Although many international companies now use target based appraisal systems, some employers still use a bell curve system which compares employees’ performance relative to others and requires that managers place team members along a distribution curve. The bell curve is an accepted form of managing consistency in performance appraisals especially in the services sectors. However, a recent Employment Appeals Tribunal (“EAT”) case highlights that it is very important to assess how it is applied and used in practice.

Background

Berthold -v- Google Ireland Limited

In this case, Ms. Berthold (the “Employee”) worked for a company which was taken over by Google. She continued in employment with Google and her entry point was as a Level 6 Manager. After a number of unsatisfactory appraisals, the Employee was put on a Performance Expectation Plan (“PEP”). The Employee did not pass the PEP test.

As a result, she received a first written warning and was placed on a more rigorous Performance Improvement Plan (“PIP”) for 90 days. During the course of the PIP, the Employee failed to meet her targets so she was issued with a final written warning. The period of review for the PIP was extended but the Employee was ultimately told that she had failed to meet targets and her employment was ended.

This case focused on Google’s performance appraisal system which involved calibrating employees against other employees at the same level. Expectations for employees were set down by the manager at the start of each quarter. A manager was assigned to do a rating. At the Employee’s level, a score of 3.0 meant an employee was meeting expectations. 3.4 was the expected average mark for the Employee’s colleagues. The Employee’s own score was 2.9 over the course of a number of appraisals which meant she was not meeting expectations.

The Employee alleged that at every supervisor meeting she attended it was agreed that one employee had to have a score of 2.9 and that this affected the bonus and salary of any employee who got such a score. The Employee argued that the calibration process was unfair and was not about how good or bad an employee was but was instead about the bell curve which was arbitrary and subjective.

The EAT found that it had not been established by Google “that the Employee changed from an employee with no disciplinary record to a less competent employee within a short period of time”. The EAT did not accept that the dismissal was fair or that fair procedures were applied.

The EAT awarded the Employee compensation of €110,000.

Conclusion

This was a significant award as last year the average compensation awarded by the EAT in unfair dismissals cases was €16,700. Ultimately, this EAT decision has implications for any company that implements similar performance appraisal systems.

However, the decision is not stating that bell curve (forced distribution) appraisal systems are unfair in themselves but that additional checks and balances are required.

To minimise the risks associated with bell curve systems, it is recommended that:

  • Employees are measured objectively and are aware of how their work is appraised and how to meet their targets.
  • A robust review takes place when grading an employee as ‘underperforming’.
  • Appropriate assistance and training is provided to employees to enable them to meet their targets, particularly those employees with a negative rating.
  • HR should review the system to ensure employees understand it i.e. that there are no surprises. This would involve policing calibration sessions so they are not personal or used as a method to target an employee unnecessarily.