Performance ratings have been a lynch pin of performance management for many years. And yet, most of the research done around ratings suggest that they have no positive impact on performance. In fact the only reason many organisations rate people is solely to make performance related pay decisions.
Part of the Advanced Clear Review philosophy is that you should ditch performance ratings, in fact there isn’t a way of rating an employee within our system, and sometimes our customers ask us why. We believe that giving employees a rating can actually be damaging to performance and your organisation, and here are some of the reasons why.
1. Performance measurement does not help productivity
Giving all of your employees a number on a scale from 1 to 5 doesn’t help anyone. Best case scenario, an employee gets a great rating and walks away knowing they have been doing a good job and will continue on in the same way. Worse case, an employee gets a terrible rating, their confidence is knocked and they don’t feel any motivation in their work, potentially leading to them leaving.
For the most part, your employees will receive ratings somewhere in the middle telling them their performance is average, they’re not terrible, but they’re not great either. This isn’t motivational to hear, and it doesn’t give an employee any information to help them improve their performance.
So, for the most part, where ratings are concerned, employees actually find they reduce their motivation at work, rather than increasing it.
2. Performance ratings are not fair
Studies show us that the majority of an employee’s performance rating will actually reflect more on the person doing the rating, than the person being rated. This means that the same person could be given a completely different rating depending on who their manager is. And if someone you know in a different team has got a manager that rates more generously than yours, this could cause resentment within the organisation.
A manager is rating people based on their perceptions, their opinions, and their view of what makes a good employee and what makes a bad one. One manager might think a good employee needs to be at their desk bang on start time and finishing not a minute early. Another manager might think that as long as the work is getting done it doesn’t matter if you sometimes start a little late, or need to wrap up early. This could make a huge difference in a rating for an employee who struggles to keep ridgid hours due to out of work commitments, but ultimately does all their work to a good standard.
All of this means that no matter how hard a person works, at the end of the day their rating will say more about who their manager is, than the work they have put in over the last year.
3. Comparing the performance of all employees isn’t helpful
Trying to plot the performance of employees working completely different jobs, in different areas with different skills, responsibilities and goals on the same graph makes no sense.
The large majority of your workers (around 80%) will be average performers. They will be doing a good job, but nothing ground breaking that massively effects your organisation’s outcomes. Trying to differentiate between a better or worse average performer is time consuming, and ultimately isn’t going to give your organisation anything useful.
As long as all of these employees are having regular check-ins with their manager, who is making sure they are reaching goals, they are engaged with work and not struggling, then giving them a number rating is ultimately pointless.
What is important is to identify the very top talent, these are the people making a real difference in your organisation, and the people who should be incentivised to stay. We recommend finding these by posing a set of simple and objective questions to managers that will bring to light those who go above and beyond. Keep an eye out for a video coming soon around identifying your top talent.
4. Many managers don’t have the data to make an informed evaluation
In a standard performance management model, managers simply don’t have enough information available to them to make a fair assessment of an employee’s performance. They need reliable and useful data to show them what their employee has been working on and how well they have performed.
Without a system in place to gather this data throughout the year and display it clearly, they don’t have much to go on, especially if their employees work remotely and they don’t get much face to face time with them.
They are therefore relying on their team members to explain to them how well they think they have performed this year. This comes down to selling oneself, something that even the most skilled employee might not be good at. It has also been found that women are less likely to talk up their achievements then men are, meaning that if it comes down to how you self-promote, men are going to have the advantage here. Which brings us onto point 5…
5. Bias plays a role in ratings
Whether consciously or unconsciously, bias plays its part in the outcome of performance ratings. As much as we’d hope someone wouldn’t get a better or worse rating based on their gender, sexuality or race, these biases are deep rooted, and could sway a manager’s opinion of their employee, effecting their ratings.
Studies have shown us that people do consider race, gender and other such factors when it comes to making judgements and decisions, even if they are not fully aware they are doing this. This means that we can never be sure that a performance rating is fully impartial and truly reflects the person’s performance, with no other factors interfering.
There is also the matter of recency bias, which is when a manager who doesn’t have a record of performance from the full year simply bases their ratings on the previous couple of months. They can recall something positive or negative an employee did a few weeks ago, much better than trying to remember how they did on a project 6 or 8 months before.
This could mean good employees who have been going through a short term rough patch are rated worse than they should be, and less capable employees who realise their evaluation is coming up and have put in more effort might be rated higher than they should be.
Here at Advanced we encourage all organisations to implement a continuous performance management model into their work place, to provide a full and fair view of employee performance, and to be used as a tool to support progression and development, and not to label people with a number.
To find out more, take a look at our continuous performance management software, Clear Review, and start saying yes to a fairer and more productive workforce.