Keep or Throw? Stances on Performance Ratings

Evelyn Rogers and Rohan Ramesh

3 months ago

In 2015 at the annual Society for Industrial and Organizational Psychology conference at Philadelphia, a sizable audience gathered for a debate made up of decorated academics and professional practitioners. The topic for this debate: should performance ratings be eliminated?

The participants that advocated for getting rid of ratings were Alan Colquitt (Eli Lilly), Kevin Murphy (Colorado State University) and Rob Ollander-Krane (Gap, Inc.). The anti-ratings arguments included:

Past and current research has not developed a meaningfully effective performance rating methodology
Rater trainings do not truly fix the underlying issue with faulty ratings such as the raters’ political motivations and their cognitive biases
Performance ratings have little popularity among both managers and employees
There is usually weak agreement on an individual’s performance among their multiple raters
The purposes for ratings (such as identifying developmental needs and determining salary increases) often conflict with each other
At best, accurate ratings may seem harsh to an employee and subsequently decrease their motivation
At worst, inaccurate ratings can derail an employee’s performance

On the other side, their challengers that advocated for keeping performance ratings were Seymour Adler (Aon Hewitt), Michael Campion (Purdue University) and Amy Grubb (FBI). The pro-ratings arguments included:

Performance will always be evaluated – ratings just provide a visible representation of the raters’ judgement
Blaming performance ratings may ignore the true issue: an ineffective performance management system
If there is not a performance rating, evaluators will have to rely on less precise narrative data
Subjective performance ratings remain the best source (even if it is not preferred) of an employee’s performance – objective measures (production, absenteeism, etc.) are often incomplete by themselves
Research has shown that strong performers prefer organizations that recognize them through differentiated evaluation
Conversely, weak performers will be more likely to remain if their deficient performance is not recognized

(Adler et al., 2016)

Nearly 10 years later – the debate rages on. While many parts of the discussion remain unresolved, one part is clear: less than 30% of employees believe their performance reviews are fair and/or accurate (Wigert & Mann, 2017). As research and practice continues to shed light in this area, organizations must ask themselves: should they strive to improve their performance ratings, or should they just abandon it?

Throw the Ratings Out

“Insanity is doing the same thing over and over and expecting different results” – Albert Einstein

Those who decide to get rid of ratings believe that it is time to move towards an appraisal system that does not leave less than 30% of employees feeling inspired. One of the largest studies on performance ratings found that 62% of a rating can be due to the raters’ subjective perception, whereas only 21% of a rating can be accounted by true performance (Scullen, Mount & Goff, 2000).

Rating Inaccuracies

Managers that rate their employees will find it difficult to keep their ratings free of bias. In a perfect world, they can keep their feelings and preconceived opinions aside when trying to objectively grade their employees. However, research has shown that less than 50% of employees agree that their managers are effectively assessing their performance (Agovino, 2023). Even when it is not done consciously, managers will fall for a number of biases. These include (Campbell, 2023):

Halo/Horn – managers’ ratings are either extremely high or extremely low for an employee based on one or a limited number of characteristics, not what all contributes to their performance
Primacy/Recency – managers rate based on the first or the most recent exposure to the employee’s performance (as opposed to their performance throughout the overall timeframe)
Leniency/Strictness – managers give generally favorable or unfavorable ratings to most or all of their employees

Additionally, raters may consciously rate their employees with certain political motivations in mind such as (Adler et al., 2016):

Artificially elevating performance data
Maintaining or improving relationships the manager has with their employees
Increasing the manager’s team’s standing within the organization

Conflicting Demands

Annual performance reviews are often the only opportunity for an organization and its leadership to examine individual performances in-depth. In a world where humans are replaced by emotionless robots that are not susceptible to biases such as the ones in the section above, objective ratings may be possible no matter what the consequence is.

However, in this world, humans will react differently depending on what outcome they perceive will happen from something as important as a performance review. If the goal is developmental, managers may be inclined to provide honest, or even strictly lower, ratings so that they give their employees a path to improve themselves. The employees may be more willing to accept the ratings knowing that their job is safe and that the performance ratings is solely for their benefit.

