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Should You Use Performance Ratings?
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Are performance management ratings really boosting productivity in your workplace, or are they just causing staff to feel demotivated and deflated every time their performance appraisal comes around? Performance ratings are coming under fire and big companies like Adobe and Microsoft have chosen to abandon performance ratings altogether. Should your company be doing the same?

The Downside of Performance Ratings

Performance ratings are used to track employee performance so that management can differentiate between the strongest and weakest employees.

While this is meant to encourage good performance, studies have shown that aside from the staff who achieve the highest ratings, performance ratings actually have a negative impact on performance.

Another criticism of performance ratings is that they are subjective and can vary between different managers who may be more or less lenient in how they score their teams. Ratings may not really correlate to actual employee performance.

Performance feedback is a valuable part of performance reviews, but performance ratings can detract from the importance of the feedback as employees are more likely to remember their score rather than the advice they were given.

Why Companies are Still Using Performance Ratings

Despite the cons associated with performance ratings, figures from e-Reward’s performance management survey show that 77% of organisations are still using them.

When scored accurately, performance ratings can be good indicators of which employees are the top performers, and can also be useful for providing evidence when taking action against lower performing employees.

Performance ratings are also a convenient way of organising pay reviews and bonuses, as many companies attach these to performance reviews.

Should Companies use Performance Ratings?

The best way to determine whether your company should use performance ratings is to evaluate their effectiveness in helping you achieve your performance management goals. Making this decision may involve a simple internal survey to gain insights from your employees and managers as to whether performance ratings are improving performance or not.

Could Performance Ratings be Improved?

If you do decide that performance ratings are right for your company, then you’ll want to take action to ensure that the rating system is accurate and mitigate the negative impacts:

  1. Use multiple criteria for rating performance, such as achievement against agreed goals and demonstration of company values.
  2. Teach managers how to rate performance objectively.
  3. Keep track of the consistency of ratings within your company to check for bias. Peer reviews could be a helpful way to improve the system.
  4. Use positive vocabulary for performance ratings. Replace middle ratings like ‘satisfactory’ or ‘competent’ with more encouraging terminology, such as ‘effective.’
  5. De-couple performance ratings from pay reviews. Avoid hard-wiring performance ratings directly to pay increases or bonuses and take other factors into account such as market rate, changes in work responsibilities and so on.

What do you think? Tell me in the comments below…

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About The Author
Stuart Hearn
Stuart Hearn runs Clear Review, a performance management software company which aims to help businesses to improve their performance management. Check whether your company's performance management is up to scratch with Stuart’s handy performance management guide. You can visit his company's site at http://www.clearreview.com/

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