Axe the Bell Curve

How the likes of Microsoft and Cisco bid goodbye to the much hated appraisal tool By Dibeyendu Ganguly

When Microsoft announced that it was doing away with bell curve system of appraisals in October 2013, there was a wave of euphoria across the organisation. After all, the bell curve has been held responsible for killing innovation and teamwork at Microsoft and fostering a bureaucratic, political culture that undercut its ability to compete. A 2012 article titled Microsoft’s Lost Decade in Vanity Fair by Kurt Eichenwald described how the company’s superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings: “Microsoft employees not only tried to do a good job but also worked hard to make sure their colleagues did not.“

Such damaging reportage notwithstanding, no one quite expected the company to ditch the bell curve in one go. When it happened, it came as a pleasant surprise to employees across the world, including the 6500 people in Microsoft India. “The initial reaction was “thank god!“ but that was followed by uncertainty, as people started wondering how they would now be measured,“ says Microsoft India chairman Bhaskar Pramanik. “My generation of engineers has been used to stack rankings since our IIT days. But what worked in the past won’t necessarily work in the future. Hence the decision to drop the bell curve.“

The relative grading system in engineering schools is based on the principle that the marks scored by the students in any test will follow a bell curve. The mean score may be high or low depending on the difficulty of the test, but therewill be a standard deviation, with a small cluster of students with scores markedly higher than the mean and a cluster far lower than the mean. It’s asystem that works well in exams, which are individual focused, but it has its limitations in an organisational setting, where teamwork is involved. “Today, a person is appraised not just on individual impact, but on teamwork,“ says Pramanik.“To succeed, you have to be smart, youhave to be collaborative and you have to develop yourself based on feedback.“

The main feature of Microsoft’s new system is the stress it lays on continuous feedback. The appraiser and appraisee are required to do at least four “connects“ every year, where the discussion is around what was achieved in the past quarter, what is planned in the next quarter and what could have been done better. “The discussion is both on what has beenachieved as well as how it has been achieved,“ says Microsoft India Human Resources head Rohit Thakur. “For example, one of the issues discussed is how you have reached out and helped others. It’s helping people get a sense of what success looks like.“

Before Microsoft, Thakur spent 12 years with GE, the original champion of the bellcurve. Today, he’s responsible for eliminating all the vocabulary associated with the concept. “We no longer label a person as “star“ or “non-performer.“ Every individual has bad years and good years. The key measure now is impact. That’s the basis on which everyone is rewarded.“ he says. One of the problems with the bell curve system is the direct link it creates between its five categories and salary hikes. At Microsoft, salary hikes are now left to team managers, who must take a call on how to distribute the sum budgeted to them. A manager can divide this equally amongst his team, but most would recognize this to be a recipe for disaster in the long run. The managers know they need to differentiate and ensure higher rewards to those who have greater impact. Else they will be left with a lowperforming team.

Compare this to the earlier process described in Microsoft’s Lost Decade, where managers would gather in one room during appraisal time to haggle over where their people should be put in the department’s bell curve. Microsoft engineers who were clued in understood it was not just enough to impress their own boss, but bosses of other teams as well, which meant making time to “schmooze as many managers as possible.“ Rajiv Kaul, now vice chairman of CMS Info Systems, was Microsoft India’s first country head. He says: “The bellcurve appraisal is an unnecessarily aggressive American invention that damages human relationships. In large organisations, politics takes over. I’ve seen how it worked, so I never used it in CMS.“

Another large organisation to recently axe the bell curve is Cisco, which announced the decision in November 2014. Since then, Seema Nair, Director of HR, has beenbusy training the 900 managers who appraise Cisco India’s 10,000 employees on the nuances of the new system, which are in many ways similar to Microsoft’s. “Abandoning the bell curve is a bold move and it sent shock waves through the organisation,“ she says.“The senior leaders intuitively get it and they’re the early adopters. But there will be some resistance down the ranks, as there is with any major change.“

Nair’s biggest challenge is to get the quarterly `sync up’ conversations between appraisers and appraisees running smoothly (similar to Microsoft’s`Connect’). The bell curve system also mandated open conversations, but they never actually happened.“In a ranking system, employees would just be interested in knowing their rank. They would tune out to the rest,“ says Nair.

