Career Bloom

Your source for authentic and practical career advice

recent posts

about

Over last 25 years, I have experienced multiple R&D roles in small startups and large multinationals, across multiple geographies (China, US, India) and domains (payments, e-learning, edtech). I consider myself a mix of leader & strategist, entrepreneur & org builder, product creator & problem solver, and now, researcher & systems thinker.

  • Workplace Reality #5: There is always a stack ranking and a bell curve of performance rating

    This post is part of the series on 9 Realities of Modern Workplace.

    In this post, we talk about Reality #5: “There is always a stack ranking and a bell curve of performance rating, even in companies that claim they don’t have these“.

    Let’s define the terms first.

    Stack ranking is ordering employees in decreasing order of their ‘value’ to the organization. Typically, this ‘value’ is measured by performance during the review period, but it can incorporate other factors like potential, yrs. of experience so far, etc. (see why this is a bad or a good thing)

    Bell Curve is force-fitting the rating of employees to a certain distribution: X% of employees have 4 or above, Y% have 3 or above, Z% have 2 or above, etc. (see below for math, or Forbes for why this might be wrong way of looking at employees).

    Both of these are applied to an identified group of employees, mostly by grouping 2-3 nearby job levels into one group.

    Let’s take an example of a group of 10 people (by the way, 10 is too small a sample size to apply these concepts, this is just for illustration).

    Name Performance Rating (out of 5) Stack Rank
    N1 4 2
    N2 3 9
    N3 5 3
    N4 5 1
    N5 4 4
    N6 3 5
    N7 4 7
    N8 3 8
    N9 2 10
    N10 4 6

    Note couple of things:

    1. It is not necessary that highest performance rating corresponds to highest stack ranking. Performance rating reflects performance against defined goals for the period. Stack Rank reflects ‘value’, which may be more than just performance in the given year (a recent hire who got 4 because he had only 4 months to show his performance may be the best bet for the company and hence can be ranked ahead of a senior guy who also got 4, who in turn may be ranked ahead of an average guy who somehow delivered exceptional performance this year and got a 5).
    2. In this sample, 20% got 5, 40% got 4, 30% got 3, and 10% got 2. Put another way, assuming 4 and above is excellent performance, 60% of the sample produced excellent results. Statistically speaking, this number is lop-sided – excellent performances are usually not so abundant.

    As discussed in Reality #3, performance rating systems in most organizations are broken, which means #1 will be similarly broken.

    According to the mathematics behind bell curve, the distribution in #2 above (if it was a large enough sample size) is an anomaly, usually created because managers are not strict enough in their evaluation. Hence managers are asked to change their rating to ‘fit the curve’, usually like this: 20% top performers, 70% average performers, 10% bottom performers, which makes a broken rating process more messed up and subjective.

    Why would an organization want to have a stack ranking?

    Looking from organization’s perspective, reason is simple to understand. As discussed in Reality #4, an organization will pay the minimum it needs to pay to keep you and will want to get the maximum out of you. Stack ranking is a good way to identify the employees who provide best ROI to the organization. It makes sense to identify them, reward them, and make best use of them.

    Whether the above exercise happens in a formal way or not, organizations need this information and so managers will always keep such a sheet handy which tells them about performance rating and stack ranking of employees so that they can do their investments in employees accordingly. This is natural.

    Implications of Stack Ranking and Bell Curve

    Here are some of the implications that should be obvious now:

    Outcome Reason
    You have done great work, expect a 5 out of 5 performance rating, but end up with a 4. Company decided they can’t have so many people with 5 rating, and your rating was downgraded in the name of ‘curve fitting’.
    Your manager says, “I wanted to give you 5, but management decided otherwise” In the meeting where the rating rationalization is done, your manager (or his manager who was representing you) was unable to convince others about your rating.
    You get a 4 but the person who got 3 gets more rewards than you Your company rewards favor the stack rank more than performance rating

