ANZ abandons bell curve rankings

The Australia and New Zealand Banking Group (ANZ) has announced it will axe the common practice of ranking staff on a bell curve according to the results of their performance reviews.

The so-called 'forced ranking' system is still common in Australia, especially so in the finance sector, but its long reign may be coming to an end. Top HR directors and senior executives are taking note of how unpopular they are with staff.

Increasingly, business leaders are recognising that the system may in fact disadvantage solid performers in cases where many colleagues have all achieved a strong performance.

An ANZ spokesman told The Australian Financial Review the bank was “shifting the focus away from measuring individual performance against peers, to measuring how well an individual delivers against agreed objectives”.  However, it will still be retaining forced ranking for bonus allocation.

As it stands, ANZ rewards the top 5% of performers with the largest bonuses, while the the rest of the bonus pool is shared among the middle 65% of performers. On the other side of the coin, the bottom 30% do not receive a bonus.

In New Zealand, BNZ is also trialling the removal of the ‘forced ranking’ system. “While we currently do use a performance curve ranking system, we’re now trialling removing it from this year’s mid-year performance review,” Annie Brown, BNZ’s new director of people and communications, said.

“The intent is to shift focus from administration and free up time for quality performance conversations between employees and managers,” Brown added. Results of the trial will be assessed in the following months.

Brown also observed that this was part of a wider strategy within BNZ. "We're constantly innovating to further our high performance culture and strengthen employee engagement, and finding new ways to differentiate performance and reward is part of this," she said.