This disinterest in feedback has always been a characteristic of the Indian workplace and bell curve appraisals have failed to address the problem. The new appraisal systems being implemented by Microsoft and Cisco are taking the issue of feedback head on. “Indian managers are hesitant to give feedback to their employees because they’re afraid of confrontation,“ says Mohinish Sinha, head of leadership and talent practice at Hay Group.

“While appraising their people, managers tend to focus on results rather than how the results were achieved. So you end up celebrating bad behaviour.“

The Hay Group has been advising several clients interested in moving away from bellcurve appraisals, but none of them have yet taken the plunge. “They’re flirting with the idea but they’re afraid of where it will take them. It’s basically a change management issue. We tell them to take courage,“ says Sinha.

Source: The Economic Times

Date: May 29, 2015

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Kirloskar Group in Talks to Enter General Insurance

Foreign insurers like Travellers and Ace are eyeing partners here

The Kirloskar Group, which has been in the engineering and machinery business for more than a century, is venturing into the country’s ` . 85,000-crore general insurance business.

People close to the development said the group has begun talks for a joint venture to sell general insurance products in India.

The Kirloskars did not respond to an email query sent by ET in this regard.

Large foreign insurance companies have been trying to enter India’s general insurance market after the government increased foreign investment ceiling to 49% from 26% earlier. Some foreign insurers, including Travellers and Ace, are looking for joint venture partners in India. Kotak Mahindra Bank is the other domestic company looking to enter the non-life insurance market. The business needs an initial capital of `. 100 crore.

In India, there are 28 non-life insurance companies including four in the public sector. The industry is still dominated by public sector companies, with more than 50% of the business written by New India Assurance, National India, Oriental and United India Insurance Company. Liberty Videocon General and Magma HDI General were the last to enter the country’s non-life insurance industry in 2012-13.

There are five standalone health insurance companies. Birla has entered into a partnership with South African MMI Holding to foray into standalone health insurance space. Non-life insurance industry had plunged to single-digit growth rate of 9.3% in premium collection during the last fiscal to . 84,715 crore.`

Source: Economic Times

Date: 27/05/2015

Indian Promoter Must Hold 26% Stake in Insurance JVs

Regulator’s directive aimed at ensuring accountability, management role of local investor

The Insurance Regulatory and Development Authority of India has mandated a minimum 26% equity holding by the Indian promoter in any insurance company to ensure that the local investor does not use the liberal foreign investment and listing policy to dilute accountability.

The regulator insists that the mandatory 26% stake to be held by the local promoter will ensure that there is accountability and that the management does not rest with the foreign company alone in the event of a single block of holding falling below 25% -public shareholding limit -when a company goes for listing.

“Indian investors jointly shall not hold more than 25% of paidup equity share capital of the insurance company,“ said Irda.

As a result of this move, the insurance regulator aims to control transfer and dilution of ownership in insurance companies similar to what the Reserve Bank of India (RBI) does with banks, to prevent financial investors from flipping investments for short term gains that may hurt longterm prospects.

Irda has mandated no single entity or group of investors can hold more than 10% of paid-up equity capital in an insurance company. Amendment to the Insurance Bill had allowed all insurance companies to access capital markets. The government had started off with the process of listing some of the public-sector general insurance companies.

“The regulator wants a promoter in an insurance company , as they have given the licence to a promoter and not just to investors,“ said Amitabh Chaudhry , managing di hry, managing director and CEO, HDFC Life.

HDFC Life, a joint venture with UK-based Standard Life, is likely to be the first of the insurance companies to list its shares on the stock exchanges.

“There seems to be no logic in restricting a single Indian investor’s shareholding to 10% when a single foreign investor can own 26% under the automatic route and 49% under government approval route,“ said Nishchal Joshipura, partner, private equity and M&A at Nishith Desai Associates. “Some of these restrictive conditions will adversely impact the way foreign and domestic investments are structured in insurance companies going forward.“ Large companies are expected to partially monetise their investment stake in their life insurance businesses as the foreign investment limit will increase to 49% from 26%. A quick calculation suggests that five large players could recognise capital gains of `. 20,000 crore, assuming they reduce the stake in their life insurance subsidiaries to 51%, said a report by Kotak Institutional Equities.

