« Should Pay Disclosure Be a More Common Practice? | Main | Excessive Overpayment vs. the Real Solution »



Feed You can follow this conversation by subscribing to the comment feed for this post.

Bell curves with symmetrical distributions only appear in robust collections of random samples or universal populations. A workforce of carefully selected employees does NOT fit those criteria. High-end outliers are treasured and coddled while low-enders are lopped off rather than retained. I've always described the distribution pattern as like a baseball cap with a long bill for the right-side tail.

While this may be news to accountants and engineers, it should be elementary Comp 201 in our profession.

I like your baseball cap analogy. You say it should be elementary Comp 201 for our profession: Well most companies out there use the bell curve. So guess not many of us have taken Comp 201.

HR and comp people should know the facts because they see first-hand how employers value key performers while eagerly shedding the opposite type. Most of our work deals with those two opposite outlier group. It tends to be top management (generally sales or accounting types) who impose destructive policies based on unrealistic bell curve assumptions.

Or, I could be wrong...

Good article.
Glad to have people realize that the Bell Curve only applies to REALLY big data. Even then it is suspect. But, I think we need to be careful when, in the name of science, a new paradigm is defined that is supposed to represent the "right way".

I have seen companies where performance is carried by 80% of the employees and companies where it has been carried by 5%. I have seen almost everything in between.

It should be noted that the Power Law (Theory, Principal, Hypothesis) almost perfectly reflect wealth disparity in the US where the to 10% hold about 80% of the wealth (or something like that). But, in other very successful countries (like those in Scandinavia) the distribution is far flatter, yet total results fairly comparable.

The Power Law may be another example of how BIG data, when looked at from a specific angle, provides a "law" that is unsupported by specific data looked at from the perspective of reality.

The days where I believe a simply rule can apply to all (or even most) companies are essentially gone.

I have seen "lumpy" performance contributions and incredibly flat contributions.

Most companies are far too small to apply any type of generic rule. This is why strategy and culture are such big components of compensation, and many other types of, success.

I am not surprised by this as it mirrors my experience that, even in large multi-national companies, the people who can, and hopefully do, "put the bread on the table" are relatively few, rare and thus in high demand. Most people, due a number of factors including the opportunities open to them from the organisational design and processes, and their own level of motivation and skills, do a perfectly good, at times great, job...but are not "key talent".

I guess the ultimate example could be a movie...the list of people on the credits who all had to work as well as they can to MAKE the movie goes on for minutes...the people who actually make the difference between whether the movie is any good and is profitable, is very small.

If we apply the concept of performance and who does all the work to our compensation structures, then we wouldn't limit the size of increase a top performer that makes more than the mid-range (I understand that not everyone employs this concept). We would throw the "max of the range" concept out the window and pay the top performer appropriately based on his/her contributions. If it happens to be above market, so what! If the 20% leave for better opportunities (compensation, benefits, recognition, etc.) then we either have to replace them with other 20%ers ......who would probably cost more than the 20%ers that left...... or count on some of the 80%ers stepping up.

Thanks Dan and Michael.
Dan -- one could argue that the 10% who hold most of the wealth are not necessarily top performers --- should be but maybe not!
Michael --- yeah this is the tough part. When a company has solid "Joes" and "Janes" that are really great performers they may still not be the people with key skills. And it goes against the grain not to treat them as special as you do the ones that "bring home the bacon".
Sherlyn --- Great! I personally don't like to argue about "nits" on not giving key/critical people increases because they are at the top of the salary range. I'm afraid that when Comp pros make this argument it shows they don't understand the realities of business.

This reminds me of a post I wrote a while back “Rewarding ‘Hyper-Performers’” and the need to rethink typical compensation rules.


Like the article Trevor! Unfortunately we still have managers and comp professionals that only think inside the box and have difficulty working with blurred lines or no lines. The more we design our comp programs to support business needs and recognize the performers that deliver, instead of spreading the peanut butter, the more effective our programs will be to drive better performance both at the company and individual level.

Great article Trevor!!

The Power Law does not improve on the fundamental flaw of the Bell Curve, rather it simply takes it further along. The issue remains that both theories confuse Talent with Performance. Yes it is true that in a group there will be a few outstanding individuals and a larger number within the same talent spectrum, however this is merely a predictor of performance and does not always translate to performance which is simply delivering against set objectives. The reason is that work within such groups becomes distributed in such a way that gives more responsibility and accountability to the outstanding few which then translates to the 80/20 rule, but everyone does perform as your less talented majority still do what's expected of them (sometimes a little more) and that's where most performance management systems fall flat!

However, this is where great managers and great companies differ.....everyone gets an equal shot with emphasis on team work and not the individual. Analogies are abound in team sports where a group of less talented players can defeat a team of immensely talented players by sticking together to make the whole greater than the sum of its parts. That's the holy grail of management, that's what HR has to help deliver.

I think the Bell Curve if used correctly can help to motivate for high group performance, as it is fundamentally a reward tool, a means to distribute limited reward spend in a way that ensures your best performers get enough to keep them engaged. It should be dynamic i.e. multiple variations used to define what performance at different levels looks like and how rewards will be distributed. This should be defined at the start to motivate for higher group performance and achievement of aggregate objectives while providing a mechanism for identifying top performers and rewarding them accordingly.

Outstanding talent in critical roles could be handled within a process that provides a "talent premium" if the retention of such talent is fundamental to achievement of business objectives. This should however be aligned to a Pay for Performance philosophy i.e. outstanding talent should actually deliver outstanding performance.

You make some very good points Oluyonmi. Thanks for your input!

Agree with Oluyonmi driving motivation and Jacque with the premise that the bell curve may not always be most appropriate. In all cases, the business environment should be evaluated to determine best approach for distributing limited funds. I would propose shifting the curve as needed ad it is not a one size fits all. Or, if the power curve is more appropriate for the business, then use it. Whatever model is chosen can be used in budget modeling to most appropriately distribute the funds. That is the value that the compensation professional brings to the table in a business strategy decision.

The comments to this entry are closed.