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Normalization Performance Scores Models: An Illustrative Case Study

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 Global Journal of Management and Business Research: A
Administration and Management
Volume 18 Issue 1 Version 1.0 Year 2018
Type: Double Blind Peer Reviewed International Research Journal
Publisher: Global Journals
Online ISSN: 2249-4588 & Print ISSN: 0975-5853

On Normalization Performance Scores Models: An Illustrative

Case Study
By Mncedisi Michael Willie
Abstract- Problem Statement: Performance Management System (PMS) applies to all companies. It is a
system that has been in existence for decades and, yet Human Resources professionals and managers
have the difficult task of ensuring that it produces results intended for. One of the limitations currently is
that models used to measure performance are subjective and methodologies such as normalization of
performance scores are not applied consistently nor have some limitations.
Methodology: This study design was a retrospective case study on a one-year performance review data.
The hypothesis in the current study was that the modified normalization performance scores models
reduces bias and performs better than the normalization score models. Final year-end performance
scores for individual employees were used to assess four models.
Results: The results showed no significant differences between the four models. Therefore, the modifying
normalization performance scores did not improve the model. These results also revealed precincts of
forced distribution such as the size of the business unit or organization and lastly, the employee-
supervisor consequence.
Keywords: performance management, management education, normalization, business management
and research.
GJMBR-A Classification: JEL Code: H89

OnNormalizationPerformanceScoresModelsAnIllustrativeCaseStudy
Strictly as per the compliance and regulations of:

© 2018. Mncedisi Michael Willie. This is a research/review paper, distributed under the terms of the Creative Commons
Attribution-Noncommercial 3.0 Unported License http://creativecommons.org/licenses/by-nc/3.0/), permitting all non-commercial
use, distribution, and reproduction in any medium, provided the original work is properly cited.
 On Normalization Performance Scores Models:
An Illustrative Case Study
Mncedisi Michael Willie

Abstract- Problem Statement: Performance Management the overall performance of the organization. There is
System (PMS) applies to all companies. It is a system that has extensive literature that links performance management
been in existence for decades and, yet Human Resources to the overall strategy of the organization (Callaghan,
professionals and managers have the difficult task of ensuring
2005; Adler, 2011; Chau, 2008). According to Saravanja
that it produces results intended for. One of the limitations

2018
(2010), Performance Management has to be
currently is that models used to measure performance are
approached from an integrated perspective, where there

Year
subjective and methodologies such as normalization of
performance scores are not applied consistently nor have is synergy between the performance management
some limitations. system and strategic planning. PMS is an important part
of the performance management process as these 15
Methodology: This study design was a retrospective case
study on a one-year performance review data. The hypothesis systems consist of measuring and monitoring the

Global Journal of Management and Business Research ( A ) Volume XVIII Issue I Version I
in the current study was that the modified normalization achievement of the goals through clearly defined key
performance scores models reduces bias and performs better performance indicators.
than the normalization score models. Final year-end In recent years South African private companies
performance scores for individual employees were used to and most government entities have increasingly started
assess four models. to link reward to performance (Callghan, 2005; Bhengu,
Results: The results showed no significant differences between 2012). On the international front, large organizations are
the four models. Therefore, the modifying normalization achieving better results and employee engagement by
performance scores did not improve the model. These results
linking reward directly to performance (Shah et al., 2012;
also revealed precincts of forced distribution such as the size
of the business unit or organization and lastly, the employee-
Armstrong, 2010). A study by Lawler et al. (2012) found
supervisor consequence. that bonuses and salary increases tied to performance
appraisals are associated with better organizational
Recommendations/Value: Alternative approaches other than
normalization of performance scores need to be considered in performance.
measuring performance. These methods need to adjust for O’Callaghan (2005) listed factors that are often
factors such as the supervisor or manager influence, the not addressed in organizations and eventually upshot in
complexity of the job, the variations in the job functions and a destructive performance management processes. The
the business unit size. author further specified that performance management
Keywords: performance management, management should be a process that incorporates the following:
education, normalization, business management and • Planning Performance: setting Key Performance
research. Area’s (KPA’s), objectives and standards that
I. Introduction include corporate strategy and development plans
• Maintaining Performance: monitoring, feedback,

