The Problem with the People-Management Bell Curve
Some people are better at some things than other people. This may be a result of training, experience, self-discipline, environment, or motivation. It makes sense to value and compensate top performers consistent with their contributions. However, some of the ways we navigate this today are downright stupid.
An employee in the for-profit world will never be fully compensated for the value they bring to an organization. The difference between value and pay goes into the pot called “potential profit.” The business owners and stockholders don’t get to pocket it directly; these funds serve to offset losses, inefficiencies, and mistakes elsewhere in the business. Workers aren’t necessarily being fleeced, since the business owner takes the risk and puts up the capital, and they deserve a fair return on their investment.
This leads to tension between compensation and value. It’s a difficult thing to navigate, both for the employee and for the person who establishes the employee’s salary and determines when it increases.
In the 20th century, some well-intentioned MBA took a statistics class. All this long-forgotten person remembered was a lecture note that said, “All distributions can be approximated or mapped to a normal distribution”—the famous bell curve. This is oversimplified, incorrect, and used to justify a bad idea that spread quickly: force-fitting the work force into a bell curve for rating employees as part of their periodic performance assessment.
The thinking goes that employees’ performance should approximately map to a bell curve. The top end of the distribution are your stellar performers, the majority of the folks in the fat middle perform satisfactorily, and at the bottom are goobers who should be either fired outright or put on some remediation plan. This is used to rein in managers’ imagined tendency to try to give raises or bonuses to more than a small fraction of staff.
Let’s examine scenarios that underscore some problems with this approach:
- You are a diligent and effective hiring manager, and most of the people you hire are above average. Too bad; force-fit them to the curve.
- A peer is a sloppy hiring manager, making consistently poor hires. Too bad; we are going to give some of the peer’s mediocre people raises and promotions anyway, and that’s why there isn’t more money for your team.
- You create a dynamic and nurturing work environment and people on your team demonstrate accelerated professional growth. Too bad; you are forced to rank most of them as “satisfactory,” which will harm morale and lead to increased turnover.
- If there is an economic downturn, your good team may need to shed 20% of its people. Meanwhile, the peer’s poor performing team also only has to shed 20% of its people.
The only way to “win” this stupid game is to hire poor performers for about half of your team and make sure your environment isn’t too conducive to staff development. When the system encourages you to do that, something is definitely wrong.