Source : Economic Times

Date : 26-05-2015

Big Data Can Be a Great HR Tool

…But has some obstacles to overcome

As CEOs across the globe grapple with issues from talent acquisition and retention to the need for greater employee productivity, a study by KPMG shows that HR has a massive opportunity to drive significant business value. They can do this efficiently by using big data & technology.The global survey reached out to 375 executives, with C-suite executives comprising more than half of them. “A lot of cos in India are showing greater interest in evidence-based HR (data-driven HR) and putting the nuts and bolts in place to have a lot more information which is critical from a talent standpoint,“ says Nishchae Suri, partner and head of people and change advisory at KPMG in India.There is a greater interest in the use of data and analysis in HR function on the part of companies in the IT and BFSI space, he adds.Rica Bhattacharyya takes a look at the key points of the survey.

Source : The Economic Times

Date : 22nd May 2015

New Distribution Norms to Dent Valuations of Insurers Tied to Banks – Shilpy Sinha

Foreign partners may find it cheaper to raise stakes in firms

Valuations of insurance companies, tied to banks, are set to plunge, given the new distribution policy pursued by the regulator. Global insurance companies such as Dai-ichi and IAG (Insurance Australia Group) may pay a lower premium to raise their stake in the joint venture with banks.

The Insurance Regulatory and Development Authority (Irda) has proposed a mandatory open architecture, where one bank will have to sell products of multiple insurance companies. As per the draft norms, banks will have to sell products of three companies, with one not exceeding 50% of the promoter company over the next four years.

At present, under the corporate agency tie-up, banks sell one life insurance, general insurance and specialised insurance like standalone health insurance.

“Fresh valuation could be lower from what IAG had earlier paid,“ said Bhaskar Sarma, managing director and CEO, SBI General Insurance.

“The new open architecture norms will have an impact on the valuation of companies.“ IAG holds 26% stake in the general insurance joint venture with the country’s largest bank State Bank of India.

The Australian insurer had paid a premium of `. 500 crore for a tie-up with State Bank of India, which has over 17,000 branches.

Bank branches that are exclusive to the insurance company now will have to be shared with others, eating into their share of business. “It’s the exclusivity in dis tribution that was at the core of JV re lationships and with that going away there will be a definite impact on the overall value perception,“ said Girish Kulkarni MD and CEO Star Union Dai-ichi Life Insurance.

“While there will be other strength areas still intact, this first level im pact could then drive subsequent valuation dynamics in such JVs. Finally, what needs to be assessed is, are we really enabling the industry ecosystem by doing this?“ “This is a big shift and there’s a bigger downside for a bank-promoted company,“ said Roopam Asthana, managing director and CEO Liberty Videocon General Insurance.

Source: The Economic Times

Date : 22nd May 2015

THE HR MANAGER’S PRIORITY LIST

There are lessons to be derived from global organisations that figure on lists of “best workplaces” year after year. And most of the times, these lessons are easy to implement.
Let’s take a look

ORGANISATIONS IN INDIA

have moved a long way in recognising the importance of human resources as a function and its criticality to successful business. However, when we look at the HR practices in Indian companies and review some of the successful global companies with effective HR processes, we see that in the Indian HR scenario, we have some distance to travel towards achieving excellence. Let’s look at a few of the practices Indian organisations can focus on more effectively: >>

INTRAPRENEURSHIP:

Indian organisations need to introduce processes towards identifying and then, nurturing the entrepreneurial talent within the organisation. HR managers need to play an impactful role in assisting the senior leadership in implementing this, which would help in developing the business and business leaders.

>> SKILL-BASED COMPENSATION STRUCTURES:

Indian organisations, especially in the knowledge sector, have been truly experimental towards creating creative compensation structures. However, the future generations, especially Gen Y will prefer a community of skill-based clubs and skill-based compensation packages with enough flexibility for personal time as well. It is important for companies to review their strategies.

