It is the time of the year when a company dedicates its time and energy to reviewing its employees’ performance to formulate strategies that define the company’s future. Every company has a different way of reviewing and rating its employees. Though rating scales are an essential component of an employee’s performance review, not many companies have adopted the practice.

What makes using rating scales difficult?

The employee performance model becomes objective when performance rubrics and capability models are used at each level of performance. But many companies fail to adopt and implement a rating scale or system to track employee performance. But why do companies refrain from using a rating scale? What makes it so difficult?

Performance ranking and rating scale is a tool that measures the employee’s performance and access ways to motivate them to improve. They are a source of valuable information, but they have a set of disadvantages as well. The pain points of the performance rating scale include the following.

Behaviour and business impact

Rating scales do not measure the behaviour and business impact that is vital to review the performance. As a result, you may promote the wrong person and overlook a potential leader who strives to accomplish the company goals.

Unaddressed biased rating

It affects how superiors rate their subordinates or employees as biased ratings may be left unaddressed consciously or unconsciously. It leads to a serious consequence of performance reviews. Two performance evaluation biases are very common and are a result of rating scale design. They include

• Leniency bias: It is the tendency to give a high rating to almost everyone.
• Centrality bias: It is the tendency to rate employees in the middle of the scale.

These types of bias lead to skewed ratings, which can also have an impact on the future of the company.

Mediocre reviews

They are considered to be as good as a small piece of paper with a change in name and having generic information. As the scale is generic and the benchmark for all employees is the same, it is believed that the feedback is generic as well, which gives mediocre reviews to employees.

Goal consideration

Not every goal is realised as employees fulfil several smaller goals throughout the year, as it takes several steps to achieve the objectives set. But the performance scale recognise only a limited set of goals in a performance review even though the smaller goals were important. Also, it fails to measure the quality of the goal fulfilled.

Given the number of pain points, one may question where there is a need for performance rating scales!

Why rate employee performance?

The reason why you need to rate employee performance is to understand how employees are performing, and will their contribution aid in company performance and growth. In addition to that, here are some of the reasons why performance rating is useful.

• To evaluate employee performance to offer a promotion, raise and bonus
  • To help the employees to understand the company’s expectations.
  • To help the manager to understand the strengths and weaknesses of employees better and motivate them.
  • To guide and support the employees to improve their skills and performance.
  • To be able to differentiate between high and low performers and act on performance differences.
  • To offer transparency in decision making.

Employee performance rating scale is a vital tool that helps an employer to manage and plan for the employee’s future.

How to create a rating scale that works

In many companies, a common performance evaluation rating scale is used for all employees at all levels irrespective of their responsibilities and goals. When this happens, it gives birth to a biased decision that may lead to several consequences that impact the performance of the company. To ensure that an employee performance rating scale is unbiased, it is ideal to have a customised rating scale that can help reduce common biases.

Here are three tips for creating employee rating scales that will help you identify behaviours that you would want to see in your employees.

• Understanding ‘spread’ and ‘validity’: Spread and validity are the two areas where traditional rating methods are weak. Design a scale that has well-defined multiple options for a response. Ensure that the scale measures what is valid and vital, and what the organisation values.
• Using customised words: Let your questions and response options be flexible, clear, and with differentiated descriptions for a response. Give more importance to the number of responses and let your words be based on the behaviors of your employees and the criteria you are trying to measure.
• Maintaining transparency: Make sure that your employees understand the scales that are being used by the company and the measurement of success. Transparency is the key that helps to build trust.

How can you create performance rating scales that are unbiased and can aid you in building a company culture where actions are valued? Here’s how!

Identify the top performers and the not-so-top performers

The first step to successfully preparing a performance rating scale is to separate the top performers from the non-top performers. Is every employee equal? Does each have similar responsibilities? You must identify the top performers from each vertical, which must make up to 25% of the total employee population. Though it is a difficult task, especially when the company itself is high-performing, separating them would help to prepare a performance evaluation rating scale that is unbiased.

Identify the best of the top performers

Once you have separated the top from the not-so-top performers, the next task is to identify the best of the top performers, which should make up to 5% to 10% of the total employee population. The best of the top-performers are marked as company role models and mentors who will define the scale. Label them as best of the best, a 5. Everyone in the top performer bracket becomes a 4.

Sort the remaining

You have covered 25% of your employees. Sort the remaining 75% of the total population and label the lowest performers as 1. Anyone who does not meet performance expectations but can improve with training can be marked as 2. Anyone else, who is neither high-performer nor low-performer, is considered as average performers and come under 3.

Choose the right rating scale

You can do everything you can and yet fail if you do not choose the right rating scale as it helps to measure employee performance quantitatively. You are posed with several options, such as the following.

• Nominal, binary and ordinal
• Numeric and descriptive
• Likert vs Semantic vs Custom

To be able to choose the most ideal performance evaluation rating scale, you must first understand different scales.

Performance review rating scale examples

Did you know that there is science behind the rating scale? Questionnaires and real scientific data have been used for several decades to understand and create employee rating scales. Some of the best rating scales examples include the following.

The three-point rating scale

The three-point rating scale is the most common form of performance evaluation rating scale that is used by most companies. It includes standard three points as mentioned below.

Figure 1: Three-point scale

1. Below expectation

Employees who are non-consistent in their performance and do not meet expectations. They need additional coaching and direction. They are willing to improve, yet fail to give results.

2. Meeting Expectation

Employees who are consistent in their performance and meet expectations, and sometimes exceed expectations. They occasionally need directions and coaching to achieve their core goals.

3. Exceeding expectation

Employees who exceed expectations in fulfilling their core goals with little or no coaching. They are achievers and influence others to perform better.

The Five-point rating scale

The five-point rating offers greater distribution of performance and helps to identify greater variation among the high performers. The five-point employee performance rating scale is used by many managers as it provides a wide distribution of the employees and their performance levels. The response options can be customised as per descriptors that align with the company’s objectives and culture.

Figure 2: Five-point scale

Soft skills evaluation

A custom employee performance rating scale can be used to evaluate soft skills like interpersonal skills, observational skills among others, and other behaviour demonstrated by the employee. The employer must work closely to evaluate the employee, based on these performance rating scales. They should also be well-informed of their behaviour to notice any change that can have an impact on company performance.

Conclusion

A performance rating scale is a tool that helps to evaluate an employee’s performance in the company, to enable the employer to understand what needs to be done to ensure that the employee contributes to the overall growth of the company. Companies use custom employee performance rating scales to evaluate the individual contribution and to ensure that the process is impartial. It is suggested to maintain transparency while performing the evaluation process as it helps to build trust.