Time For Change In IT's Appraisal System

by Sohini Bagchi    Mar 02, 2016

work

Technology companies are increasingly moving away from the traditional bell curve method of performance appraisal to systems that involve regular feedback and rate employees based on their individual contribution. With more millenniums joining the workforce, globally, IT giants such as Microsoft, IBM, Accenture and Adobe among others have already dropped this system of appraisal over the past one year. Back home too, Infosys, Wipro and Mindtree and HCL to an extent have announced the same in the recent past. Experts believe many more companies will soon follow suit.

Typically, the bell-curve mechanism segregates all employees into distinct compartments such as top, average and bottom performers - with the vast majority being treated as average performers. However, with the changing business and HR models in today’s digital era, the bell-curve rating mechanism is no longer an effective method. That’s because, experts believe, the rise of the millennial workforce emerge through collaboration and are the result of a dynamic interplay between levels and various parts of the organization.

Read more: India’s Best Tech Companies To Work For 

As per a Deloitte report, 52% of the millennials expect to leave their current employers within the next two years. The figure are expected to grow up to 76% by 2020. Since millennials account for more than 70% of the workers in some companies, employers have little choice but to tailor their policies accordingly.

The new appraisals systems demand that employees will be offered feedback and subjected to reviews throughout the year rather than just an annual appraisal. Infosys for example is abandoning the bell curve appraisal system, bringing a new incentive structure called iCount as part of its performance appraisal system. Under iCount, employees will be rewarded on specific short term targets and will be given feedbacks throughout the year.

In a recent interview with ET, Srikantan Moorthy, senior vice-president, group HR, Infosys mentioned that the industry needs tools that take into account individual contribution rather than just relative performance. “The bell curve creates dissonance as it limits the number of high performers,” he said.

Similarly, very recently, Wipro has allocated performance-linked compensation budgets to its managers as part of the new appraisal system. “The new system significantly empowers managers to take individual decisions related to employee appraisals, as opposed to the previous system where managers had to conform to the bell curve bandwidth,” a senior spokesperson of Wipro said.

Read more: Infosys Too Revamps Employee Appraisal System

Chris Arringdale, Co-Founder and President at Reviewsnap, an online performance management system believes that employee performance can’t effectively be judged on a Bell Curve, which is unpredictable and also expensive. “On those occasions when managers lead truly high-performing teams, someone still must be ranked low, despite meeting performance plan goals. To replace that person with an unknown is expensive, leading to higher turnover rates,” he said in an article published on June 2015.

Josh Bersin explained the basic faults of the Bell Curve system in his blog stating that it damages employee morale. “Grading on a Bell Curve rations high performers, regardless of those who perform well. These are (typically) the top 10% of the workforce. Forced rankings set a “losers” group at the bottom of the employee food chain. These are (typically) the bottom 10% of your team and finally, the middle level performers who make up 80% of the workforce as scaled will never be motivated to improve,” he explained.

As a  recent Accenture report mentioned, enterprises must focus on enabling people—consumers, workers and ecosystem partners—to accomplish more with technology. They will have to create a new corporate culture that looks at technology as the way to enable people to constantly adapt and learn, continually create new solutions, drive relentless change, and disrupt the status quo. In an age where the focus is locked on technology, the true leaders will, in fact, place people first, it said.

Experts believe by getting rid of old systems and adopting a more robust system where every employee counts, IT firms can also bring down the attrition rates.