    Dealing with the reality

    Good thing is that there is enough buzz in the air that these are bad things – Microsoft recently got rid of both rating and stack ranking, Adobe got rid of its annual performance review system. However, you still need to understand the rationale and deal with them, because as I mentioned above, even when these are formally gone, they exist informally, and so they impact you. Best way to deal with these is to work closely with your manager (or manager’s manager) to make sure you understand where you are in that ‘valuable employees’ list. Also, it is more important to observe the behavior, just listening to your manager may not help much. Watch for these:

    1. When a new/interesting project comes, are you asked to work on it?
    2. When you ask for a reassignment to an interesting project, how hard it is to convince the decision-maker?
    3. How much do you have to haggle with your manager for bonuses/raises?
    4. How many of your ideas/thoughts are entertained or accepted by your manager?

    If you think you are not high enough in that ‘valuable employee’ list, you need to change something.

    In the next post, we will discuss the Reality #6: “The new hire can replace you any day if your only strength is technology“. Stay tuned.

    Maths behind bell curve

    A theory called Central Limit Theorem suggests that if you take random observations from a large enough sample size, their average values, when plotted on a graph, will resemble a bell curve (normal distribution). Applied in performance rating context, it means that with a large enough number of employees in a group (large sample size), their performance rating will be a normal distribution and produce a bell curve.

    Image: freedigitalphotos.net

  • Workplace Reality #4: Promotions and Bonuses reflect market conditions, not capabilities, mostly

    This post is part of the series on 9 Realities of Modern Workplace.

    In this post, we talk about Reality #4: “Promotions and bonuses are determined more by available budget and market conditions, less by your capabilities or your performance“.

    Compensation Planning

    An organization exists for the primary purpose of maximizing shareholder value. This means that what the organization pays to its employees depend on 2 conditions:

    1. Organization’s ability to pay, this year and subsequent years – this depends on profitability and other factors.
    2. Market price – this depends on how much other companies pay for the talent you need

    Annual (financial) plan for a company decides the amount of money (usually as a percentage of their revenue) allocated for bonuses and salary hikes, based on these 2 factors, usually picking the minimum of these 2 numbers.

    Compensation Logic

    Once this amount is decided, say 3% of revenue, this money is supposed to be distributed among the employees, using some reasonable logic. Here are 2 tricky situations that companies navigate when applying their logic:

    1. When giving bonus and raise as a percentage of existing salary, those who are already paid more, will get more (but % wise it may feel less to them). A 3% raise of a senior guy can be equivalent to 20% raise for a junior one. Organizations then try to decide whether to make a junior guy very happy or a senior guy just a little more satisfied.
    2. When bonus and raise are made contingent upon performance rating, Reality #3 can hit you. If performance review process doesn’t generate good and fair rating, this can result in seemingly unfair bonuses and raises.

    Most organizations apply both these logic (one portion of money is allocated to #1, another to #2). In addition, given that organizations value extrinsic motivators so much, motivational factors are incorporated when designing this logic (“Everyone will get raise proportional to performance rating, except when they are attrition risk, in which case we give an attrition-risk-linked portion of raise to avoid that risk“).

    Implications of Compensation Planning and Logic

    Here are some unexpected outcomes from compensation planning and logic:

    Outcome Reason
    Everyone worked very hard this year and expected a good raise, but the raise was extremely low Company’s revenues were down and so condition #1 above (organization’s ability to pay) became the driving condition
    You worked regular hours, no pressures, you thought year was very light on work, and the raise for that year was exceptionally good Market had lots of demand for talent of your time and so condition #2 above (market price) became the driving condition
    You are a senior manager doing very well in the company, and are expecting a good hike this year but you get only 4%, much less than your expectation of 15% A few junior employees in your division were attrition risk and company decided to give them a hefty raise, which meant not enough money for your raise %, since your base salary is so high
    You are a junior developer and expect a substantial raise because you did very well last year, but got just the regular 15% One of the senior managers had to be placated with a high raise and that didn’t leave enough money on the table.
    Your performance rating is very high this year and you expect a very high raise. Doesn’t happen. Total allocation for raises this time was very low so your individual raise was low too.