P
erformance Management is a process of defining coaching, mentoring and regular interactions
clear organizational objectives for employees and regarding goal achievement
regularly review their actual performance against • Reviewing Performance: formal feedback and
set targets. One of the vital stages in the process is to ratings to evaluate performance
eventually reward high performers and also identify non- • Rewarding of Performance: increases, bonuses,
performers with an objective of employing interventions incentives, etc.
to help them improve. High performers are generally
Another body of literature depicts performance
rewarded in monetary or non-monetary form. Rewarding
management process asanintricate process due to
of high performing employees is subject to policies and
some reasons, one of them being that the direct reward
performance standards that are defined at
(or the withholding thereof) for performance may impact
organizational level. Effectiveness of organizations is
on the employee’s motivation to perform better (or
achieved through improving the performance of staff by
worse). Furthermore, a performance reward
continuously developing their capabilities.
management system that lacks objectivity might
Performance management remains an
become unsustainable or controversial.
important aspect of connecting people management to
Leneburg (2012) discussed the methods and
Author: Multinum, Post Net Suite 427, Private Bag X 32, Lynwoodridge, factors that may adversely impact the objectivity of PMS.
0040, South Africa. e-mail: [email protected] The four rating errors described by the author include
© 2018 Global Journals
 On Normalization Performance Scores Models: An Illustrative Case Study

strictness, leniency, central tendency, the halo effect both mid-year and final assessments and the average of
and, recent events. The rating scale method is the most the two scores was used in the analysis.
common method of recording and evaluating
b) Procedure
employees and for deciding promotions and annual
There is comprehensive literature on
increases. These methods continue to attract
performance rating methods, a study by Stewart et al
controversy due to bias as well as inconsistencies when
(2010) describes a plethora of performance terms.
implemented.
These include terms like forced distribution, forced
Normalization of scores commonly compares
ranking system, bell curve, group ordering and normal
and standardizes performance scores of individuals
distribution. These are often used in performance
belonging to different business functions in an
evaluation systems to rate and rank employees
organization. A recent study by Sarkar et al (2011)
performance. Many organizations make use of these
proposed a modified methodology of normalization of
rating systems where performance scores of various
scores. In an illustrative example the author found that
2018

functions are combined, irrespective of outliers (Sarkar

the modified methodology reduced bias in the form of
et al., 2011). The current research adapted a
Year

association between the rank of an individual and the

methodology employed by Sarkar at al. (2011) and
organization.
considers grading range and corresponding incentive
16 A study by Vaishnav and Denos (2005)
level as depicted in table 1 below.
discussed limitations associated with normalization of
Table 1 further depicts that employees who
scores in the PMS. The authors warned that a PMS that
Global Journal of Management and Business Research ( A ) Volume XVIII Issue I Version I

