Appraisals are an important part of the employer-employee relationship. It provides the opportunity to recognize and reward employees and ensure they feel valued for their work. By monitoring performance and progress against objectives, employers can assess whether to reward staff with salary increases, promotions, or bonuses.
But what if the appraisal system itself is flawed? Gayathri, our CEO, recently had a conversation with her friend on the appraisal system followed by most large-sized companies and also shared her thoughts through her internal mailer initiative – ‘Pesaalam Vaanga’ – which literally translates to “Come, let’s talk!”. Here are some excerpts from there.
Unlike MNCs and other companies that follow the standard Bell Curve Appraisal System, we do not follow that system at Ideas2IT. Based on the Bell Curve in Statistics premise, The Bell system assumes that there’ll be a few employees that’ll be high-performers and a few employees that’ll be low performers in an organization. The majority of employees will be in-between, the category known as average performers. The Bell gained popularity in the 1980s, and around 75% – 80% of companies in India still use the system.
According to this system, the entire workforce is ranked and divided into 5 categories.
- Below Average Performers
- Average Performers
- Above Average Performers
- High Performers
The managers MUST rank all of their team into one of the stated categories, regardless of whether they are all performing well or not. This system also puts a cap on the number of people in each category, force-fitting employees into one of the 5 categories as per the demands of the Bell curve. For example, if there are 6 high performers but only 4 ‘High Performers’ slots, the manager is forced to give a lower rank to 2 of those 6 high performers.
Moreover, since most companies have a fixed budget for appraisals, a sizeable chunk of this budget goes to the top performers of the top-performing teams. Who are these top-performing teams? Teams that have generated the most revenue for the company. This means that star performers from other teams are left out. Neither are they recognized, nor are they rewarded sufficiently.
Another issue employees face with appraisals is that most companies carry out their appraisals in April. This means that if you joined the company in May 2020, you might not get an appraisal until April 2022. Unfair, isn’t it?
Our verdict – the Bell does not ring it for us
At Ideas2IT, we do NOT follow the Bell Curve Appraisal System. So, what do we do instead?
First off, appraisals are carried out annually, based on the employee’s joining date. So if you joined in June 2020, then your appraisal will be in May/June 2021. This ensures that team leads have enough time for each person’s appraisal. Imagine a team lead who has to appraise almost 50+ teammates in one go in one week. Gumbaloda Govindhaa, right?!
Secondly, we record OKRs (Objectives and Key Responsibilities) at the start of the year for the company as a whole and then for individual teams and employees. We first set the OKR for the organization and share them with our employees. The employees then analyze the organization’s OKR and set THEIR OWN OKRs that are aligned to the company’s objectives.
For example, suppose the company’s OKR is to generate a revenue of XX USD.
- Based on that, a person from Marketing or Sales will set their OKR to generate X number of leads worth XXX USD.
- Similarly, a Team Lead would state that their OKR is to expand the team size from X number of people to X + ΔX number of people for an existing client.
- Meanwhile, a developer might set their OKR to complete certain certifications that will make them invaluable for specific projects.
Thus, our employees set their OKRs in such a way that they can positively contribute to the company’s goals. Therefore, the OKRs vary from employee to employee, team to team, and function to function.
Once the OKRs are set, the respective team manager steps back every 15 days to see how each person in his team is doing. And our CEO takes a step back to see how each manager is doing. These frequent interventions allow for timely course corrections so that everyone has the chance to give their best.
Next up, we record each of our employees’ remarkable feats. Then, depending on what the employee has pulled off, we send out instant emails on our ‘All Hands’ mailing list, that everyone including the senior management, reads. The instant rewards start here with recognition in a company-wide forum and at times goes all the way up to an Alexa! We also organize callouts at quarterly Town Halls to mention the achievements of our people.
Ask those who have been with us for a long time and they’ll vouch for us when we claim that we have given gold coins to long-termers! Also, we recently started our ESOP program, where our employees receive a share in one of our upcoming product ventures.
We always keep our encouragement up to date with the current pulse of our people and the industry. For instance, we gifted iPhones to freshers who joined us last year. How crazy is that?!
Thirdly, and finally, we do NOT keep a specific budget for appraisals. Why should increments be limited to the company’s budget constraint OR how much revenue that team has generated for us? We want appraisals to have nothing to do with the team’s performance or how much revenue the team made. As long as the reasons are correct, we are happy to approve the numbers. Therefore, it is not an overstatement to say that about 99% percent of our people receive 100% of their performance bonus.
That said, we are not claiming that our appraisal system is the best. We are merely stating that our system has been working wonders for us – helping us identify, recognize, and incentivize good performance. We are a great team, with an enviably low attrition rate and a 4.5 rating on Glassdoor. That is why even with all the scope for improvement in our system, we continue to follow our appraisal method until we come across something that is even more rewarding!