>> CULTURE:

Good companies abroad have always focused on culture and its sustenance. In India, many a times, business priorities take precedence over culture and we see many companies drifting away, thus impacting them in the longterm. It’s pertinent to have the culture sustained since it does tend to become the core pillar for good businesses, especially during difficult times. It is said, if you take care of culture and take care of people, people in turn will take care of the business. >> HR BRANDING:

HR teams internationally focus a great deal on `HR branding’, both internally and externally. This helps in attracting and retaining talent and helps the HR fraternity in self-motivation. The HR function has a long path ahead to travel on this area, which needs patient monitoring and sustenance. >> WELLNESS:

Companies have started lending importance to physical wellness of employees.However, as it is being practiced by many HR-oriented businesses abroad, companies need to look at the emotional and social wellness of employees as well. With stress and early burnouts becoming common phenomena, it is pertinent to have professional counsellors or psychiatrists as a part of the company’s panels. HR managers need to play a crucial role in ensuring such discom forts are not seen as stigmas and facilitate it to be natural course-corrections.

>> FUN, AS A THEME:

Wellness can be well supplemented by having fun and not as a specific intervention unlike what companies do today. This has to be well-aligned into the HR processes, which can include the families of employees and facilitate the employees to connect hisher inner self for any social cause.

While these are some of the practices that can add value, it is imperative to also note that HR practices cannot just be imported from one country to another or one company to another. They need to be aligned and adjustedto the requirement of the environment and sustained.

Source : Economic Times

Date: 19-5-2015

IT’S THE POST-APPRAISAL JOB SWITCH SEASON – Recruitment Firms Go on a Hiring Binge to Meet Demand

Recruitment firms are strengthening their hiring teams in anticipation of post-appraisal job shifts and a surge in client demand. Task forces are being prepared to take on the increase in job hopping within the next few months.

“We hired 100 recruiters in the past three months to manage new orders from ongoing contracts and in anticipation of more clients,“ said Ajit Isaac, chairman, Quess (formerly Ikya Human Capital Solutions).

To net the right candidates in the shortest possible time, the firm has rolled out a `Sniper Recruitment’ training programme wherein head hunters will be trained to identify the best candidate and ensure fewer dropouts. “To increase the wallet share, we have to increase the team,“ said Isaac, who had a team of 180 recruiters before the hiring binge.

The mandates for hiring agencies are expected from technology, infrastructure, oil and gas, aviation, BFSI and hospitality with e-commerce drawing the top slots.

Job switches peak in May-July after appraisal results are out in most companies. The acceptance of temporary employment in job-generating sectors will add to the surge as well.

“Staffing companies are spring boards during good times and shock absorbers in bad times. And acceptance of temporary staff by new industries like ecommerce has pushed the demand,“ says Ashok Reddy, co-founder, TeamLease Services. He added that the plain vanilla staffing firm has 100,000 temps on its rolls, with their year-on-year growth at 22%. In the past two months they hired 15 recruiters and a large chunk of them will focus on IT and ecommerce, said Rituparna Chakraborty, co-founder and senior vice president of TeamLease Services Quess too has 10,000 people working ecommerce alone and expects better times. “Year-on-year growth has been 35% and the numbers are growing dramatically,“ added Isaac.

Adecco India, which has around one lakh temps in India, hired over 20,000 of them in the first quarter of 2015 . “Our temp numbers are growing not only in terms of volume but also in terms of business mix. Our y-o-y growth has been positive and in line with our strategy of `quality growth’ (volumes plus margins),“ said Angelo Lo Vecchio, country manager and MD, Adecco India.

ABC Consultants anticipates that the IT industry will be its key growth area and has increased recruiters in this sector to 90 from 55. The company has 24 verticals that include specialised sections like sports and logistics.

The excitement is not just in staffing and recruitment companies. “The search market will see unprecedented growth once tech, infra and finance industries come into play ,“ said Atul Vohra, managing partner for Transearch India. The company has brought into its fold search firm HR Reflections this April and added four new partners to manage new mandates. Each partner has four to five head hunters in the team.

Source : Economic Times

Date : 19-05-2015