Fairness At The Helm: Why Performance Curves Are a Bad Way to Lose Good Talent
Performance curves, a typical component of performance management cycles, is a traditional, and many would add obsolete organizational practice that is simultaneously contested and practiced in many organizations. The basic tenants of its inception are difficult to resist, because, who would argue against objective-based distribution of performance ratings that differentiate extraordinary performance from that of the ordinary?
The practice of performance curves is informed by the powerful statistical notion of "normal distribution," which is a probability distribution that is symmetric around its mean, showing that data near the mean are more frequent in occurrence than data far from the mean. It assumes the same about employees performance and hence force performance expectations on that basis, which is both naivety and absurdity combined. Since it gained popularity as a legitimate organizational practice in the 1980s, and it quickly served two counterproductive functions: a) put the management of the organization under a false impression of control and b) caused significant indirect risks and costs to the organization. We can discuss each in more detail.
False impression of management control
Few organizational leaders, unless made aware of the significant indirect costs of poorly practiced performance curves, would relinquish the practice on their own initiative, precisely because it is seen as such a potent tool to effect influence and hold employees reins. This practice ensures they never lose control over the "effort-bargain." As you may be aware, no organization can survive on the baseline activities of its employees alone; more is always needed, and that bit of "more," on which the organization relies, is secured in no small part through such practices. However, even this is quickly undermined when good employees, at the edge of broken promises and betrayed expectations, choose to leave. Performance curves, while intended to manage and enhance productivity, often fall short in providing a true diagnostic of performance problems to organizational leaders. They are seldom paired with serious inquiries into the reasons behind performance that deviates from the norm. Instead, they are resurrected at the end of each year, processed in routine, and swiftly closed, without any genuine feedback exchanged, or transparency or fairness attended to. This drift from a premise of objectivity and fairness leads to a reality of disappointments and resignations. The false impression of control, however, is maintained, as those who contest their outcomes are reminded not of the objective criteria they failed to meet but of who is in charge of their fate in the organization. In this context, the illusion of precision and objectivity in performance curves often masks their lack of substantive value. The misguided focus on numerical evaluations overlooks critical qualitative aspects such as creativity and leadership, leading to a pseudo-objective approach that fails to capture the real contributions of employees. Furthermore, the sense of accountability these systems claim to uphold is often counterproductive. By emphasizing competition over collaboration, they inadvertently undermine the collective goals of the organization, discouraging risk-taking and stifling innovation. The counterintuitive impact on employee morale is another significant cost. The stress and anxiety associated with these rankings can lead to burnout and increased turnover, which is particularly damaging considering the cost of losing talented employees. Performance curves often fail to address the underlying causes of performance problems, such as management issues or systemic organizational challenges, instead placing undue blame on individual employees. This leads to a culture of scapegoating rather than one of development and support. The reliance on these curves can also be seen as a preference for control over true leadership. Effective leadership is about inspiring and guiding, not managing through fear or competition. Such an approach signals a lack of trust, which can erode commitment and engagement. Lastly, the ethical and cultural implications of these systems are profound. They can foster a toxic work environment where individual survival takes precedence over shared success, undermining the sense of community and purpose essential for a thriving organizational life.
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Significant indirect risks and costs
According to research by Moon et al. (2016), Performance curves, might initially seem effective by boosting individual task performance and aligning performance efforts. However, these curves can deteriorate overall job performance, especially in areas of teamwork and organizational culture. Their evidence, a sample from other high-quality research papers, suggests that over time, performance curves can undermine citizenship performance, which is crucial for a collaborative and healthy work environment. Employees may feel that these curves don't recognize their broader contributions, leading to a decrease in cooperative and voluntary behaviors. Moreover, the authors documented a noticeable rise in counterproductive behaviors as a result of performance curves. The system's inherent competitiveness, coupled with perceived unfairness, can foster negative actions harmful to the organization. In the long run, the drawbacks of performance curves, particularly their negative impact on team dynamics and overall organizational culture, tend to overshadow the initial gains in task performance. This evidence strongly suggests that while performance curves might offer short-term benefits in specific performance metrics, they can be detrimental to the broader, and often more critical, aspects of organizational life. Moreover, and according to research by Barankay (2012), which details the findings from a three-year randomized control trial examining the impact of performance rankings in the workplace. The study, set in a sales environment where compensation was based solely on absolute performance and not rankings, experimented with providing or withholding rank feedback and adding benchmarks. The results revealed that removing rank feedback actually led to an 11% increase in performance, challenging the conventional belief that awareness of one's rank invariably drives better results. This suggests that the pressure of rankings might actually impede performance for some, and that intrinsic motivation, unburdened by constant comparison that performance curves often force upon employees, could be more effective. In addition, in a multi-tasking environment where employees could sell multiple brands, the study observed that employees strategically shifted their efforts to other tasks when their rank was lower than expected. In other words, performance curves forced behavioral change in employees, which may not always align with the interests of the organization.
In conclusion
I will be the first to say that this article does not contribute anything new or innovative. Much of its content is well understood and agreed upon by many HR professionals and leaders. For what is worth, I felt obliged to discuss it. The essence of it is that performance curves, initially designed to bring objective fairness to performance management, ironically end up doing the opposite. They simplify the complex reality of human performance into mere numbers, often overlooking the unique contributions of individuals. This oversimplification can lead to unrecognized potential and dissatisfaction, driving away valuable talent. In their quest for standardized assessment, organizations using performance curves risk losing sight of what truly matters - the diverse capabilities and motivations of their people. The real challenge lies in understanding and nurturing these human aspects, rather than relying solely on a standardized metric that may fail to capture the full picture. In the shadows of such performance curves, a narrative unfolds - one where the extraordinary is often mislabeled as ordinary, and the unique potential of individuals is lost in the quest for standardized excellence. The persistence of performance curves in many organizations, despite their detrimental effects, is a strange reality. Perhaps, this practice continues not because of its benefits but due to its insidious nature. It silently, slowly, and subtly erodes the good elements of a healthy work culture and in the aftermath, the good talent will just choose to leave silently so I guess nobody has to account for anything.
Full-stack Software Engineer ✨
11moValuable read.