obtained scores less than 46do not meet the minimum

employs normalization of scores methodology needs to
criteria for financial incentive reward and these were
be adjusted for supervisor or manager effect. Zewotir
denoted as underperformers. Employees that obtained
(2012) argued that unless the same supervisor is
performance scores of more than 80 points were
evaluating all employees in the organization, then there
regarded as outstanding performers and qualified for a
is likely a bias effect that could possibly be introduced in
performance bonus factor of 10%.
the process. The author further noted that the supervisor
influence were a significant factor that could not be Table 1: Performance Grading and Incentive Levels
ignored in any employees' performance appraisal.
Grading range Incentive level
In the current study, we conducted a
comparison analysis between the normalization and [0-45] 0%
modified normalization of a performance score model. [46-55] 7%
The modified model was proposed by Sarkar et al. [56-69] 8%
(2011) as a better model that reduces bias. [70-79] 9%
The objective of the current research was to
[80+] 10%
assess one of the key pillars of an effective performance
management process, namely the rewarding of c) Data Analysis Method
performance (O’Callaghan, 2005). The hypothesis was The study design was a retrospective case
that the modified normalization of scores methodology study which compared four performance models, these
reduced bias and was not coupled with factors such as models followed forced (normal) distribution function.
job complexity, variances in job functions and the The hypothesis in the current study was that the
supervisors’ effects. For the purpose of the current modified normalization performance score models
article, factors such as job complexity and the reduced bias and performed better than the
supervisors’ effects were not explored in detail. normalization score models. In this study descriptive
Therefore, the primary objective of the study was to statistics including frequencies and mean ratings
illustrate the use of a bell curve to assess the overall scores. Final year-end performance scores for individual
performance of employees for the 2011 financial year, employees were then used to assess the three models.
secondary was to compare the ordinal normalization Significance was at 5% level and, the analysis was
scoring processes and the modified methodology. conducted on both (SAS, 9.2) and Stata 12.0 statistics
packages.
II. Methods
d) Model Specification
a) Research Population and Sample There is extensive literature on the use of a
The investments company included in the Gaussian (Normal) distribution to measure individual
current study was a consulting firm that consisted of performance. These practices are particularly prevalent
over a 100 employees employed across 18 business in the field of human resources management,
units. As a part of the performance management organizational behavior, and industrial and
assessment, employees were assessed for performance organizational psychology. The assumption made was
reflecting the 2011 financial year. The study included that individual performance follows a Gaussian (normal)

© 2018
1 Global Journals
 On Normalization Performance Scores Models: An Illustrative Case Study

distribution in the form of a bell curve with the majority of As per normal distribution, high performers are
performers clustered around the mean. This selected if they scored more than the average + ‘Z’
predisposed organizational practices for a while now. times the standard deviation. The ‘Z’ value depicts the
The normal distribution, sometimes denoted as a forced standardized normal variable or the Z score.
distribution would assume that there would be a small For example, to identify the top 10% of
number of non-performers and a small number of high employees, the Z score will be 1.28155 (Sakar et al,
performers. The majority of individuals would be the 2011). The normalization of scores was the
average performers clustered around the mean (Stewart methodology employed in the current research and,
et al., 2010; Harbring et al., 2010). scores were used to determine which employees
Box 1 below depicts an example of a forced qualified for performance incentives such as bonuses or
distribution schema. annual increases.
Box 1: Forced Distribution Scheme adapted from Normalization of performance scores was
denoted by Model 1 (M1). Model2, Model 3 and Model 4

2018
Grote (2005)
[M2-M4] are modifications of M1 and are subject to
Level Ranking Scheme Rank %

Year
different characteristics as depicted in Equation 1.
1 Does not meet minimum requirements 5 In Table 2 below, the Z-score in Equation 1 was
2 Not yet effective 20 derived for each business unit and, the final comparable 17
3 Effective 50 score for the respective Models were calculated for each
employee as follows:

Global Journal of Management and Business Research ( A ) Volume XVIII Issue I Version I
4 Very effective 20
5 Clearly outstanding 5

Comparable score = overall average +Z score × overall standard deviation (1)

Table 2: Model Description
Model Adjustments
Model 1(M1) None
Model 2 (M2) Comparative scores based on Model 2
Comparative scores based on Model 3. Re-classification of business units to attain effective size per
business unit. Desired number of business units was 5. Re-classification of business units ‘classes’
Model 3 (M3) were purely based on the size effect. Therefore job complexity between professions and professionals
of the level of qualification were not accounted for.
Comparative scores based on Model 4. Reclassification of business units to attain effective size per
business unit. Desired number of business units was 4. Re-classifications of ‘classes’ business units
Model 4 (M4)
were purely based on the size effect. Therefore job complexity between professions and professionals
of the level of qualification was not accounted for.

