Yale Has a Retro Plan to Push a Tenth of its MBAs to the Bottom of the Class

Jack Welch during his tenure as CEO of General Electric Photograph by Shawn Baldwin/Bloomberg

When Yale University’s School of Management announced it would update the grading standards for its incoming class, students sent up an alarm. Current MBAs criticized the school for not seeking their feedback and for judging students in a way that they say conflicts with SOM’s mission to create competent leaders.

Yale SOM’s policy revives the bell curve—long outmoded as a corporate evaluation guideline—as the grading golden standard: Ten percent of any class can be top performers, and 10 percent must be at the bottom, according to Senior Associate Dean Anajani Jain, who announced the new system.

The new grading plan affects how students are marked and who can see their grades, in addition to employing the controversial curve policy. Currently SOM marks students with one of four grades—Distinction, Proficient, Pass, or Fail—and reveals only top grades on their transcripts. Starting in the fall the school will add a grade between Distinction and Proficient, and require transcripts to show grades of students who receive “Distinction” or “Proficient” marks. The school originally intended the new policy to show all of a student’s grades on their transcript, but faculty met after those changes were announced and decided to limit that transparency to only the top two grades.

While students have spoken out against several aspects of the new provision, the grading curve has received only passing scrutiny, according to reports from the campus newspaper.

Yale is new to evaluating its students on a curve, but the business community has already headed in another direction: After several decades of popularity, forced ranking, where employees are grouped into performance categories (and some employees always end up on the bottom), has fallen out of favor. Companies using a forced ranking evaluation dropped to 14 percent in 2011 from 49 percent in 2009, according to research by the Institute for Corporate Productivity.

“In a business setting where you’re trying to push everybody to perform better, it tends to create distortions,” says Josh Bersin, founder of Bersin by Deloitte. “My interpretation with that is if you create a curve, that learning is not the objective. We are simply sorting people.”

The bell curve, or normal distribution, was popularized in business evaluations in the 1980s, when Jack Welch formalized the spread at General Electric, which assumed there will always be a certain percentage of top performers and a proportion of laggards. The “rank and yank” approach spread from corporation to corporation, and the academic world eventually jumped on board in an effort to curb what was seen as grade inflation, Bersin says.

But recent research suggests there’s a much wider variation in performance, often with top performers outshining other workers by a lot, according to a paper by the University of Iowa’s Ernest O’Boyle Jr. and Indiana University’s Herman Aguinis.

O’Boyle and Aguinis found that when looking at performance across high-skill jobs, including researchers, entertainers, athletes, and politicians, a substantial number of star performers dominated while many of the rest fell below average. In fact, these “hyper-performers” often accounted for most of the output in a company or industry. The results reflected the 80/20 rule, where 80 percent of the work is done by 20 percent of the people.

In companies where this trend prevails, roughly 10 percent to 15 percent of workers are far above average. Some hover around the middle, and the vast majority actually fall below the mean, according to O’Boyle and Aguinis’s paper, The Best and the Rest. This is why the same top performers often win awards over and over, Aguinis says.

But elite business schools aren’t supposed to look like the average company—they train the cream of the crop. Assuming B-schools, which generally accept less than 20 percent of applicants, are culling the very best students, a bell curve doesn’t seem like a natural fit, he says.

“When you use a normal curve and you limit the number of A’s that you give to your students, that’s probably telling you that your admission system wasn’t that good,” says Aguinis, a professor at Indiana University’s Kelley School of Business. If the selection process is as rigorous as promised, he says, “shouldn’t you have a lot more stars?”

Yale SOM’s Jain says the school had noticed that in the larger core courses, 10 percent of students typically outperform and 10 percent are at the bottom of the class—in other words, a bell curve distribution. If future observations prove different, SOM might adjust how the curve is designed, he says.

“We don’t think of any particular grading system to be perfect,” Jain says. “We remain open-minded about how there might be a need to alter the parameters going forward.”

Highly selective schools, like corporations, may be hurting performance rather than meeting their high-minded objectives by forcing students into inaccurate ranks, Bersin says. Scoring on the bell curve has two negative effects: It fails to reward the really high performers, and it discourages the ones getting B’s and C’s from trying for an A because they can’t beat their top peers.

“So they say, ‘Eh, forget it. I’m never going to be in the top percent, so what the heck. I’ll just do what I’m doing,’” says Bersin. “And they just become sort of complacent.”

As corporations start to value teamwork as much as individual output, the forced ranking evaluation isn’t proving to be good business. Many companies, including Microsoft, have opted out of forced ranking, finding that it pits workers against each other in a race for the top, making collaboration a low priority. The policy even led to lawsuits for the $335 billion software maker, as employees claimed that forced rankings led to racial discrimination. This could be even more detrimental in a classroom setting.

“Not getting the A that you deserve—and you’re one of those star students—how are you going to feel about your class, your school, your justice and fairness perspective?” Aguinis says. “Are you going to try to force someone to get a B?”