If the rating ties in compensatory outcomes such as their yearly bonus, employees may be less willing to admit their faults. Conversely, leadership will want to limit their costs as much as they can so they have their own goals. If the ratings determine which employee gets a promotion, how generous will they be about their peers when given opportunities to contaminate their managers’ opinions? Having one outcome linked to the performance rating brings about a set of issues. Having multiple tied together can lead to a pandora’s box, one that no one in the organization would want to open (Croswell, 2023).

Moving Past Ratings

Use a Story, Not a Statistic

With a limiting strict rating scale, even the best well-intentioned evaluators may not get their points across. Instead, have the rater write a simple story about the ratee. Not only will this illuminate the employee’s performance in a human way, it will show the previously hidden details that led them to their judgement. The system can range from the manager being given an open-ended prompt or a few probing questions for them to answer. Whatever method is used, this solution gives employees the opportunity to see more than just a number on how their leader and organization views their performance (Bascal & Associates, 2018).

Measuring what can be Measured

For departments like sales, it is easy to track an employee’s performance with objective data. Often times, it’s not these departments that have the worst experience with the standard appraisal system – the issue lies with other roles such as those in administration or human resources. When hard metrics are not possible, here are a few substitutes that can be used:

Classification System: Rather than rate their employees on a scale, managers can be asked to put their employees within one of three classification groups:

Superstars (roughly 5–10% of the workforce) – These are the clear high potentials. Signs of being a Superstar include setting the performance standards for everyone else and not being easily swapped out.
- Superstars should be rewarded through things such as higher compensation, greater visibility, and opportunities to develop into the organization’s next leaders.
Bottom Performers (3–5%) – These individuals are those who are clearly not meeting their performance expectations. Signs of being a Struggler include performance plateauing and not demonstrating the proper KSA’s for their role.
- Before being considered for termination or transfer, there should be some efforts of remediation for Strugglers such as greater feedback or training.
Everybody Else (85–90%) – These employees make up the vast majority of the work force. They are solid performers that come into work every day and meet their standards regularly.
- The organization and its leadership should never miss showing these employees clear and tangible appreciation. Additionally, there should be efforts to prepare them developmentally towards promotion so that lower-level high potentials can move up along the pipeline.

Goal System: In this system, managers set out certain performance goals for their employees each month or quarter. At the end of the cycle, managers sit down with their reports and examine how many goals they achieved (the percentage of goals completed) and what occurred during the pursuit of the goals. They then adjust accordingly and continue to the cycle.

Keep the Ratings

“Democracy is the worst form of government, except for all the others” – Winston Churchill

Those who support ratings accept that is flawed but warn that removing this appraisal method is just throwing the baby out with the bathwater. How would organizations individually differentiate employees from each other? How will their culture be affected if such a large change with its evaluation system suddenly disappears? Will it actually solve the underlying problems? Advocates would say that getting rid of ratings is not so simple.

Ratings Happen Regardless

Eliminating ratings may not eliminate judgement. And some version of judgement is required for outcomes such as salary decisions and job opportunities. If employees are not given the transparency afforded by ratings, they may be left in the dark when their manager makes critical decisions about their career. Evaluations, whether implicit or explicit, will always be conducted by leaders – and this is something the organization should want. The manager that does not evaluate and help with personnel decisions is clearly a liability to their organization.

Utilizing the rating system gives the employee the visibility they need to know where they stand and what they need to do to improve (Goler, Gale & Grant, 2016).

The Problem With Narrative Feedback

If ratings are abandoned and managers are required to write or speak about their employees, the issues may not be resolved, they may in fact compound. At first qualitative feedback may seem better because it gives managers the opportunity to comprehensively evaluate their employees. However, if they are told to evaluate someone with little to no guidelines, there is a severe risk of increasing biases.

What happens when if the rater is asked to “describe the employee’s performance in the past year”, they use that opportunity to criticize them on matters not relevant to their performance? An open-ended response format can veer into trouble areas: not just for administrative reasons, but also for legal liability. Organizations will be expected to defend a system that could give raters an opportunity to act in a possibly discriminatory way.