III. Results assessed for normality and, we subsequently rejected

the null hypothesis (p-value=0.0237). Therefore,
a) Descriptive Analysis
performance scores of the total population does not
The final analysis included a sub-sample of 94
follow a normally distributed.
employees out of a sample of 95 employees from 18
business units. This represented 98.9% of all
employees. The average mean score was 70.3 with 95%
CI (68.5, 72.1) for the sample and 70.6with 95% CI (68.9,
72.3) for the sub-sample. Table3 below also depicts a
median score of 72 for both the sample and sub-
sample.
Table 3: Descriptive statistics of the scores
Lower 95% Upper 95%
N Median Mean
CL for Mean CL for Mean
95 72 70.3 68.5 72.1
94 72 70.6 68.9 72.3

Figure 1 below depicts a distribution function of

the total scores and, a Whisker Box plot for the sample
which also shows an outlier. The sample was also

© 2018 Global Journals

 On Normalization Performance Scores Models: An Illustrative Case Study

75

90
65
55

80
Total score

45
35

70
25

M1
15

60
5
-5

50
1 2 3 4 5
2018

M1 BellCurve

40
Year

Figure 1: Distribution of scores and Whisker Box Plot for the sample, n=95
18
The identified outliers were further removed in subsample analysis scores followed a normal
the sub-sample data and, scores were re-tested for distribution.
Global Journal of Management and Business Research ( A ) Volume XVIII Issue I Version I

normality.
Table 4 below depicts Skewness/Kurtosis tests
for normality which were not significant; therefore the
Table 4: Skewness/Kurtosis tests for Normality, n=94
Variable n Pr(Skewness) Pr(Kurtosis) Adjchi2(2) P-value
M1 94 0.057 0.3867 4.46 0.1074

Normalization of performance denoted as M1 This was done to test the size effect between the
were compared to incentive levels given in Table 1. different business units.
Model M2 was a modification of Model 1 as outlined by In M2, M3 and M4 the Z-score for each
Sarkar et al. (2011). Models M3 and M4 were a business unit were computed and the final comparable
modification of M1 and were based on the re- score for respective Model was calculated for each
classification of business units ‘classes’. employee as follows:
Models M3 and M4 were re-classified and the
desired sample for each business unit was obtained.
Comparable score = overall average +Z score × overall standard deviation (2)
Table 5 below depicts descriptive statistics other models, which were significantly higher. The
computed for each model. There were no significant average number of employees per business unit was
differences in the average scores between the four higher for M3 and M4, and the effect of reclassification
models: 70.6 95% CI (69.1-72.1) compared to 70.6 95% of the business seemed to have had an impact only on
CI (68.9-72.3), 70.6 95% CI (69.0-72.2), 70.6 95% CI M3. Normality tests for the four models are shown in
(68.9-72.3) of M1, M3 and, M4 respectively. Table 5 below.
A noteworthy feature of the data was that there
was less variation in M2 (SD=5.93) when compared to
Table 5: Descriptive Analysis of adjusting for different models
Model Class level Total score
Number of Business Average Number of Employees per Mean Std. Range
Range
functions Business function score Dev. (Min-Max)
M1 18 5 2-9 70.61 8.23 51-87
M2 18 5 2-9 70.64 5.93 57-82
M3 5 19 8-39 70.63 8.01 53-84
M4 4 24 14-36 70.61 8.07 51-87

We cannot reject the hypothesis that M1, M2 reject the hypothesis that M3 is normally distributed at
and, M4 are normally distributed but we also cannot 5% level.

© 2018
1 Global Journals
 On Normalization Performance Scores Models: An Illustrative Case Study

The kurtosis for M3 was 0.0228 with a p-value of cannot reject the hypothesis that M3 is normally
0.0229, which indicated that it was significantly different distributed on the basis of skewness alone. Therefore,
from the kurtosis of a normal distribution. However, we all four models follow a normal distribution.
Table 6: Skewness/Kurtosis tests for Normality for M1-M4, n=94
Variable Pr(Skewness) Pr(Kurtosis) adj chi2(2) P-value
M1 0.057 0.3867 4.46 0.1074
M2 0.1202 0.3118 3.54 0.1703
M3 0.1122 0.0228 7.06 0.0293
M4 0.1428 0.3022 3.31 0.1914

Figure 2 below depicts the assessment between the four models.

The sub-sample data on the four models do not have outliers and, its symmetric box implied that the scores

2018
appeared to be normally distributed.

