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Making the Most of Rating Systems for Performance Management

Managers have used numeric scales to rate employees since the third century China, but it’s still an imperfect system.

Ideally, numeric ratings can simplify record keeping, help with decisions about raises and promotions and allow for comparisons between employees. Recent research, however, has shown that numeric ratings also have their downsides, including discomfort for both parties and the inconsistencies inherent in the process.

Challenges with Rating Systems

Reducing an employee’s activities and achievements, or lack thereof, to a simple number is difficult and can be stressful for both the supervisor and the person being rated. It is especially challenging to maintain consistency in what is an inherently subjective process. Different managers will rate employees differently, and it’s especially difficult to give a low rating to people we like.

Companies have taken different approaches to resolving these issues, from rating employees on a bell curve to giving raises and promotions regardless of scores.

The problem with bell curves is that we want all of our employees to be achieving great things for the company and, if they are, how is it fair to arbitrarily give some lower scores? Also, the question of what people are being scored for becomes an issue. One employee may have several challenging goals set while another may have only one or two easily achievable goals. Should an employee working on several goals be scored low if he or she doesn’t achieve all of them, while another gains a high score despite not taking on or achieving as much? This situation can be interpreted as unfair and lead to employee dissatisfaction.

If, on the other hand, companies award pay raises irrespective of performance scores, then what is the value of having a rating system at all?

Minimizing the Negative Effect of Rating Systems

Rating systems, however, may be so integrated into the operations of the company that it is not feasible to implement another, non-rating-based system. In that case, there are still a number of ways to mitigate the potential negative impacts of a rating system.

First, clearly define and communicate what the different numeric values mean, and what employees might expect based on their score. Will a given score mean they’ll be promoted, given a raise, or fired?

One company, for example, made it clear to all employees that a 3 was a perfectly acceptable performance score. Employees not fulfilling their goals and objectives over a period of time, in discussion with and support from their supervisors, might expect to be scored 2 and then face constructive dismissal. Having everyone understand that 3 is a satisfactory rating leaves the 4s and 5s for the superstars who undertake special challenges or projects. Although not necessary for successful employment, some employees thrive on challenge and innovation and this system allows for them to be recognized and rewarded, without diminishing others who choose, for personal and professional reasons, not to take on extra work.

Supervisors also need clear guidelines and training on how to use the rating system. They need to know what to look for in an employee’s work and achievements and, most importantly, they need help in staying objective when rating people they may like or dislike. That last aspect is very challenging. We tend to like people who look and act like/or have some connection with ourselves. Many of us have biases that we are not even aware of. Having another person, possibly from the HR department, review ratings with supervisors may help support supervisors.

Rating systems can be effectively implemented with clear guidelines and support, often from an HR department or resource. Additionally, other supports, in the form of awareness and training for all employees, can help.

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