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Should The Form Provide A Recommended Distribution Of Performance Appraisal Ratings?

In most cases, it’s a good idea.

One of the most common problems with performance appraisal is grade inflation, where performance appraisal ratings creep up until everyone is rated as exceeding expectations. One way to counteract this problem is by publishing a recommended distribution of appraisal ratings, or requiring managers to conform to a specific predetermined ratings allocation.

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To start, recognize that a standard bell-shaped curve distribution of performance appraisal ratings, with as many employees getting higher-than-middle ratings as lower-than-middle ratings, is probably not appropriate in most organizations. For a bell-shaped curve to be mathematically valid, there must be both a sufficiently large sample size and a random distribution of elements being distributed. Although there are enough people in most organizations for the sample size to be large enough, performance in organizations is far from randomly distributed. People are not hired at random—organizations hire the best available talent. People are not promoted at random—companies promote their top performers. Organizations send people to training programs and arrange development opportunities to improve their performance. Why, then, would you expect a random distribution of performance appraisal ratings?

At the same time, we know that in every organization, some people do perform better than others and that performance overall distributes itself in a way that reasonably resembles a strict bell-curve pattern. The difference between a purely random distribution and the distribution of performance appraisal ratings in a well-managed organization is that in the latter there is an appropriate shift in the distribution of ratings in a higher direction.

If managers are applying tough-minded and demanding performance expectations to a talented and motivated group of employees, if these managers consistently provide coaching to help people improve their performance, and if they confront performance problems when they arise and quickly terminate those who are not willing to meet the organization’s expectations, then it is reasonable to assume that more people will get a higher-than-average performance appraisal rating than a lower-than-average one. In this case, using a five-level ratings distribution procedure, a reasonable distribution might look like this:

In the distribution portrayed above, more than half of all employees are expected to get the middle performance appraisal rating. In most organizations, this would be appropriate. But twice as many people are expected to be rated in the category directly above the middle as will be rated in the one directly below it. Finally, a very small number of individuals produce results over the course of the year that are so outstandingly good or bad that they receive the ratings at the extremes.

If this is the ratings distribution that the organization would like to see, why not publish it directly on the performance appraisal form? In this way, everyone knows the expectations. It’s an even better idea to let people know what the actual ratings distribution for previous years has been, so that people can see the degree to which the actual distribution resembles the desired one.

But should the organization demand that every manager in every area of the company follow this scheme? In most cases, requiring that an exact percentage of performance appraisal ratings be distributed according to a predetermined scheme is not an effective approach. If the work unit is small, managers will be required to rate people higher or lower than their actual performance warrants in order to fit the demanded guideline, and managers who have assembled a particularly talented crew (or managers who have inherited a work group almost completely staffed by slackers) will be limited in their ability to use the performance appraisal process effectively.