Year
90

80 19
70

Global Journal of Management and Business Research ( A ) Volume XVIII Issue I Version I
60
80

50

Count
40
30
70

20
10
0
60

0 1 2 3 4 5 6 7 8

Incentive level
50

M1 M2 M1 M2 M3
M3 M4 M4 BellCurve

Figure 2: Distribution of Performance Models M1-M4

In Table 1 above and Table 7 below, we when compared to the other models where only a few
illustrated the model matrix of sample representation of ratings obtained a 10% incentive reward. Another
performers per model and incentive level. The results noteworthy feature of model M2 was that there were no
showed that model M2 followed a contrary outcome 7% incentive rewards.
Table 7: Model Matrix, sample representation of performers by grading level
Incentive Level M1 M2 M3 M4
0 0% 0% 0% 0%
7 4% 4% 5%
8 36% 45% 37% 37%
9 48% 53% 45% 48%
10 12% 2% 14% 10%
The top-ranked (9% incentive) as depicted in The comparison analysis between M1 and M3
Table 1;Figures 3, 4 and five below shows a comparison was more bias towards BB4 and BB5 with an effect rate
analysis between the four models to assess the effect of 0.4. Comparisons between M1 and M4 were bias
on performance incentives. These results indicated that towards business BBBU3 and BBBU4 with an effect
the interquartile range (IQR) was smaller for model M1 rate of 0.5.
when compared to model M2, M3 and, M4. IQR of 11.6, Overall, there were significant differences in the
11.7 and 12.1 indicated a widening interquartile range. mean number of performers subject to incentive: M1
The figures below indicated that they was bias and M2 with 3.45 95% CI (2.316-4.59) vs. 3.36 95% CI
in comparison of M1 and M2, and M3 and M4. The size (2.11-4.61). Comparisons between M1 and M4 yielded a
effect was evident in the comparison analysis between slightly higher with the average score of nearly three
M1 and M2, where the modified model M2 was more times more at 8.4 95% CI (2.28-14.52) vs. 9.0 95% CI
bias towards 3 of the 18 business units with an effect (4.03-13.97).
rate of 0.17.
© 2018 Global Journals
 On Normalization Performance Scores Models: An Illustrative Case Study

The average number reward increased further performer: 11.25 95% CI (3.08-19.40) vs. 11.25 95% CI
between M1 and M4 with the average number of (3.31-19.19).

BU18 0 1
BU17 2 2
BU16 2 0
BU15 0 1
BU14 1 1
BU13 4 0
BU12 0 1
Business Unit

BU11 5 5
BU10 2 2
2018

BU9 4 6
BU8 2 1
Year

BU7 4 5
BU6 6 5
20 BU5 1 1
BU4 5 3
Global Journal of Management and Business Research ( A ) Volume XVIII Issue I Version I

BU3 5 5
BU2 2 2
BU1 0 2

0 2 4 6 8 10 12

Count

M1 M2

Figure 3: Comparison analysis between M1 & M2

BBU5 15 16 BBBU4 4 6
Business Unit

Business Unit

BBU4 11 10
BBBU3 16 18
BBU3 7 6
BBBU2 13 11
BBU2 5 3
BBU1 7 7 BBBU1 12 10

0 10 20 30 40 0 10 20 30 40
Count Counts

M1 M3 M1 M4

Figure 4: M1 & M3 Figure 5: M1 & M4

IV. Discussion The study showed that when adjusting for both
average and above average performers; approximately
The purpose of this research was to review 85% of the employees were considered based on M1,
performance management models by comparing and 83%of the employees were constructed from M2.
performance normalization scores to modified Performance analysis between the two models
performance scores. The first approach in the analysis illustrated that more than two-thirds of the employee’s
was to test the data for adequate statistical distribution, performances were related to the reward system. There
in this case is the normal distribution. Outliers were were also no significant differences at business unit
identified and removed from the final dataset as a levels on the number of employees who qualified for
results are duced sample of 94 observations followed a performance rewards. Therefore, the four models
normal distribution. The total sample used represented depicted similar results overall.
98.9% of all the data. Overall performance scores in all These results were not consistent with the
the four models followed a normal distribution. findings of the study by Sarkar et al (2011). The author
found that modification of the normalization of scores
© 2018
1 Global Journals
 On Normalization Performance Scores Models: An Illustrative Case Study

