them what they need to do to reach the higher levels of performance appraisals. It can be extremely defeating to an employee to simply ‘meet expectations’ with no conversation about what ‘exceeds expectations’ or ‘outstanding’ looks like, and no willingness from management to help them get there. Like everything else, effective performance appraisals that actually motivate and inspire employees require a commitment to communication and a dedication to the on-going development of those employees who have the desire and initiative to reach those upper levels. Great post – thank you!
I would love to improve, not be beat down, it’s unfortunate that my co. uses performance reviews like some kind of revenge tool and then not tell you what they expect or how to improve, just because your super is angry or don’t like you.
I agree that the way employees interpret the 1 to 5 rating scale causes them to urge their managers to rate them 4 or 5. One of the reasons for that (maybe the primary one) is that a 3 on a 5-point scale is half-way down the scale and the employee sub-consciously sees that as only ‘average’…despite the fact that a 3 is fully meeting expectations, i.e. a 100% performer or ‘A’ employee.
That’s why we have chosen to not only show the raw weighted average on the 5-point scale for the overall score, but, we also display how that is represented as a percent. If the overall weighted score is a ‘3’ then they see 100%, which means they are an ‘A’ employee. That absolutely has proven to take away the inflationary pressure and results in truer, more accurate ratings for the individual performance measures.
Hi, Your article helped me reassure my thoughts about bell curve. I never believed in that system.. and after reading yr article.. I am certain i was right in thinking so. In my previous job, I worked as an HR business partner and we adopted the normalisation method (Bell curve) for performance rating. We would do this exercise twice a year and that is when all hell broke lose. Managers were asked / forced to form a bell curve as much as possible and employees went berserk with the idea of putting them in average league when they had performed every aspect of the job efficiently. I never got the point of doing so and tried my best to talk to my managers to adopt a different more objective way of doing things.. but it never happened. being what I am i started devising my own performance managment system (in my mind ofcourse) which is modeled to assure the employees that they have done a good job. Like in the example above.. instead of rating them C.. i would rate them an A. The people who exceed expectations an A+ and the people who need improvement can be rated as A- or B (depending on how poorly they hv preformed).. by this way atleast they are in the A and B league and they know that with little help and training they will perform better.. This sort of rating will aspire them to work harder rather then deject them and make them complacent..
I have this same problem every year. Some managers will rate all their direct reports as “Exceeds Expections”, because they think that meeting expectations has a bad connotation (like a “C”). I like the article, but can anyone give me any real advice on how to get managers and employees to understand what the ratings really mean, other than just pointing them to this article?
We should not be rating employees against each other; we should be rating employees against how well they are meeting the expectations/goals of their job. And those expectations should be defined. A manager should be able to clearly identify what ‘meeting expectations’ would be and what ‘exceeding expectations’ would be. The rating the employee would receive is based on his/her performance around those expectatons/goals as opposed to how another employee performed against the same expectations/goals. The employee then, who is ‘meeting expectations’ isn’t a “C” employee; he is an employee who is doing his job.
I think it is important to measure employees against the job they are expected to complete, not against each other. There also needs to be clear measurements as to what constitutes a “met expectations” and what constitutes an “exceeded expectations”. That discussion, between an manager and a direct report, should happen at the beginning of the year and continue to be discussed throughout the year, so at the end of the year it is relatively easy to rate how well the employee performed against each measureable goal. In sports, just about anyone can tell you who the superstars are because performance goals have distinct measurements. The difficulty in the corporate world is the time and energy it takes to find accurate and agreeable measurements.
Performance reviews can really be difficult! I have done my best to change my current company’s corporate view that only those getting raises or demotions get reviewed! A 5-point scale is definitely a rating system to avoid, in my opinion. I remember my first review out of college. It was “fully meets expectations” all around with a few “exceeds expectations” and NO “oustandings”. It angered me greatly! I had no idea that this average rating was supposedly a good thing! Although companies EXPECT a high quality of performance, when “outstanding” becomes an unattainable goal- you can only hope to dishearten your employees with a review. And as supervisors, aren’t we prone to quickly point out the flaws and forget to praise the successes? Many of us are so busy, and we HAVE to point out the flaws and mistakes to make sure they don’t occur again. None of us HAVE to praise good work for the job to get done. Of course we can all improve in something, but if you want a review to come out “average”, perhaps it would be best to put “exceeds expectations” on certain items and “needs improvement” in others. Even your worst employees do some things well, or would you really keep them in the fold? I am also a big believer in reverse performance reviews- anonymous, of course! How do your employees really feel about YOUR level of performance?
Let’s not forget that the “A” and “B” ranking generally comes with a greater pay increase. This does not help the perception at all.
