In this months ‘How to…’ Dr Gerry McMahon considers using ratings as part of Performance Management Systems – is their use rising or declining? Dr Gerry references several research reports and their findings and summarises the advantages and disadvantages of using ratings. He also discusses how we can use the rating system to motivate people rather than and use reflective evidence in order to rate employees fairly.

Rating Scales: Rising or Declining?

Rating scales are an integral feature of most performance management systems. For example, research findings from the Chartered Institute of Personnel and Development tell us that the majority of Irish-based organisations with a performance management system used ratings in 2018. Likewise, Wills Towers Watson’s survey found that only 10 per cent of organisations across Ireland go ‘ratingless’, whilst the figure – at 7 per cent – is even lower across Europe, the Middle East and Africa. Such usage is hardly surprising, given Gartner’s 2016 global research finding that employee performance drops by about 10 per cent when ratings are removed. The practice also appears to enjoy popular support at ground level, as the Harvard Business Review reported in 2016 that 87 per cent of Facebook’s staff want to retain performance ratings.

However, this popularity runs counter to a separate survey that was also reported in the Harvard Business Review around the same time, which found that ratings reveal more about the rater than the ratee! Whilst closer to home, only 8 per cent of those working in the Taoiseach’s department in 2015 could agree that ‘ratings are fairly allocated’. This tallies with some of the sentiment currently being given space in the media, where it’s reported that there has been a mass exodus from the forced ranking and grading scheme, with luminaries like Microsoft, Cigna and Accenture abandoning this traditional route to performance management.

Of course, as with any appraisal or performance management scheme type, the rating scale has its advantages and its disadvantages.

The Advantages of the Rating Scale

Amongst the advantages of the rating scale technique is the fact that it can be quick and easy to use. It can also be widely applied. Furthermore, as it yields quantitative results, it often serves to keep people focused upon what is important. Such scales are also extensively used as the basis for rewarding and developing staff. Indeed, for many organisations, ratings are central to their performance-related pay process. It is also argued that as managers form an overall view of an employee’s performance, it is appropriate to express rather than hide that view. Furthermore, the rating scale enables judgements to be summarised and high or low performance levels to be identified.

The scales can also be designed to facilitate concentration (and consequently feedback) on employee behaviour, as opposed to personality.  Furthermore, they can encourage an emphasis on how results are achieved, rather than solely on the results themselves (i.e. via competency scales). Ultimately, such scales can motivate employees toward a performance improvement, prompting them to question what they have to do to secure a higher rating at the next review.

The Disadvantages of the Rating Scale

The question marks currently hanging over such scales arise from their alleged impact on various components of an employee’s engagement. These can be attributed to a range of longstanding reservations about the practice. For example, the pursuit of the perfect and acceptable rating scale appears to be futile. That is - in terms of levels and descriptors - there will always be limitations and detractors. Related thereto, research has found that many employees dislike being rated, as it is an over-simplified technique that fails to recognise the complexity of their performance over an extended period. Related thereto, it can prove to be both demeaning and demotivating in its application.

This ‘application’ problem brings the ‘human dimension’ of rating scales to the fore. For example, there are many reasons to provide inaccurate (typically inflated) ratings and few good reasons to give accurate ratings. There is evidence confirming the tendency amongst reviewers to lump the vast majority of reviewees at the upper end of the distribution, probably due to a fear of angering or upsetting a poor performer or even to hasten their promotion up and out of the team\department. Of course, high ratings may also be awarded to reflect favourably on the manager of the ‘high-performing’ team. It is also important for managers to maintain positive relationships with staff. Indeed, it can be argued with conviction, that it is much more important to do so, than to turn in accurate – but ultimately demotivating and disaffecting - scores.

In contrast, it is also reported that ratings can be artificially deflated ‘to show who’s boss’, to prepare the ground for dismissal, to punish a difficult and rebellious employee or even to ‘scare’ better performance out of staff. Such scales also harbour considerable potential for bias and abuse. That is, they are vulnerable to ’leniency’, ‘severity’, ‘recency’, ‘length of service’, ‘horns’ and ‘halo’ effects. Furthermore, it is often alleged that managers give their best ratings to people that they like. Where the rating drives the pay/bonus decision – as it often does - the performance dialogue is often dominated by the fact that it will end with a rating, thus inhibiting the all-important developmental focus. It is also true that such scales need to be periodically updated and validated to reflect job changes and modified to reflect variations across roles. However, to the frustration of those affected, this process is frequently neglected.