reduced bias. Similarly, when adjusting for different some of these possible alternatives. We recommend
performance incentive levels as well as business units, that the use of forced distribution to assess performance
the data showed similar results between the models. be considered in concurrence with other relevant recent
This particular finding was consistent with a study by methodologies, in particular when issues of bias
Harbringet al.(2010). The author found that the may exist.
introduction of forced distribution led to short-term
V. Conclusion
performance increase. It is important to note though that
the sample size of the study conducted by Sarkar et al. The current study illustrated that despite the
(2011) was higher than in this research. Thus, a bigger controversies in methodological issues such as the use
sample size could potentially improve the findings of this of normalization of scores; most organizations still
research. implement this method. This research revealed that the
The results in this study revealed that there was modification of this model did not necessarily reduce
bias when comparison model M1 and M2, and M3 bias. Therefore, the modification of the bell-curve; such

2018
andM4. Size effect was noted when comparing model as the model employed in the current study needs to
take into account factors, such as supervisor’s/

Year
M1 to model M2, where the modified model M2 was
more biased towards 3 of the 18 business units. manager's effect which need to be accounted for when
Comparison analysis between M1 and M3 was more rewarding employees. 21
biased towards BB4 and BB5. The comparison between The complexity of the job and the size of the
M1 and M4 was biased towards business BBBU3 and organization, inter (intra)-differences between the

Global Journal of Management and Business Research ( A ) Volume XVIII Issue I Version I
BBBU4. businesses units remain a contributing factor. The size
It is stated in the literature that for the the business units were also noted as one of the critical
normalization of scores system to have statistical validity factors. Therefore, size effect of the business units need
there must be a large number of employees in the pool to be adjusted for in the performance reward incentive
(Stewart et al., 2010; Abelson, 2001). A sample size of scheme; whether the motive is a reward based or
30 or more is considered appropriate; however if fewer penalty based, this will ultimately fail in its intended
than that, then confidence in the predictive power of the purpose of improving employees' overall performance.
bell curve begins to diminish sharply according to the A reward system for performance remains an
central limit theorem. Therefore, smaller companies integrated performance management process. In the
avoid force-fitting employees to the bell curves. current study we did not conduct a comprehensive
The effect of size within the business units also assessment of employees who underperformed.
has an effect on the manager’s social preferences. A Therefore, interventions employed by companies to
study by Willie (2014) presented that business units with assist underperformers still need to be explored further.
a significantly small number of employees resulted in a Finally, alternative statistical methods can also
performance rate of 100%. This potentially indicate that be applied as an alternative to normalization of
there may be a positive association between actual performance scores. Advanced statistical methods such
performance of the team within the unit, job complexity as linear mixed modelling have been applied in annual
or to other factors such as the managers effect which performance evaluations. These methods have been
was not explored further in the current research. A study shown to reduce supervisor’s/managers based effects.
by Harbringet al.(2010) found out that the manager’s Acknowledgements
social preferences on ratings had a substantial impact
The author is grateful to the organization that
on the rating behaviors, these social preferences were
supplied the data to conduct this research work. The
not picked up by forced distribution. This finding
author is also grateful to Phakamile Nkomo for his
illustrates a need to consider other factors that
comments in concluding this piece of work.
introduced bias in the PMS.
Finally, the current study noted that the Competing Interests
normalization of scores was used across the The Author declares that there is no financial or
organization irrespective of the sample size of the personal relationship which may have influenced him
different business units. Stewartet al (2010) warned inappropriately in writing this article.
against the use of scores across all departments, in Authors' Contributions
particular, those that differ in size and job complexity. The Author was responsible for the data
He further narrates that such practice might be analysis and drafting of the article. The Author has
problematic and maybe an unfair comparison. In the proofread the final manuscript.
current research work, we illustrated that modification of
the normalization of performance scores did not
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