Performance Rating Scales: Should They Stay or Should They Go?

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rating scales By now, we have all noticed the overwhelming trend to ditch performance rating scales and instead, have performance appraisals and performance management be centered on quality conversations and continuous feedback.

Organizations like Adobe®, Deloitte®, Microsoft®, Accenture® and even GE® are all examples of organizations that committed to ending using a single number to define performance.

This makes complete sense and all sounds amazing… in theory. But what we are seeing on the ground is that practically, this isn’t working and wouldn’t work for many organizations. At least not by simply getting rid of ratings anyways. We need to look closely at the fine print of these ‘no rating’ processes and focus on the fact that for many of the high-profile organizations that threw their ratings in the garbage, the switch took place alongside a series of newly implemented programs and procedures to engage their workforce and develop performance. So, this means that an organization just looking to erase ratings and replace them with comment boxes shouldn’t be shocked to discover it doesn’t actually improve things a great deal.

Getting back to it – are we throwing out the baby with the bathwater? Is there such a thing as an ideal ‘rating’ system that allows for fair and accurate performance measurement that does not negatively impact employee engagement while still providing the metrics organizations need to monitor performance and plan for the future? Our answer is ‘YES…BUT’.

YES It is possible to optimize how ‘ratings’ are defined and used as to minimize any negative impact on engagement and performance while still allowing organizations to monitor what is happening… BUT In order for it to make a positive impact on employees and the organization, these ratings and their delivery need to take place alongside a re-tooled performance management process.

Let’s start by analyzing the good and the bad sides of ‘ratings’ and their effect on performance.

Performance ratings: the good, the bad and the reality.

 

RATINGS: THE BAD

There is no question that we have all had a love-hate relationship with ratings over the years. They can be subjective and the less than ideal rating scales can be downright confusing. Our experience tells us that people are also biased when handing out ratings and they tend to be more “nice” than “accurate”.

So what do the numbers say? What is actual impact on business who use ‘ratings’?

Let’s pause for a case study: We recently hosted a great webinar through HR.com where host, Edie Goldberg presented a case study. Edie stated that Ely Lilly shared some interesting research results that were part of their own business case for eliminating ratings and moving to a more continuous performance management process.  The data they share has to do with their employee engagement scores and the impact that ratings had on these engagement scores.

They research demonstrated the impact on employee engagement when making a once-a-year year judgement on employees. Based on monthly pulse surveys, they noticed an interesting trend over the years. Immediately following the performance rating process, there was a significant drop in engagement for 80% of the employee population. And that drop stayed down for up to 3 months after the ratings were given out. A drill down on this data also revealed that it was employees who were rated a ‘4’ or lower (based on a standard 5 point scale) that had the biggest drop in engagement.

What’s even more interesting is even the employees with a rating of 5 still experienced a dip in engagement, even though they recovered from the drop more quickly. They determined their rating process was causing a drop in engagement and performance for almost an entire quarter.

ratings

The data speaks for itself doesn’t it: If ratings are causing a drop in engagement and thus performance, then of course we are going to get rid of them! Right? No!

 Let’s peel back the onion a little before we get the eraser out. Eli Lilly also states that these ratings are the only form of feedback given in a 12 month period. There is no question that employees experience a level of shock and subsequent loss in engagement when feedback and ratings are saved up for 12 months and then thrown at them. Or when they are given one number that defines an entire year’s worth of work and accomplishments. Even Eli Lilly concluded that decreases in employee engagement after being rated has as much to do with the shock as it is the labels.

 

RATINGS: THE GOOD

There is a rainbow. For all of their faults, ratings can deliver some value.

Ratings offer a quantifiable view of performance. This means an organizations can report on their talent base and use trends to plan for improvements. Which managers are most effective? Which employees are most likely to become leaders? Are there severe skill gaps we need to address? Just to name a few. Some can argue that the ratings themselves are not accurate and thus any data cannot be trusted but overall, we are seeing organizations refusing the let go of any let alone all visibility into their largest investment and determinant of success – talent. Instead, companies are opting to improve the accuracy and validity of ‘ratings’ so any data can be used for decision making.

Besides providing data and metrics, it has been shown that ratings also provide or a clear indicator of relative performance, which makes it easier for managers to center and focus development discussions and helps employees link pay decisions to results3.

 

RATINGS: THE REALITY

Performance ratings in their multiple forms are tools, and at many companies they’re despised not because the tools are bad, but because the users aren’t being given the right tools or the information needed to use them properly.As such, ratings are being given out willy-nilly and inconsistently throughout the organization and the result is as expected – managers don’t like giving them and employees don’t like getting them.

 

FINDING A BALANCE: HOW TO GET THE BEST OF BOTH WORLDS

Re-Define ‘Ratings’:

For convenience, we see the same rating scale applied to all areas of an employee’s evaluation. From goals to competencies. This is more often than not a 5 point rating scale (5– Outstanding, 4– Exceeds Expectations, 3- Meets Expectations, 2- Needs Improvement, 1- Unacceptable). The problem is that you can’t ‘rate’ certain evaluation criteria using this scale and it isn’t fair to expect managers and employees to do so.

Goals, for instance, cannot be ‘Outstanding’ or ‘Needs Improvement’. They are either ‘Achieved’, ‘In Progress’, ‘Deferred’, or ‘Cancelled’. The same is true with development items or accomplishments. The impact of these ratings on engagement likely stems from employees being assigned to an arbitrary quality scale for items that are quite black and white.

