Redesigning Your Organization's Performance Management Program

Bell Curves Can Be Useful Tools in Assessing Talent but are Limited

Remember the bell curve paradigm where roughly 20% of employees "exceed expectations," 70% "meet expectations," and 10% "fail to meet expectations"? Most companies no longer employ a bell curve to assign performance review scores. Still, they're taught a lot in management courses and are worth exploring further here, as they can still be useful in a less formal or limited context. 

In fact, a true bell curve can typically only result from selection pools that exceed 10,000 units in size. Therefore, small to mid-sized companies can't technically use the bell curve tool to "sort," "rank," or "measure" employee performance or assign formal scores. That being said, a bell curve can be a helpful tool and guideline to avoid grade inflation and generally assess talent in the order of who makes the greatest impact and adds the most value to the team's overall deliverables.

Mandatory bell curve assignments have historically caused angst in both managers and employees alike. First, managers naturally resist categorizing their employees according to predefined 70-20-10 parameters. Second, Jack Welch's "rank-and-yank" (AKA "forced ranking") system at General Electric may have produced high performing CEOs and executive leaders back in the '80s and '90s, but it feels out of sync in today's business environment because it limits collaboration, negatively impacts employee morale and engagement, and stifles innovation and risk taking. Third, managers likewise fret coming across as "judging" their staff members without concrete evidence or examples to justify the grades assigned. 

Employees likewise dislike receiving annual reviews and bell curve distributions for myriad reasons: 

1. They feel judged, particularly when they believe that their managers are "forcing them into a bell curve distribution" rather than considering their individual needs. 

2. Performance reviews often lack documentation, examples, or otherwise justify subjective (often negative) feedback. 

3. Reviews are often delivered late, indicating to the employee that their career and professional development isn't that important to the organization. 

4. Employees often aren't sure how they're doing throughout the year due to little or no feedback, so they lose sleep as performance review season nears for fear of the unknown. 

5. Workers feel like the performance appraisal template that their company uses is old and stale and poorly reflects the skills, knowledge, and abilities needed in today's business environment. As such, they feel like reviews are little more than a "paper chase," composed without much thought, foresight, energy, or goodwill.

But wait: there's more. . . The three-tiered "Exceeds | Meets | Fails to Meet Expectations" scoring categories often leave employees lacking in the performance management process. "Meets Expectations" is often equated with C-grade in school. Workers reason, "You mean I killed myself all year for this company despite all the tremendous challenges we've faced, and all they're giving me is a C for my efforts?" How disappointing. . . 

It's time to consider up-ending this old paradigm of performance management, including "annual" performance reviews using stale templates that are out sync with today's demands and grading categories that are let downs. Here are some ways to spoof up your template, grading categories, and the overall efficacy of your company's performance management program. It's easier than you think and can be rolled out by the numbers, one step at a time or all at once. 

Step 1: Transition to a Quarterly Rather than Annual Feedback Rhythm 

I recommend quarterly touch-base meetings to meet Gen Y and Gen Z's needs for "career and professional development." The catch: the employee sets the time on the manager's calendar as well as the agenda for the meeting. The manager's job is simply to listen and coach. Nothing need be put in writing, although employees are welcome to do so. And managers should have questions prepared to keep the conversation moving along (which can be shared with employees in advance).

By discussing performance, goals, achievements, roadblocks, suggestions for team improvement, and progress toward goal attainment on a quarterly basis throughout the year, the end-of-year "annual performance review" inherently changes. It becomes more of a two-way discussion. It helps employees focus on codifying their achievements throughout the year. It treats employees like adults who are responsible for their own deliverables and career achievements. And it places the manager into the role of coach and mentor, which is always preferable to unilateral decisionmaker and disciplinarian. 

Thought of another way, managers can dedicate 80% of the annual performance review discussion to future goal setting and career and professional development; only 20% of the time allotted for the annual review meeting will need to be dedicated to "looking backwards" at historical performance (since it's been discussed throughout the year). It turns the "annual" review paradigm on its head: employees don't feel judged, managers don't feel awkward about sharing negative news for the first time, examples of work product or customer experiences are more recent and concrete, and the natural penchant to inflate grades is minimized. 

In short, quarterly professional development meetings trump annual performance reviews every time. Both are necessary but serve different purposes. Think of quarterly meetings as "verbs" that keep the action going and help employees steer their careers in the right direction. Annual reviews are more like static "nouns" that capture the entire year's contribution and are used for merit and bonus preparation as well as succession planning. As such, annual reviews function as a "wrap-up" or "year in review" meeting, allowing the annual appraisal meeting to focus on future professional goals and KPI (Key Performance Indicator) achievement targets. 

For suggested questions that managers can use during such quarterly "professional development" meetings, see my blog article: "Continuous Professional Development Meetings: Coaching Windows of Opportunity" at https://www.paulfalconehr.com/post/continuous-professional-development-meetings-coaching-windows-of-opportunity. 

Step 2: Update Your Performance Review Template 

Step 2 (a): Customize Your Template According to Your Organization's Growth Stage and Employee Population 

Let's face it: many companies haven't changed their outdated performance review templates in years if not decades. True, performance management software offers templates that are ready to roll out, but they need to be customized. Samples of customized templates include: 

• Small company start-up template 

• Growth company template 

• Mature company template 

• Senior executive template 

• Operational front-line leadership template 

• Professional/technical individual contributor template 

• Hourly, nonexempt, or union employee template 

Read that: once size shouldn't fit all. The more you can capture the stage of your company's growth, your target employee populations, and today's priorities (e.g., agility, accountability, innovation, emotional intelligence, or the like), the more relevant the template will feel. 