Improving Ratings

Focus the Ratings to Behaviors or Outcomes, Not Traits

If a manager is asked about certain traits or intrinsic characteristics of their employees, it may be ambiguous and inaccurate. However, behaviors are more easily exhibited, as well as outcomes (Cox, 2019). Here is an example of a trait-based question and how it compares to a behavior-based question:

Using a scale from 1-5 (1 = strongly disagree, 5 = strongly agree), rate the participant on the following questions

(Trait) The employee is conscientious towards planning

(Behavior) The employee has planned 75% or more of the time before acting

Combine Qualitative Feedback with the Quantitative

The numerical performance rating serves a purpose. Even if it is not 100% accurate, it at least serves as a firm starting point for how the manager sees their employees’ performance. To support that number further, give the manager an opportunity to explain why they reached their ratings. This will ensure the manager feels heard about their reasons that contributed to their decisions and it gives employees insight into the “why” behind the “what”.

A traditional performance rating form might just have the scales. Some of these forms may even have a section at the end that gives managers an opportunity to make any comments they would like. In order to combine the color and context that comes with qualitative feedback to the focus of quantitative scales, have the managers first rate the employee with a number, and then have them comment on why they rated the way they did.

Looking Outside of the Ratings Debate

Regardless of whether an organization uses a strict performance rating system or some other appraisal system, some of the most common issues can be addressed with other solutions.

Implementing Regular Feedback

Take the fact that many organizations provide feedback only a few times a year. Many times, it is just an annual review. When employees are told that they will have one just conversation with their supervisor about their entire year’s performance, anyone in their position would be understandably nervous and closed off. And in fact, according to Gallup, “only 14% of employees strongly agree their performance reviews inspire them to improve”. Conversely, when managers provide weekly (as opposed to annual) feedback, their employees are more than 5 times likely to strongly agree that they received meaningful feedback, more than 3 times likely to strongly agree they are motivated, and more than 2 times likely to be engaged at work (Sutton & Wigert, 2019). Even if it is impractical for managers to devote time out every week to sit down with all of their employees to provide feedback, making it a regular habit throughout the year can resolve some of the tension and ambiguity employees would normally face with just an annual feedback session.

Involving the Employees in their Own Reviews

In the world of organizational change, it is well known that change often needs a key ingredient: employee buy-in. Change management experts get this buy-in by giving employees a voice in the change process. If we expect to involve employees in a change process for their organization, why would we expect anything less when we are asking them to change themselves? Ensuring the process is fairer by giving the employees a voice in their appraisal will help receive that critical buy-in for their own development. Research has shown that even if the outcome is not ideal, employees will be more willing to accept it if the journey to get there was perceived as fair (Brockner & Wisenfeld, 1996). Some methods of giving employees a voice in this process include (Goler, Gale & Grant, 2016):

Allowing employees to speak first about their performance during the review rather than the manager coming down – including how they felt about the resources they were provided by their manager and organization
Developing psychological safety that allows employees to voice their opinion on the ratings or feedback they received
Ensuring evaluators are detailed and transparent about how they reached the judgement that translated to the feedback
Giving employees the space to provide feedback on their coworkers to their manager/evaluator

Focusing on the Plan to Improve Performance

Aside from the administrative needs, arguably the most important purpose of appraisal is to inform how best to improve performance. So long as the appraisal method identifies the performance gaps, the necessary next step is to develop the person. When the manager and employee set a developmental plan, they can use methods such as:

Summarizing and focusing on the most important feedback points
SMART Goals – focusing on specific metrics with a goal that the employee is capable of achieving but something that still stretches them
Use periodic one-on-ones to check in on the progress (also gives a great opportunity for more frequent feedback as stated above)

As with anything, the best decision to keeping or getting rid of ratings may depend on each organization’s situation. It is important to remember that whatever the appraisal system is, it serves a greater purpose. When making the decision keep in mind a few important things:

What are your employees’ current attitudes toward your appraisal system?
What are the associated costs and benefits with the possible directions you can take?
Do employees feel there is misalignment between how they see their performance and how evaluators feel?
Are high potentials being identified accurately and given the opportunities to reach higher roles?
Are developmental needs actually being met for the majority of the workforce?
Are the answers to the questions above the same for all areas of the organization?