    Dealing with the Reality

    It is very hard for most people to deal with this reality – this impacts money they get, and it skews all of our judgment about the workplace. However, the best way to deal with the reality is to understand how these numbers are derived for your organization (if you sincerely try to understand the process in your org by asking around, you will get good information), and give the company the benefit of doubt: this is a very complex challenge and they are trying to do the best they can (in most cases).

    Good thing is that over a period of time (say 2-3 review cycles), many of the issues mentioned above will average out – so you may get very poor raise one time though you worked hard, but you may get a much better raise and a promotion, without doing anything extra in next review cycle. If they don’t average out (or are not heading towards it), and you don’t see any reason why you shouldn’t be getting more than you do (based on market conditions and your company’s financial conditions), this may become a fairness question that you need to deal with – maybe your manager or your org is not being fair with you. Till then, you should spend your energy in making yourself more valuable in the industry and more learned so that companies crave for your skills and abilities.

    In the next post, we will discuss the Reality #5: “There is always a stack ranking and a bell curve of performance rating, even in companies that claim they don’t have these“. Stay tuned.

    Image: freedigitalphotos.net

  • Workplace Reality #3: Most performance review systems are broken and useless

    This post is part of the series on 9 Realities of Modern Workplace.

    In this post, we talk about Reality #3: “Most performance review systems are broken and useless“.

    I have written many posts on performance and performance appraisals before (managing performance, annual review, self-appraisal) and so have others (Forbes, Wall Street Journal, payscale). Most have been critical of the performance appraisal systems. It is very hard to find articles that talk about good systems; most such articles talk about what it should be (Forbes, Gallup). So the statement above shouldn’t feel very shocking. However, I have very specific reason to use the words broken and useless that I want to explain. Hopefully this will also explain why organizations behave in a certain way in some cases.

    Performance Review System

    Performance review is the process by which an employee’s performance is evaluated. Organizations use this process to make sure they are getting good returns on their investment in a particular employee. Idea is actually quite good: rate the employees based on their performance, use the rating to rank the employees, and then compensate them according to the rank. Tell poor performers to improve or get out, to be replaced by better performers. This will maximize the ROI on people investment.

    However, this makes certain assumptions:

    1. It is possible to objectively rate (based on performance measurements) employees across the organization
    2. It is possible to compare rating (or performance) of any 2 people and rank them relatively
    3. Employees will agree to linking compensation to value creation
    4. There is always a steady supply of talent available who will perform better at the same compensation

    Unfortunately, none of these assumptions hold true in today’s organizations.

    • #1 requires rating is based on objective metrics and is done by able managers. Both of these are hard to come by.
    • #2 requires quantification of every performance which is hard. How do you compare the performance of a business analyst vs. a sales person?
    • #3 makes the compensation fluctuate widely which employees can’t handle
    • #4 depends on external factors and always comes with a time lag which hampers quick results

    Broken and Useless

    System is intended to adjust compensation and rewards every year to align with performance of the individual. This is expected to create incentives for high performance. Since above assumptions don’t hold true, rating and ranking results are inaccurate. This means compensation and rewards are not aligned with performance all the time. Instead of incentivizing value creation, it may create unhappy employees and thus hamper performance.

    System is also intended to give feedback so that employees can improve their performance. For the reasons cited above, this feedback is not useful at all, and can be harmful in some cases.

    Dealing with the reality

    Most people use performance review system outcome as a way to measure their own worth, and their career growth. If they get a raise or get promoted, they think they are growing, and they are worth more. If they get no raise or promotion, they think they are not growing or are worthless for the company (my earlier post evaluating your performance).

    It is critical to wean yourself away from the myth that performance review outcomes are a good indicator of your career growth and personal worth.

    If you can do that, following statements will make sense:

    1. Performance rating your manager gives you may have little correlation with your performance
    2. Bonus, salary increment, rewards that you get may have little correlation with your performance rating
    3. Performance rating may have little correlation with your worth to this or another company

    If you can adjust yourself to live with above statements, you will realize that you can deal with your workplace much better.