How to Use the Rating Scale effectively

It is clear that one of the most effective means of bringing the performance management system into disrepute is the misuse of the grading or rating scale scheme type. Given that the primary purpose of the performance management system is to MOTIVATE, this should always be kept in mind, as there is nothing more ludicrous than demotivating or losing a valuable staff member over a ‘4’ score, when they feel they deserve a ‘5’.

Allied to the ‘motivation’ objective, the review process is about discussing with the employee how they are doing, where they are going and how they can maximise their strengths, whilst addressing their development needs. It should not be an occasion for ‘telling them’ what grade(s) they got and rushing them out the door. That is, the review meeting is a precious (and often rare) opportunity to exchange ideas on how things are going and how they should progress, to the mutual benefit of all parties. Of course, given the pay\bonus link, and the fact that the outcome is recorded for posterity, both parties to the process may be so worried about the grade(s) that as soon as they are announced, the meeting is effectively over.  Hence, the competent manager will be thoroughly prepared for such meetings, in terms of the structure, strategy and the accompanying interpersonal skills to be deployed, to ensure that they meet their key objective – to motivate.

It will also help if the manager can suspend (final) judgement as to the employee’s score(s) until such time as the review meeting winds to a conclusion.  For example, having discussed the matter with one’s own manager the reviewer may come to the meeting with the grades pencilled into their ‘aide memoir’, though remaining open to modification. This approach reflects the reality that the manager may gather information in the course of the meeting that will influence the record or content of the employee’s review and – as a result - the rating(s) allocated (and hopefully agreed!). A related benefit to this ‘open-minded’ approach is that one cannot be accused - for example, in the course of a subsequent appeal hearing - of breaching a principle of natural justice and ‘having made up one’s mind before hearing all of the evidence’. Accordingly, the review meeting should not transpire as an opportunity to deliver judgements - as the ‘subject’ sits and listens.  The good reviewer will know that it is important to involve the interviewee and to ask them for their opinions and recommendations on matters which (effectively and ultimately) pertain directly to them (i.e. to their performance and development).

Therefore, the rating process should be no different to commenting on performance.  That is, should the employee’s performance be described as ‘Very Good’ they should get a ‘Very Good’ rating. Furthermore, if one accepts that the golden rule of the process is about motivating the employee(s), everything should be as honest (and as tactful) as possible and geared to the employee’s benefit. So, when pondering rating decisions such as ‘will I give him\her a four or a five’, it will help to ask oneself: ‘What effect will it have if I only give him/her a four?’. If the answer to the question is ‘he/she will be demotivated’ - which will have implications for their future performance, and the manager’s reputation as a leader (cum motivator!), it may well be judicious (and appropriate) to lean toward the five. Of course, it will help if the manager is as objective as possible and supports their view with facts and concrete examples of past performance (which in the best tradition of the ‘no surprises’ maxim were ‘flagged’ at the time):

In giving you a 4, I felt that whilst your overall performance has been well above average, as discussed during the year and agreed at this meeting, your interpersonal skills can be developed to your benefit and the benefit of others.  We have looked at specific instances of this again today.  Tell me what you think you, or the organisation, can do to help with this?

The bottom line is that the grades should be used to motivate the employee, whilst reflecting the evidence reviewed during the discussion. Related thereto, there is a view that when employees have to be graded across a range of competencies or criteria, the astute manager should overlook or concede on some scores to enable progress to be made on others.  For example, unless one is dealing with an ‘underperformance’ scenario warranting a ‘Performance-Improvement-Plan’, it would be demotivating and unrealistic to grade any employee in such a way that they’ll need to improve on a range or all scores to reach an acceptable level.  It may also be judicious to rate on the basis of the employee’s performance vis-à-vis their service and/or track record. Hence, in the medium to long term it may prove beneficial to focus on one or more key development needs and to agree improvements and scores on them, rather than getting into a row on all of the criteria to be scored and destroying the employee’s self-esteem and the all-important manager-employee working relationship in the process. This approach firmly places the primary objective of performance management – to motivate – centre stage. The bottom line is that the rating scale is not just part of the form to be completed and returned to the H.R. department on time. It’s an essential and consequential tool to be deployed judiciously for maximum motivational effect.