Accounting and consulting giant KPMG is changing the way it evaluates its staff in India, in an experiment to see whether qualitative evaluations may be better suited than the traditional bell curve approach rooted within the industry. With the experiment, the Big Four firm aims at simulating a less competitive environment, hoping that a more collaborative work culture will take hold, to the benefit of teams and clients.
The curved people
Traditionally, like many of its consultancy rivals, KPMG uses a bell curve evaluation system to determine and rank the performance of its employees. The approach ensures that the performance of employees is relative and comparable, ensuring that only a certain % of the population (‘top performers’) gain top notch scores and, at the other end of the tail, a similar % of the professionals is rated as underperforming. The overlarge majority of the population sits around the mean performance level. The bell curve approach has large implications for the wallets of accountants and consultants, as both pay and bonus are typically linked to scores.
While the approach creates a useful atmosphere for business to operate in certain market environments, HR experts however suggest that the normalised distribution has the downside that it creates artificial barriers based on limited metrics to determine who is in and who is out at the end of an evaluation cycle. Shalini Pillay, head of people, performance and culture at KPMG in India, explains: "the bell curve, the way it is understood and implemented, is wrong sometimes, making it a forced normalisation and forces rating. It cannot be a rigid curve. It could be a steep curve, flat curve depending on the business performance."
Not only might there be better ways to interpret the distribution, but because only so many can be of a particular rank based not on their ability to perform but on their relative ability to others, highly skilled and motivated staff that have the qualities required to succeed as consultants or partners, may be constrained from moving forward. In addition, it arguably creates a competitive culture, where individuals are forced to see their team mates as something to be beaten to get ahead in the ranking.
The limitations of the bell curve have for long been widely discussed by HR experts, the issue at hand is that are little practical alternatives in place, in particular for large firms such as KPMG and its Big Four peers. To understand the impact of an alternative system, KPMG India has decided to take a pioneering role within the firm. Starting April 1 2015, the business advisory will adopt a new performance management approach.
Competing for talent
The move is partly a rationalisation by KPMG as it comes into a time of increased competition for staff. In India it has around 8,000 employees, and hires 2,500-3,000 people a year on average while it loses about 1,000. The improving market conditions are creating opportunities for staff looking for jumping the ship, risking KPMG losing key talent. To combat this trend, KPMG has been revisiting its employee engagement policies, performance management and hiring strategies to shield key people from competition and fill talent gaps.
As part of the new model, KPMG will focus on providing regular feedback and debriefing to staff for every major assignment. To keep hold of key staff, the firm will also create a steeper bonus curve for its high performing staff. “We want to encourage a collaborative work culture and take away the internal competition between employees, thus encouraging qualitative discussions on performance. We do believe this will help support and drive a high performance culture," says Pillay.
The experiment will last for at least a full fiscal year cycle, although the management team is said to have high expectations, with KPMG International keeping a close eye on the impact. "It is an experiment and we may go back to the old system if it doesn't work, but at the moment we have taken out the rating system," says Richard Rekhy, CEO of KPMG in India.