The Right Way to Use Ratings in Performance Reviews

Ratings are often maligned because no one wants to be boiled down to a score, but ratings do offer a quantifiable view of performance.

When companies need to make decisions regarding their talent base, they rely on data and use trends to plan for improvements. Some questions they might be asking are which managers are most efficient? Which employees demonstrate the best leadership qualities? Are there skills gaps that need to be addressed?

For someone in the process of building out a performance management strategy, rating scales can be an essential tool used to measure the performance. So if the information gathered from a rating scale system is valuable to an organization, why are some ditching the entire approach, and is there a better way to implement its use?

What are rating scales?

First, let's clarify; ratings are not rankings. Rankings make up a system where employees are compared and categorized into some type of ordering or buckets.

Ratings instead are the quantitative answers to performance appraisal questions. Ratings could be used to rank, but they certainly don’t need to be used that way. According to SHRM, rating scales are used in performance management systems to indicate an employee’s level of performance or achievement. The types of methods used to measure the performance are graphical rating scales, numerical scales, and letter scales. Some are only 2 or 3 point scales, but most companies opt for a 4 or 5 point scale, which might look something like this:

Outstanding - 5pts: Performance consistently far exceeds job standards/expectations on a sustained basis.

Exceeds Expectations - 4pts: Performance consistently meets and exceeds normal job requirements.

Meets Expectations - 3pts: Performance meets position requirements.

Needs Improvement - 2pts: Performance meets some position requirements, objectives and expectations.

Unsatisfactory - 1pt: Performance does not meet position requirements. Immediate attention to improvement is required.

Pros and Cons of Ratings

The advantage of this model is that it is structured. It allows ratings to be quickly compared and contrasted, and because each employee receives the same rating criteria with the same range of responses, it is a standardized process as well. Consequently, this encourages fairness in treatment for all employees and creates standard measures of performance across any business area.

The disadvantage one might run into with rating scales is the loss of trait relevance. Are the selected rating-scale traits relevant to the performance of all employees? Since the questions need to be constrained, there is a higher likelihood they won’t apply to an employee’s work. Not every job within an organization will require the same use of specific traits.

Another challenge is the accuracy of ratings. Numbers can feel authoritative, but they are only as good as the process that creates them. Just because it’s cleaner to make decisions with data doesn’t mean that you’ll be making the right decisions.

How to Make Ratings Better

One way to improve performance rating data is through calibration sessions. The way this works is managers prepare preliminary performance appraisals, then meet with other managers who supervise similar groups of employee's. The participants review and discuss their proposed appraisal ratings for every employee. In the end, participants adjust ratings to assure accuracy and final performance appraisals are then prepared. This also weeds out the “hard” and “soft” grader effect.

Another way ratings are being modified is by combining them with qualitative comments and feedback that give the employee a clear understanding of why they got their rating and how their performance aligns with goals. In this case, we see that ratings can serve as a base for more productive conversation, engaging meetings, and employee input.

Lastly, many companies are changing the scales to reflect behaviors and ditching the “expectations” terminology. A lot is said in a word and employees don’t necessarily feel great when given a number 3 for fulfilling their job description accordingly. Re-defining rating scales to make them specific to the criteria being rated could mark goals “achieved” or “deferred”. Competencies and soft skills could be marked as being observed “consistently” or “sometimes”.

Organizations that are able to develop standard competency based ratings across all functions would be most likely to benefit from its implementation. Likewise, companies that can rate various job objectives across all functions as well, could benefit from using rating scales in their performance reviews. Companies that work on diverse projects, or contain diverse positions, might not be able to customize the use of ratings to their advantage.