For sample templates that match the categories above and that can be downloaded and "mixed and matched" to create the ideal templates for your organization, please see the book that I cowrote with Winston Tan titled The Performance Appraisal Tool Kit: Redesigning Your Performance Review Template to Drive Individual and Organizational Change. You can find it on my author page at Amazon (https://amzn.to/41L6d8E) or at HarperCollins Leadership (https://www.harpercollinsleadership.com/catalog/paul-falcone/).

Step 2(b): Enhance the Performance Descriptors 

A performance review template is not the same as a job description! The job description captures the minimal performance standards needed to perform the basics of the position at an acceptable level. (Think of it as a tool that maps out the basic job functions and requirements that will help a physician return an employee to work by meeting the "essential functions" of the position.) The performance review, in comparison, should set the standard for outstanding performance so that the template itself can be used as a motivational teaching tool. 

For example, a Customer Service descriptor in a typical job description might read: 

"Provides prompt, courteous, and professional customer communication. Provides timely and well-informed advice to customers. Demonstrates sufficient knowledge of company products and cross-selling skills to ensure a high level of customer satisfaction."

That's fairly ho-hum and makes it easy for any employee to "Exceed Expectations" if that same language is carried over into the annual performance review template. 

Now look at this revised descriptor in the enhanced performance review template and notice its heightened expectations: 

"Demonstrates total commitment to outstanding customer service. Provides knock-your-socks-off service that consistently exceeds client expectations. Regularly exhibits creativity and flexibility in resolving customer issues. Remains customer-oriented, flexible, and responsive to last-minute changes in plan. Regularly puts the human relationship above the transaction. Looks always to surprise customers with unanticipated benefits, including lower costs and shortened delivery time frames."

See the difference? These enhanced descriptors drive higher productivity expectations, set the bar at a new level, and reflect performance at a much higher standard. If employees can honestly meet and exceed these heightened expectations, then they deserve a higher score of 4 or 5. Many will realize, however, that a score of 3 is more suitable relative to the heightened expectations outlined above. 

Even more important, a manager can then engage in discussions by asking, "How can we partner together to increase your overall score to [4 or 5], and how can I help you achieve that level of performance? How can you set a goal around that? And what will the measurable outcomes look like so that we'll know you've achieved your goal?" Now THAT'S the Leader-as-Coach model at its finest! See how the template itself can drive healthier career discussions while naturally lessening grade inflation? 

Step 2(c): Replace the Old "Exceeds | Meets| Fails to Meet" Terminology in Your Performance Management Program

I recommend using a five-tiered scale that provides more grading "nuance" and gives operational leaders more flexibility in assessing talent. Three-tiered systems, in comparison, are typically too rudimentary and fail to motivate and excite employees. Four-tiered systems tend to place more weight and emphasis on the failing or partially failing categories, which is counterintuitive because it dedicates more space to subpar performance. Four-tiered programs often look like this: 

1: Exceeds Expectations

2. Meets Expectations 

3. Partially Meets Expectations 

4. Fails to Meet Expectations 

There's little reason to provide two categories that focus on full or partial failures (i.e., Scores 3 and 4) on a four-scaled scoring grid.

Instead, consider a five-tiered rating scale like this: 

5—Distinguished Performance and Role Model Status

4—Superior/Highly Effective Performance

3—Fully Successful/Effective Performance

2—Partially Successful Performance/Needs Improvement

1—Unsuccessful/Unacceptable Performance

This revised scale accomplishes several things at once: First, it balances positives (Sections 5 and 4) with negatives (section 2 and 1). Second, it makes people proud to receive a score of 3 ("Fully Successful Performance") and makes it much easier to deliver than a mere "Meets Expectations" category. Third, it sets managers up to "move the middle of the bell curve"--by targeting high potential staffers currently in the middle of the bell curve and helping them step up into the Superior category. 

For more information on these categories and descriptors, see my blog post "Redesign Your Performance Appraisal Template to Drive Individual and Organizational Change" at https://www.paulfalconehr.com/post/redesign-your-performance-appraisal-template-to-drive-individual-and-organizational-change.

Step 3: Focus "Annual" Reviews on the Future Rather Than on the Past 

Currently, managers spend at least 80% of the annual performance review discussing historical performance to justify the scores assigned. Now imagine it this way: You hold three quarterly touch-base meetings with your employees where they set the time on your calendar, they set the agenda for the meeting, and you get to listen and coach. You have opportunities to discuss recent performance achievements, roadblocks, and challenges faced. You discuss the individual's career, training, and professional development needs. You listen to suggestions on how the team might work together better, what stretch assignments or special projects the individual would like to participate in that match their current career interests, and you discuss goal attainment and next steps. Thirty minutes per direct report per quarter yield an incredible return-on-investment for your time. 

By the time you arrive at the annual performance review meeting, you can then spend 20% (not 80%) of the time looking backwards at past performance and instead spend 80% of your time discussing future goals, career interests, stretch assignments and special projects, mentoring opportunities, rotational leadership roles, and so much more. You can likewise discuss coaching the individual to become a 4 (Superior) or 5 (Distinguished) performer and how to get there. Imagine an annual review program that focuses on the individual's career and professional development goals while codifying their achievements throughout the year, including accomplishments that (a) increase revenue, (b) decrease expenses, (c) save time, (d) improve customer satisfaction, (d) roll out new systems seamlessly, (e) complete projects on time and under budget, and the like. On a more practical basis, you can discuss your employee's improvement and ongoing development in areas that remain stubbornly difficult to master. 

Performance reviews in their current form feel judgmental, out of date, and out of sync with today's realities. It's a wise investment of your time and energy to reinvent the process, shift responsibility for self-evaluation and goal development to your employees, and serve as a mentor and coach rather than unilateral decisionmaker and authoritarian. 

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