Why you should reconsider ratings in performance reviews

If you’ve ever participated in a performance review, chances are you’ve received a rating. Maybe it’s an overall rating, where your manager attempted to distill all of your hard work into one tiny number. Or maybe you’ve been rated on specific skills or behaviors, like how well you’ve demonstrated your company’s values.

Ratings seem to be a fast and easy way to give quantifiable feedback, but many employees don’t like receiving them. Also, evidence shows that they have the potential to do more harm than good. If you are considering adding a rating system in your performance reviews, you’ll want to learn about their limitations and the potentially negative consequences for your teams. 

What’s the problem with rating systems?

Well, there are actually a couple of problems with rating systems. First, research has shown that rating systems trigger a very intense reaction in the brain, especially when correlated with systems of rewards like promotions and pay increases. Your body basically goes into “fight or flight” mode, making it hard for you to really absorb what is being said. That makes it difficult to have a constructive discussion about performance and growth. 

Also, while ratings do provide quantitative data that can be analyzed across teams and over time, that data isn’t as objective as it appears. Indeed, because of something called the idiosyncratic rater effect, it’s actually pretty bad data. Research has shown that variation in ratings is more often due to characteristics of the raters than those being rated. In other words, your rating might tell us more about your manager than about you. 

There are other problems, too. Rating systems don’t really account for the day-to-day fluctuations and changes that take place throughout the year. In some organizations, curves may force competition between employees where they could be working more collaboratively. And finally, managers may not give their reports the guidance necessary to translate these ratings into actual improvement.

It’s no wonder that Eli Lilly saw a significant and long-lasting drop in engagement for the 85% of employees who received overall ratings of 1 through 4 on a 5 point scale on their performance reviews. Even those who scored 5 out of 5 had a decline in engagement after their reviews.

Performance metrics still have some benefit – now what?

People Ops teams that rely heavily on ratings may be reluctant to abandon these systems because they do give organizations regular, quantifiable data. However, a growing number of companies are ditching traditional rating scales and numerical metrics in favor of more conversational feedback methods. According to a 2015 study, thirty large companies (totaling about 1.5 million employees) have phased out rating systems. 

However, abandoning ratings completely may not be the best option either. On the ground, they give organizations a quantifiable view of performance among employees, allowing companies to report on and analyze trends so they can make improvements.

The problem with “open box” questions

Instead of using rating systems, some organizations use “open box” or free text questions that allow for more explanation. Research conducted by the Stanford VMware Women’s Leadership Innovation Lab found that implicit bias can enter into open boxes because managers have the ability to fill in their own assessments and criticisms. Their research also indicated that women were more likely to receive vague feedback without specific details where men received longer reviews based on technical skills compared to shorter reviews for women that were more focused on their communication skills. 

Ways to make ratings work better

If your organization would like to continue using rating systems for the benefit of quantitative results, there are some ways that you can use them in combination with effective feedback to ensure that performance reviews have an overall positive impact. 

Here are a few ways to improve on rating systems without removing them completely:

  • Explicitly link ratings to objective performance metrics whenever possible. For example, you might assign a rating for “effectiveness” to customer support employees that are directly tied to measures like response times and customer satisfaction scores.
  • Make sure your ratings are more than a number. When creating a ranking system, consider using a sliding scale or frequency scale that gives slightly more quantitative feedback. Ratings should also be paired with open-text questions that provide more clarity and concrete examples.
  • Include plans for improvement. One way to counter the negative consequences of ratings is to include very specific and actionable recommendations for improvement and advancement. This gives employees a clear path forward and more motivation to achieve success milestones. 

Another alternative: an assessment graph

You can also consider replacing rating questions with a simple assessment graph. Select two different dimensions of performance for the x-axis and the y-axis – behavior and results, or functional knowledge and ability to execute, for example – and then have managers place a dot where they think the employee belongs. Without a specific number to fixate on, the graph provides a great starting point for constructive conversation about where someone is in terms of their performance. This can lead to interesting discussions about expectations as well. And if employees use the graph for self-assessments, you can also see how aligned your managers are with their reports.  

Focus on improvement and development

The key to any successful performance review, whether numerical ratings are included or not, is to focus on personal development, advancement, and growth opportunities for employees. According to Josh Bersin, research in 2018 demonstrated that the highest performing companies focused on growth and development in their performance reviews rather than “competitive assessment.”

This means taking time to coach and focus on what is working, rather than what is not working. Ratings that assess past performance can run counter to this, so if you do decide to keep using them, you need to make sure that managers spend time on providing specific suggestions for development.