I agree with Mr. Bruce’s assessment of ratings. A few years ago, a survey was conducted in which employees were asked to rank their performance compared to others in their respective companies. The results suggested that 60% of employees rated themselves in the top 20% for performance – which is statiscally impossible. If that holds true today, then most performance review conversations will continue to be challenging for managers and employees.
Currrently I am working on a rating system centered around 1, in which 1 equals meeting expectations. Ratings above 1, like 1.05 or 1.1 would be above expectations, and those below 1, like .9 or .78, would be below. I haven’t worked out the details, so I’m certain there are challenges with this approach as well, although I would hope that it might tear people away from the A, B, C, D, F grade stigma.
Bell curve / Force distribution is the best way to appraise.
Inspite of the fact that everyone is performing as per the standards, but to appraise is something else. There would be someone who is doing extra ordinarily and some one who is not at all performing.
It is very simple equation. Standards set -(Minus) Actual Performed, you’ll get the result.
Mostly people are on average and it as per the x and y theory. One can be postively reinforced if he/she is performing well than others.
Thats why performance management has to evolve with culture of the organisation. The administrators of performance management (read HR Practitioners) need to steer the organisation towards a common understanding of what the performance appraisal scores mean, in the context of fulfilling the desired objectives or goals.
The reality of the matter is that its not an easy thing to get a common understanding across the organisation, but if you can achieve 75- 80% who interpret the scoring system with a common understanding , thats good enough.
I’d tell them that outstanding is an A+, exceeds expectations is an A-, meets expectations is a B+, needs improvement is a C-, and unsatisfactory is a D-.
As a manager and HR Consultant who has experienced all of the challenges associated with Performance Appraisal ratings, my solution was not to use summary ratings in connection with appraisal discussions. Rating categories are primarily “compensation tools” to divide scarce resources (dollars) and as such, lend themselves to rating categories. Since the purpose of appraisals is to reinforce/encourage expected performance or to improve performance that is not meeting expectations why not limit the discussion to focusing on expectations rather than having an emotional discussion around A,B,C etc.
I like this article, but it is nothing new and I think we all know this. I would really appreciate an alternative solution or practical advice on chaning the system, rather than just pointing out the obvious.
The every-kid-gets-a-trophy issue is really a non-issue, and it’s a red herring argument in this context. The truth is, the kids know who won. The reason the win/lose thing isn’t focused on is because we’re trying to encourage love of the sport. And, by the time they’re in high school, the trophies-for-all thing goes away (at least in most cases). Trying to make parallels between the treatment of pre-high-school kids in sports and that of adults in the working world really doesn’t usually work.
The problems of communicating bad performance news have been with us since long before my kids started getting “participation ribbons.” People don’t like to hear bad news, but we’re responsible as managers to deliver it.
In performance assessment systems, why not have measurable criteria to be met as opposed to any rating scale? Or, if you prefer a scale, one that recognizes performance such as 1 = awareness, 2 = can perform with assistance, 3 = can perform to job requirements each and every time called upon to do so, and 4 = can teach others. Matching the “4’s” with the “2’s” gives you an in=house training capability.
There are a number of issues with this approach:
– Many companies present this as a rating system for the individual employees performance, not as effectively a ranking against others in the group or firm
– Many companies won’t admit to using a bell curve when they do and force it. Then tell employees they aren’t doing their job well even if they were, when they needed to be ranked in the lower percentiles.
– If you have a group of top performers but still must fit a bell curve there are people you are going to rank below average that don’t deserve it. The bell curve has now forced you to tell top performers they aren’t because well a bell curve must curve.
– Since many companies use the 2 levels to be in the group to terminate no one wants to be ranked in those groups ever or you know what is coming, bell curve or not.
– Due to the curve sometimes this rating won’t even come directly from the manager but from a higher up or even HR to force fitting the curve, because hey we need to fit it! For companies looking to downsize this is a great way to fire people without giving packages.
When companies use performance reviews this way it sets up a cycle for distrust in performance reviews, sometimes arguments and even lawsuits due to them.
So what can be done to make this better:
– NOT GREAT BUT BETTER THAN MOST FIRMS DO:Be honest with the employee, tell them this is a company or group ranking that is curved so doesn’t necessarily reflect if they are doing their job poorly or not.
– Don’t make the lower ratings the way to fire people and put them on automatic improvement plans (basically used to prove the employee is worthless to fire them more often then try to actually improve them).
Really should stop using ratings like described above though.
Better would be:
– Really rate the employees on their job they are doing not relative to everyone else because you know what, not everyone in the firm is doing their same job.
– Let’s face it there will always be a ranking of some sort but that doesn’t mean it needs to be directly included in the employees rating given to them.