Performance Rating Scales: When and how to use them

What could cause an 80% drop in employee engagement at one of the world's most successful pharma companies?

An over-reliance on performance ratings.

The truth is, rating scales are one tool in the performance management toolbox. Like any tool, they’re useful—but not made for every situation.

Let's take a closer look at ratings to find out when they work and when they don't.

Classic Ratings and Modern Ratings

The classic example

The classic performance scoring matrix uses a 5 point scale and in most cases, probably looks something like this example from UC Berkeley:

• Level 5: Exceptional
• Level 4: Exceeds expectations
• Level 3: Meets expectations
• Level 2: Improvement needed
• Level 1: Unsatisfactory

The problem with a scale like this one happens when it's used to assess vague competencies, like "organizational skills."

‍Managers aren't good at rating broad competencies, and one person's self-starter could be another person's insubordinate trouble-maker. You run the risk of broadening the gap between managers and employees with the disagreement of terms that is bound to result.

On the other hand, assessing employee performance without ratings opens you up to more subjective opinions that we know often show bias.

If you want to use ratings fairly and effectively, start by applying them to well-defined behaviors rather than personality traits.

A Modern Example

Deloitte addresses all the concerns raised above with their two rating questions:

1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus. [1-5]
2. Given what I know of this person’s performance, I would always want him or her on my team. [1-5]

It's important to note that Deloitte’s survey has open-ended questions as well, but these simple ratings-based questions help use their managers' inherent biases to understand how teams are performing, while making reviews incredibly fast and easy to execute.

It's important to note that there's no limit to the number of ratings statements you can use. In one of the HR world's most popular examples, Google uses 11 ratings statements plus 2 open-ended questions for employees rating their managers.

Why have performance ratings?

For years, companies have overused ratings, applying them to every aspect of the business and the people within it.

But the best employee rating system has everything to do with your own specific performance goal and the amount of intention with which you use your ratings.

Here are some of the best ways to use performance rating scales, according to research.

1. Use Ratings to Support Short-Term Improvement

While ratings probably aren’t as objective as we wish they were, research shows that a manager's subjective ratings can be good enough for short-term performance improvement.

Dick Grote, founder of Grote Consulting, took a deep look at the data, including a study of 100 companies using a GE-style rank and yank. He found that identifying the lowest 10% of performance, and replacing them, succeeded in helping the business improve. Dick writes that “organizations got their best results immediately, in the first few years after implementing a forced ranking system.”

It makes sense when you think about it. After a few years of cutting low performers, the issue won’t be talent, it’ll be talent management. Brutal as rank and yank can be, it can also be fair in circumstances where the business might be holding on to a group of underperforming employees who simply weren't a great fit to begin with.

If you're using performance ratings to boost short-term results, you could easily use the classic 5-point rating scale with any of the following statements.

Example Statements

Change Management

This person clearly explains how change will impact the team/department/individuals

This person achieves optimal levels of performance and accomplishment with/for ...

This person provides strong evidence of achieving results [list specific accomplishment]

Project Management

This person excels at developing projects that have delivered X results

This person improved production by X% through [the following specific tasks and strategies]

This person exceeded the original goal of X by X% through [performing/introducing the following tasks/strategies specific task]

This person keeps meetings action oriented by [using the following strategies/task]

Deadlines and Time Management

This person consistently meets all deadlines [provide numerical figure e..g completed 8 out of 10 tasks on time]

This person prepares meeting agendas that are concise and time-saving

This person keeps meetings on schedule

This person respects the time of others

This person makes effective use of discretionary time

2. Create and Uphold Workplace Standards

Ratings can also be great for creating standards, a crucial foundation for any high-performance culture.

Companies like Asana set standards of independence and responsibility (using their famed AOR model), while Netflix sets unapologetic standards of excellence and skill. Held together by regular performance reviews, these standards coalesce to form the pillars of their workplace culture. While ratings have recently come under fire for being somewhat "counter-cultural", they can actually boost transparency and help employees know where they stand in relation to the company standards.

For example, GE also used ratings to support their company-wide standard of growth and improvement. Ron Ashkenas, consultant and author of The GE Work-Out, writes that GE, “assumes that most people have the capacity to continually grow.” The powerhouse company used rankings and ratings as just the start of a longer performance management conversation, a way to differentiate what employees need what kind of help.

That doesn't mean you put a 10-point scale on a vague metric like, "organization". The qualities you rate must be meaningful and aimed at providing a transparent framework for helping the employee develop. In GE's case, they followed up their ratings system by offering tools and programs to help employees reach their potential. After all, if you're going to tell someone they "Need Improvement", you better be able to help them improve.

Example Statements

Culture

This person excels in living the organization's values

This person promotes strong support of the company's mission and vision

This person excels in contributing to the company's goals

This person promotes the company culture among peer

This person enforces company policies and values without creating negative reactions

Vision

This person is able to turn visions into actual action plans [give examples]

This person demonstrates an ability to transfer vision into execution by [implementing the following strategies/tasks]

This person collaborates with individual team members to establish a development path

Creativity

This person initiates and executes creative ideas such as [provide examples]

This person provides their team with the resources needed to attain results by  [performing/introducing the following tasks/strategies specific task]

Development

This person provides substantial support during periods of organizational change

This person is a key contributor to the successes of the department

This person makes a significant contribution to the continued operation and growth of the organization

3. Reduce the Performance Management Workload

In Deloitte's case, the company was spending way too much time on annual reviews.

After completing the forms, holding the meetings, creating the ratings, then arguing about the results behind closed doors, Deloitte's leadership team found that their performance reviews consumed close to 2 million hours a year.

The company scrapped much of its appraisal form but kept its 5-point rating scale (strongly disagree to strongly agree). To make it more effective, they simply adjusted the performance factors to lean into manager bias by asking managers to rate based off of their feeling, something research showed they could do accurately.

At the end of the day, ratings will work. But only when approached intentionally. If you suspect your performance review system is too reliant on ratings, step back and ask which employee competencies or behaviors really need a clear and scalable rating, and which performance factors would benefit from a more open and honest discussion.

A more balanced approach will almost always pay off in more balanced employees.