We suggest re-defining rating scales to make them specific to the criteria being ‘rated’.

Let’s ditch the term ‘rating’ altogether and instead start using a text ‘status’ scale to replace a 5-point ‘rating’ scale so employees can be evaluated on actions instead of subjective views of quality. This allows tracking to take place while removing some of the negative stigma associated with ratings.

To take it a step further, the user should only see the text-based-rating but having a numeric scale assigned on the back-end will allow for easy reporting.

Goal Status Scale:

Goal Achieved (3): All milestones and success measures have been achieved
Active Goal (1): The goal is still in progress, some milestones may have been achieved
Goal Not Met (0): Timeframe for Goal has been met; however, some or all milestones and success measures have not been met
Goal Deferred (-): For timing or business reasons, this goal has been deferred

Development Item Status Scale:

  • 100% Complete
  • 75% to 99% Complete
  • 50% to 74% Complete
  • Less than 50% Completed
  • Not Started

For areas of an evaluation that have to do with soft skills and require a little more subjectivity, we suggest using a behavior-based scale where employees are evaluated on the frequency of said behaviors being observed.

Observation Frequency Scale:

Consistently Observed This competency/skill is observed on a constant basis; everyone in contact with this person would observe excellence in this area
Observed This competency/skill is observed, please continue to focus on it so that it is observed constantly without exception
Observed Sometimes The competency/skill is observed on an infrequent basis, there is a clear development opportunity here
Seldom Observed Needs Immediate Improvement

 

Ditch the Stigma of ‘Meets’:

Everyone wants to be unique and excel. This is why employees get their feathers ruffled if they are shot into a ‘Meets Expectations’ category. I remember my grade-school report card saying ‘Satisfactory’ and thinking, ‘hmm…that doesn’t sound good’ and the same goes for ‘meets’. We suggest using an ‘observed’ or ‘achieved’ rating scale (see above) so that an employee can feel perfectly happy and proud about their performance in an area being ‘Observed’ or ‘Achieved’.

Hide Numbers:

We suggest displaying only text ratings instead of having numbers or text and numbers. This way, employees are not associated with a number but instead a relative ‘category’ of performer. This allows everyone involved to focus on the behaviors and observations instead of getting too hung up on a number. If you are in the process of finding a new performance management system, be sure to check if they can accommodate text-based ratings with a defined scale on the back-end for reporting.

Ghost Ratings:

Something we are seeing more and more of is the concept of ‘ghost ratings’ where a manager is asked to provide an overall rating for an employee that the employee does not see. This allows organizations to report on the status of performance and potential while keeping the review open and conversation-based for the employee. If you are currently looking into performance management systems, be sure to ask if the forms can accommodate hidden sections and ratings for the manager.

Remove the Shock-Factor:

A little feedback goes a long way. The research presented above (in the case of Eli Lilly) was based on organizations engaging in performance management once a year. There is no doubt that employees experience a level of shock when feedback and ratings are saved up for 12 months and then thrown at them.

It is essential that organizations remove this shock by re-tooling traditional once-a-year reviews with continuous feedback and status updates. Quarterly meetings, performance logs, ongoing coaching and feedback are ways to not only engage managers and employees in performance-boosting dialogue throughout the year, but it removes the air of mystery surrounding appraisals. Both parties enter into the final review knowing more or less what to expect and the conversation can look ahead instead of scrambling to come to an agreement about the past.

Warning: this might sound easy, just get managers to give more feedback, no problem. The reality is that ongoing feedback is probably the most important part of an effective performance management strategy and yet it is the most difficult to enforce and monitor. We have dedicated many posts to that very topic but the 5cent overview is this: train managers to give effective feedback, create a culture of feedback, encourage organization-wide feedback and lead by example from the top. If you would like to learn more about how to implement an ongoing feedback strategy in your organization, click here to watch the on-demand webinar.

Focus on the Future:

Continuing the sentiment from above, research has found that if revamped reviews that focus on the future instead of recapping the past seem to be the most effective3. And it makes sense! If employees are given more frequent status updates throughout the year and the end of year ‘review’ is treated as more of a formal re-group and development discussion, then employees and managers are going to get more value out of it and it won’t just be perceived as a gut-wrenching report card meeting.

Overall, it is possible for an organization to dampen the negative impact of ratings while still experiencing the benefits of them but at the end of the day, your organization’s culture and needs should shape how evaluation criteria is defined and measured.

If you would like help reviewing your organization’s current performance management processes and measurements, click here to complete our ‘getting to know you form’ and our experts will be in touch.

Happy Rating!

 

Sources:

1 Why More and More Companies Are Ditching Performance Ratings. By: David Rock & Beth Jones. Harvard Business Review. September 08, 2015 https://hbr.org/2015/09/why-more-and-more-companies-are-ditching-performance-ratings

2 Microsoft and Dell are ditching employee performance reviews. By: Geoff Colvin. Fortune Magazine October 29-2015. http://fortune.com/2015/10/29/microsoft-dell-performance-reviews/

3 Firms Ditching Performance Reviews, but There’s No Obvious Successor Yet. By: Jena McGregor. Washington Post. June 8-2016. https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0ahUKEwir17rD38vNAhWGSiYKHb3cADkQFgg1MAQ&url=https%3A%2F%2Fwww.pressreader.com%2Fusa%2Fthe-washington-post%2F20160608%2F281878707641582&usg=AFQjCNHVk2anlSOu5Wib_M0c0DtAKhXQbQ&sig2=Y4XVXyqbJ-Q_TicDp6NN7w