    In the next post, we will discuss the Reality #4: “Promotions and bonuses are determined more by available budget and market conditions, less by your capabilities or your performance“. Stay tuned.

    Caveat: Above post exaggerates the situation by assuming that all parts of the system are broken. Most companies will have some parts broken and not all, so your personal experience with your performance review system will be better than the above description. However, being ready for the above scenario serves you well.

    Image: freedigitalphotos.net

  • Workplace Reality #2: “Organization deliberately sets up conflicting goals for people”

    This post is part of the series on 9 Realities of Modern Workplace.

    In this post, we talk about Reality #2: “Organization deliberately sets up goals for people and departments that conflict with each other“.

    There are 2 reasons why organizations end up creating conflicting goals:

    1. Organizations need a healthy checks-and-balances system. They need one set of people to keep a tab on what another set is doing and hold them accountable. For example, finance team is there to make sure money is not being spent unwisely by other groups (of course, they have other goals too!).
    2. Organizations are quite complex. It is very hard to rationalize the goals of one group with the goal of others. It is expected that individuals in these positions will rationalize and get to a common set of goals as needed. So sales is asked to get high revenue (hence sell more and more), engineering is asked to deliver best quality (hence take more time to build it well), and these 2 groups are expected to work out the right balance between them. Simple!

    The conflicting nature of goals can create unpleasant situations which are hard to understand. A few examples:

    1. Expense filing process becomes too complicated and keeps getting complicated every year. This makes rest of the company mad at finance team and creates bitter relations. Finance team feels this bitterness is unjustified because they are just doing their job of tracking expenses.
    2. An aggressive sales team becomes over-demanding and keeps selling more than what the engineering can deliver. Engineering team feels burdened and frustrated and end up producing poor quality. This makes sales team mad because they feel engineering is not doing its job.
    3. Developers take too much time to write their code and testers don’t get enough time to test it, letting the product go with inferior quality. When customers complain, tester gets blamed for quality.

    Almost all of these (and other similar ones) hard-to-understand situations can be explained if we look at the goals and how they interact when 2 groups come together. Finance goals of strict control on expense conflicts with other groups’ goals of spending little time on non-revenue generating work. Sales team goal of quantity (which is proportional to revenue) conflicts with engineering goal of quality. Developer goal of code completion conflicts with test goal of comprehensiveness.

    As if this was not bad enough, organizations create incentives (bonus, rewards, raises) to motivate people to focus on their goals. This makes the situation more complicated by making people push more for some goals than others (and the balance is disturbed more and conflicts are harder to resolve). But that is a topic of its own, to be dealt with on another day!

    The way out of such situations having conflicting goals is negotiation and influencing of parties involved. However, most people view this suspiciously and give it an easy name – organizational politics. They dream of working in a company that will have no politics, and fail to see the reality. Smart people instead spend their time mastering their negotiation and influencing skills, and develop networks within organization that helps them navigate these conflicting goals.

    In the next post, we will discuss the Reality #3: “Most performance review systems are broken and useless“. Stay tuned.

    Image: freedigitalphotos.net

  • Workplace Reality #1: Organizations care for value, not you

    This post is part of the series on 9 Realities of Modern Workplace.

    In this post, we talk about Reality #1: “Organization doesn’t care about you, it only cares about the value you create“.

    A job is a financial arrangement: you offer to provide value, and the organization pays you for it. Like any other business transaction, the organization expects to make more money off of the value you create. When you start adding more value, organization pays you more, resulting in salary hike. When you start adding less value, organization tries to help you produce more (training, counselling, transfer, etc.), or tries to get rid of you (since it can’t reduce your salary!). The difference in the value you create and the cost incurred on you is the ROI (Return on Investment) for the organization. Organization will want to maximize this ROI as much as it can. This is the essence of this reality.

