Case-in-Point: When managers game the system to protect their teams

Company: Zenith Bank (fictitious), a private sector bank with 18,000 employees across retail, corporate and SME banking.

Background

During Zenith Bank’s annual performance review, HR noticed something unusual.

Most regions showed the expected spread of ratings. A handful of top performers. A large middle. A few employees needing improvement.

Then came Arvind Kapoor’s region.

Arvind, the Regional Head for the West, is one of the bank’s strongest business leaders. His business numbers are consistently among the best. Attrition is low. People want to work for him.

Yet, for the third consecutive year, nearly 90 per cent of his team had been rated “Exceeds Expectations.”

The consequence was obvious. Almost everyone in his region qualified for the highest bonus band.

Employees doing similar work in other regions, with similar outcomes, would receive significantly smaller bonuses simply because their managers had rated more conservatively.

HR initially treated it as an anomaly.

It no longer looks like one.

Arvind believes he’s simply recognising good work. His team believes they’ve earned every rupee. HR is now left to resolve a problem it didn’t create.

The dilemma

Should HR recalibrate Arvind’s ratings, even if it means reducing bonuses for employees who acted in good faith?

Or should it accept the ratings and tweak the bonus formula instead, solving the symptom rather than the problem?

Or is there a third option: bring business leaders together for a structured calibration exercise based on evidence rather than managerial generosity?

What’s really at stake

This is not just about one generous manager.

It’s about whether performance management has real governance behind it.

Arvind hasn’t broken a written rule. He’s exercised the discretion the system gave him. But the outcome is hard to defend. Two employees doing the same job, delivering similar results, walk away with very different bonuses because one manager is more generous than another.

That’s not performance.

That’s a lottery.

There is another risk.

If HR lets this pass, other managers will notice. The lesson won’t be subtle: fight harder for your people and they earn more; play fair and they earn less.

Yet forcing a recalibration carries its own cost.

Employees in Arvind’s region performed in good faith. They were assessed, recognised and told they had exceeded expectations. Reducing their bonus now feels less like fairness and more like punishment for decisions they never made.

The deeper question is difficult to ignore.

If one manager can inflate ratings for three consecutive years without challenge, is the real issue the manager, or the system that allowed it?

We asked three HR leaders how they would approach this dilemma

What HR leaders said

Nagendra Acharya, G-CHRO, Greenply Industries

“If I were faced with this situation, I would resist taking either extreme. I would neither slash ratings overnight and penalise employees who acted in good faith, nor accept inflated ratings and tweak the compensation formula just to avoid conflict. Both approaches weaken the credibility of the performance management system.

For me, the issue is much larger than bonuses. When one regional leader rates almost the entire team as ‘Exceeds Expectations’ while others follow a more balanced approach, it raises questions about organisational fairness, pay equity and governance. Employees doing similar work across regions deserve to be assessed against the same standards. Otherwise, rewards become a function of who their manager is, rather than how they performed.

My first step would be to initiate a robust calibration exercise involving HR and business leaders. The focus should be on evidence: business outcomes, contribution levels and performance against common benchmarks, not managerial advocacy. If inconsistencies emerge, ratings should be recalibrated accordingly.

Equally important is transparent communication. Employees should understand that any changes are aimed at protecting fairness across the organisation, not diminishing individual contributions. The failure lies in inconsistent application of standards, not in employees believing they had performed well.

Unchecked grade inflation has consequences that extend beyond compensation. It distorts succession planning, inflates talent assessments and weakens confidence in the entire performance management framework. Over time, genuine high performers begin to question whether excellence is truly recognised or whether rewards depend on managerial generosity.

Managers should absolutely champion their teams, but they must do so within a governance framework that applies the same definition of high performance across the organisation. If performance ratings can be manipulated without accountability, the system loses its purpose.”

Pawan Mishra, Head – HR (North and East India), Bisleri International

“My first reaction would be to ask whether this is really a case of rating inflation or whether it exposes weaknesses in the performance management process itself. If one regional head has consistently rated nearly 90 per cent of the team as ‘Exceeds Expectations’, HR must examine whether performance expectations, rating guidelines and governance mechanisms were sufficiently clear and consistently applied.

Performance management starts long before appraisal discussions. Goals should be clearly defined at the beginning of the cycle and aligned with each region’s business realities. Revenue, profitability, customer acquisition, productivity and other business metrics should be cascaded objectively after accounting for regional opportunities and challenges. Once those expectations are agreed upon, performance evaluation should be driven by measurable outcomes rather than managerial discretion.

In this case, I would avoid arbitrary rating reductions. Instead, I would conduct a structured, data-led calibration exercise. Employees across regions should be compared on actual business performance, achievement against agreed KPIs and overall contribution. A calibrated ranking methodology can then help differentiate performance objectively and eliminate rating inflation without relying on subjective opinions.

The objective is not to punish a manager or disappoint employees. It is to ensure that rewards reflect actual business outcomes and that the same standards apply across the organisation. When performance ratings are evidence-based, employees are far more likely to view the system as fair, even if adjustments become necessary.

Ultimately, this is less about one manager’s generosity and more about ensuring that excellence has a common definition across the enterprise. If performance standards differ from one region to another, the credibility of the entire rewards system comes into question.”

Satish Mohapatra, EVP – HR, Maruti Suzuki India

“If I were handling this situation, I would resist looking for a simple, one-line solution because performance management is rarely that straightforward. Appraisal systems often create more dissatisfaction than motivation, largely because ratings are directly linked to rewards.

Naturally, everyone wants the highest possible outcome, and managers respond to that pressure differently.

Some managers are generous and want every member of their team to benefit. Others are extremely conservative. These individual styles inevitably influence ratings, making consistency difficult. The real question is not whether one regional head inflated ratings, but how the organisation ensures fairness despite these differences.

Many organisations rely on forced distributions or bell curves to solve this problem. While that can curb rating inflation, managers often learn to game the system by rotating high ratings among employees each year, allowing everyone to eventually benefit without genuinely differentiating performance. In the long run, this becomes another form of manipulation.

I prefer a more collaborative approach. I would bring all regional heads together, along with business leaders and HR, for a structured calibration discussion. Every manager should present their top performers, emerging talent, employees with high potential, those facing challenges and the rationale behind every rating. Since leaders work across regions, they can offer valuable perspectives on collaboration, contribution and business impact that may not be visible to one manager alone.

These conversations help both overly generous and overly conservative managers recalibrate their judgement. By the end of the discussion, ratings should reflect collective wisdom rather than individual managerial styles.

That said, my longer-term view is that organisations should gradually move away from rigid rating-driven systems altogether. Ratings create administrative complexity for managers, frustration for employees and endless follow-ups for HR. Instead, organisations should focus on equipping managers to make sound reward decisions within clear budgets, while using separate assessments to identify future potential and readiness for promotion.

Every organisation should ask a simple question: does the performance management system genuinely motivate and recognise people? If the answer is no, the system deserves to be rethought.”

If you were the CHRO at Zenith Bank

Bonus decisions are about to be finalised.

Do you:

• Recalibrate Arvind’s ratings, even if employees lose bonuses through no fault of their own?
• Accept the ratings this year, but tighten governance before the next review cycle?
• Bring business leaders together now and recalibrate ratings using objective business data?

Or is the bigger question this: 

If a manager can inflate ratings for three years without challenge, who is really responsible: the manager, or the performance management system?

 What would you do? Share your perspective in the comments or on LinkedIn using #HRKathaCaseInPoint.