Why IBM, Infosys and others are junking bell curve system for appraisals

With Infosys and IBM doing away with the so-called bell curve system of employee appraisal,
 more companies are likely to follow suit and find new methods of assessment as more millennials join the workforce.
Experts said this may be because 52% of the millennials, or those who reached young adulthood around 2000, expect to leave their current employers within the next two years, as per a Deloitte report. The figure shot up to 76% when the time frame was extended to 2020.
Since millennials account for more than 70% of the workers in some companies, employers have little choice but to tailor their policies accordingly.
“This group of people we manage today want fast, frequent, instant and more feedback,” said Richard Lobo, senior vice-president at Infosys, where millennials form nearly 85% of the workforce. “These youngsters are driven and are comfortable being measured against something they understand unlike the earlier generations,” he said.
Under the old system, the systematic bell-shaped graph classifies a majority of the employees in the middle and assumes all employees in a company can be ranked as either top performers (20%) or average performers (70%) and the bottom 10% are typically weeded out. Such a pay-for-performance system, companies earlier believed, encouraged employees to perform better. ​
Infosys has introduced for its 1.9 lakh employees a system called iCount, under which employees are rewarded on the basis of their performance on specific short-term but important targets during the year. Google, Microsoft, Accenture, KPMG and HCL have also either discarded or phased out the bell curve system. Business consultant Ram Charan told ET in a recent interview that his advice to CEOs is that they have to adapt to millennials.
“I tell them you can’t fire them. They will fire you. We have to give up most of the hierarchical structures and use digitisation for that. If you do not do that, you will get left behind. It’s going to happen in the next three years. Millennials have skills that older people don’t have,” he said. Companies are increasingly adapting to this reality. At HCL, where 60-70% of the 1.7 lakh employees are millennials, chief HR officer Prithvi Shergill advises against companies treating their employees as a herd.
“Organisations that treat their workforce as a blob of people will have a challenge retaining them. The same way companies think about customers, they must think about each and every employee a workforce of one,” he said. The change is proving to be a challenge for companies such as Infosys, though, which are figuring out how to iron out issues in the transition phase. Consultants said one way to bring attrition rates down is to adopt a more robust system which indicates that every employee counts.
“The whole notion of employment is turning into ‘Uberisation of work’. People are happy to take short-term projects and their risk appetite is higher. Therefore, retaining them is harder too,” said Kunal Sen, senior VP and strategic business unit head at Teamlease Services.
Time for change
The time is now right for a new system of performance management for companies, said SV Nathan, human resources leader at Deloitte. “It’s nearly a 100-year-old system and people are tired of it. One ask of millennials is that they want feedback in a timely fashion that doesn’t come in a year later. Beyond the feedback they’re looking for coaching. They don’t want to be told they’re dumb but want solutions,” said Nathan.
At Citi India, which uses a distribution curve rather than a pure bell curve, the average employee age is 31and a significant percentage of employees are millennials. The chief HR officer at Citi South Asia, Anuranjita Kumar said the trend of moving away from the bell curve is so far largely for companies in new age and technology industries. “There is a lot of debate about the use of the bell curve and some of that discussion is driven by millennials who are hungry to grow, learn and develop.
The trend is really about moving to real-time feedback and for companies to talk about development rather than appraisal for rewards,” she said. Many companies are now seeing a shift in feedback flow in the opposite direction, that is, from employees to managers. “We all grew up with parents telling us what to do. Now it’s the other way around. We are finding millennials are taking control of feedback.
The practice of having positive, reinforcing conversations is becoming a must,” said Shergill. Another thing that managers would shy away from earlier – difficult conversations – are becoming a must on a more regular basis.