    Keeping the ROI equation in mind can help explain lots of organizational behavior. Look at these points:

    • Organizations don’t need to care about individual’s career growth if it doesn’t impact ROI positively. They may care if ROI becomes negatively impacted (to recoup their investment), or when they are confident it will increase the ROI.
    • Organizations will use stack ranking, bell curve and all other means to differentiate performance. This is how they improve their ROI, reward better performers and fix or let go worse performers, keeping average ROI improving all the time.
    • Training is a known way to improve ROI since cost of training is assumed to be less than the skill improvement achieved. So organizations invest in training, and will stop the investment when they stop seeing ROI impact.

    Many individuals, esp. those in IT in India, fail to look at a job in this way. They think they are so much in demand (because they are much cheaper than their European or US counterpart) that market pressures don’t apply to them. They seem to think they generate significant value just by showing up! Their behavior at workplace and expectations from it doesn’t keep ROI equation in mind. They follow a disastrous career path with unintended consequences. When they are let go, they are surprised and feel victimized.

    So how much value does an individual create that warrants the salary he gets?

    I teach organizational behavior at a business school. I asked one of the batches to identify and quantify the value they create for their organization. Most students didn’t even attempt to solve it – some said this is too tough a problem to solve, while others said this problem is unsolvable! Those who did attempt found it a very hard exercise.

    Modern organizations have such complex inter-dependencies that it is hard to do the math of the value you create. One of the easiest (and crudest) measures is to look at revenue per employee. In general, the way is to understand how money is made and spent, and what role you play in that process. It is better to be in a role that directly and visibly contributes to revenue generation (sales, R&D, delivery) than the indirect ones (cost-saving, internal efficiencies, support roles, etc.).

    Once you know how to calculate the value you create (even if approximate), you can understand and control the ROI equation in your favor, and that is one of the best ways of proactively managing your career.

    In the next post, we will discuss the Reality #2: “Organization deliberately sets up goals for people and departments that conflict with each other“. Stay tuned.

    Image: freedigitalphotos.net

  • 9 Realities of Modern Workplace

    While talking to a project manager in a services company recently, I was reminded of how little people (even those with 8-10 years of experience) understand modern workplace. We were talking about promotions and bonuses and she was lamenting the fact that promotions very rarely happen in the mid-year review. When I asked her why that might be (it is the case in most companies – it is an exception to get promotion in a mid-year review), she offered a few: it gives more time to people to prove themselves in case they missed out in the last review, it is too early, etc. but nothing convincing, even to herself. I left it as homework for her to figure this out but it left me thinking.

    If someone is serious about building a career, they need to understand modern workplaces. While there are lots of management books about workplace and organization behavior, very few people bother to read them, preferring instead to somehow manage their way through the workplace. This puts them at a serious disadvantage. Many times, people think their current workplace is bad because these factors exist and think that their next workplace will be much better. The sad reality is that most workplaces are similar in these aspects and their next workplace is unlikely to be any better than current one. From career management perspective, it is much better to stay and try to figure out how to excel in the presence of these realities rather than trying to run away from them.

    Here are 9 realities of modern workplace that everyone would do well to keep in mind and plan to tackle.

    • Organization doesn’t care about you, it only cares about the value you create
    • Organization deliberately sets up goals for people and departments that conflict with each other
    • Most performance review systems are broken and useless
    • Promotions and bonuses are determined more by available budget and market conditions, less by your capabilities or your performance
    • There is always a stack ranking and a bell curve of performance rating, even in companies that claim they don’t have these
    • The new hire can replace you any day if your only strength is technology
    • Organizations are full of leaders and managers who are incompetent and painful
    • There are lots of star performers who are jerks, or vice-versa
    • What leaders say can be very different than what they mean

    Here are 7 personal rules that career-savvy engineers try to live by and work around these organization realities:

    1. I don’t work for my manager, I work for my organization
    2. I don’t listen to leaders, I only observe them
    3. I make things happen, I don’t wait for them
    4. Every obstacle is an opportunity to learn something new
    5. I always explore opportunities to learn new things that are aligned to my goals
    6. I measure my own career growth, I don’t rely on performance management systems
    7. I always produce the best I can produce, independent of how the organization makes me feel

    Later posts will delve deeper into some of these realities and rules. I am very interested in listening to what your experience has been with realities of modern workplaces, and how you have dealt with them. Please post your comments.

    PS: So what is the answer to the question I posed to the PM at the beginning of this post? Well, it is simple: company’s annual budget incorporates the money needed for salary hikes and bonuses. If companies start giving regular hikes and bonuses during mid-year, financial planning will become quite complicated because salary usually constitutes a significant portion of the cost of a technology company. So to keep things simple, all such changes to money outlay is planned to be done once a year and money is allocated during budget exercise.

    PPS: Here are the links to the posts for each of the realities:

    1. Organization doesn’t care about you, it only cares about the value you create
    2. Organization deliberately sets up goals for people and departments that conflict with each other
    3. Most performance review systems are broken and useless
    4. Promotions and bonuses are determined more by available budget and market conditions, less by your capabilities or your performance
    5. There is always a stack ranking and a bell curve of performance rating, even in companies that claim they don’t have these
    6. The new hire can replace you any day if your only strength is technology
    7. Organizations are full of leaders and managers who are incompetent and painful
    8. There are lots of star performers who are jerks, or vice-versa
    9. What leaders say can be very different than what they mean

    Image: freedigitalphotos.net

  • My Independence – Growing up

    This is part-3 of a series in which I am writing a post every 6-7 months to chronicle my entrepreneurial journey (see first part and second part) and share my roadblocks as well as lessons. It is hard to write connected posts with such a long gap, you tend to get lost in details and what to exclude. Let me try to distill my thoughts and present a short version of my last 7 months (this is still a very long post!).

    I left the last post at a point where I had just come out of a pretty depressing phase where nothing seemed to be going for me –called ‘informed pessimism’ in psychology literature – and I had entered ‘informed optimism’ phase. Most of the comments suggested that people thought I was on the verge of giving up, and they tried to encourage me. I have good news for them: I am continuing on the same path, with much more determination and fun. All of your best wishes definitely worked for me! (more…)

  • Learning Product Management from City Administrators

    Two real stories, one long and one short, and an observation on how you can learn product management from city administration.

    Story 1: Caring about unmet need

    I live in Greater Noida, which very clearly has been designed by people who thought a lot about city planning and had lots of creativity. Roads are very wide (even small streets are 4-6 lanes), Sectors have Greek names (Alpha, Beta,..), and every type of property has a designated location (all schools together, all colleges together, all factories together, all shops together, etc.). (more…)

  • B.Tech Degree Shops (aka engineering colleges) – Who will clean the mess?

    Recently I met a 3rd year student of a private engineering college in Greater Noida. To avoid problems for me and the college, let’s call the College Best Standard Institute of Technology (BS-IT). Here is the profile of the student I met (let’s call him Sam), so that you can decide for yourself if this is a representative sample of students going to normal private engineering colleges in the hope of good education and degree:

    Class XII – No name school in a no name place with average marks because he was preparing for IIT-JEE in Kota for 2 years

    Class X – Top notch school in an industrial township, average marks

    Decent performance in school level Maths and Science Olympiads (the ones that start from Grade 2-3), very good at logical and memory-related skills

    Middle-class family, father a PSU employee (more…)

  • IIT Mania – Can kids be kids?

    Recently, I read the news about JEE (Advanced) Delhi topper (who is also JEE 4 nationally), who said

    “I have been preparing for five years for this exam“

    Wow! This means he started when he was in Class VIII, aged 13-14 years. He goes on to say

    “When I had school, I usually could put in about four or five hours of study every day, but as soon as the holidays begin, I usually put in about nine hours minimum“

    So when was he doing things 14 year old kids are supposed to do – like playing with friends, net surfing, reading non-textbook books, watching TV, playing pranks, socializing, etc.? (more…)