A performance rating system is useful for determining how well your staff have mastered certain skills or tasks. They allow you to categorize performance levels and assign scores.
But how should you define performance rating scales? And how should you apply them in practice? In this article, we’ll be sharing information about creating performance rating scales with numerous examples, tips, and an action plan.
What are performance rating scales?
A performance rating system uses a sliding scale and allows you to evaluate to what extent staff or trainees (students/interns) have mastered or internalized certain knowledge, skills, and/or competences.
The sliding scale represents a range for any number of criteria, for example:
- from ‘below par’ to ‘excellent’
- from ‘unsatisfactory’ to ‘highly satisfactory’ or even ‘exemplary’
- from 0 to 10
- from ‘never’ to ‘always’
- from ‘beginner’ to ‘expert’
- from 0% to 100%
What’s more, performance rating scales may also serve as a visualization tool. A good example is a star rating system using one to five stars, where one star is the lowest possible score and five stars the highest.
It’s even possible to indicate a minimum required level. With this information, you can see instantly whether a staff member’s skills and knowledge are above the minimum required level. Or whether someone is performing below par.
When assessing soft skills – an increasingly important metric in the modern day workplace – you can even use such a scale to depict how often an individual conducts themselves in a certain way. Examples include leadership qualities, analytical thinking, innovative working, inquisitiveness, helpfulness, procrastination, or avoidance.
But why use performance rating scales at all?
Perhaps you’ve been asking yourself why it’s even necessary to assign a score to your staff’s knowledge levels, skills, and competences. The simple answer to this question is that it’s vitally important you know how well your staff are performing for your company to remain competitive and continue growing.
But it’s important from your staff’s perspective, too. They want to know where they stand and what’s expected of them. It also gives them an insight into their strengths and weaknesses, and where to focus their career development efforts.
What’s more, a performance rating system is objective and provides transparency, as it’s based wholly on pre defined performance indicators. Using these, managers can then explain and justify their decisions.
Need to keep track on the performance of your employees?
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Prerequisites for performance rating scales
You’ll need to take several factors into account when setting up a performance rating system. These will ultimately determine how to set up and configure your scales, for example:
- nature of the skills and tasks in question
- assessment matrices with relevant objectives and evaluation criteria
- nature of feedback given
- performance rating range
- performance rating gradation
- performance rating criteria
Temporary drawbacks – the engagement dip
Although performance rating scales are useful and widely used, not all are fans.
For example, research conducted by Ely Lilly showed an intriguing trend immediately after an assessment review. Many employees (80% of respondents) went through a significant dip in engagement level. What’s more, this engagement dip sometimes lasted for up to three months after the assessment!
The engagement dip was primarily noticeable among staff members with a score of 4 or lower on a scale of 1 to 5. But even staff who scored a 5 out of 5 went through a minor engagement dip, although they did recover faster than co workers with a lower score.
Tips for a sound performance rating system
How you structure your performance rating system depends largely on the specifics of your organization. Creating and using a scale will be very much custom work, yet there are several general recommendations that will benefit your organization and help you avoid the drawbacks we mentioned in the previous section.
Time for the main dos and don’ts.
1. Be relevant
It’s key that you address relevant issues when implementing performance rating scales. This prevents unnecessary distractions. Ask yourself whether your performance rating system addresses the issues that are critical to your organization or department. And do your scores contribute to making better decisions?
2. Opt for the right range
It’s important that you select the correct range and gradation for your scale, i.e. the maximum and minimum levels and the number of steps in between. Not too extreme and not too few or too many. If the range is too limited, it won’t be possible to map all the skill and knowledge levels accurately and fully.
Many old school assessment tools fail to differentiate adequately, leading to overly generalized evaluations. For example, an assessment system using one to five stars doesn’t provide very much room for nuance. This obscures small differences between staff members and ends up with too many people in the same category, most often the three- and four-star categories.
You can avoid this situation by implementing a scale with greater variation and a wider spectrum. In other words, avoiding stars or ratings and using wording instead, such as ‘above average’ and ‘excellent’.
3. Select the right words & definitions
Language is critical to creating a performance rating system. Using the right words and clearly formulated sentences and descriptions minimizes biases and clarifies what you’re aiming to measure and determine.
Subtle differences in language usage can also have a major effect on your staff’s mindset. For example, writing ‘… is making progress in …‘ encourages further personal and professional development more than writing ‘… has not yet achieved …‘. The latter isn’t exactly constructive and could leave staff feeling disconcerted because it implies a degree of failure.
4. Be transparent
In this context, transparency means that managers need to inform staff members fully and clearly. Explain why you’re using performance rating scales, what the criteria are, and what you’ll be doing with the information. Doing so lets staff know how management defines success.
The use of performance rating scales behind closed doors is one of the biggest blunders management can make.
Transparency also entails that you replace annual assessments with continuous feedback and status updates, for example, quarterly reviews, performance logs, and ongoing coaching. Such an approach prevents staff members feeling overwhelmed by twelve months of radio silence followed by an intensive bout of feedback and critique.
Annual assessment reviews were one of the main reasons behind the negative perceptions and the engagement dip at Ely Lilly we discussed above.
Frequent communication also avoids a sense of secrecy around reviews. Openness and transparency about performance rating scales also minimize any possible sense of arbitrariness or unfairness.
5. Focus attention on the future
Research has shown that future focused assessments are more effective and better received than reviews that focus exclusively on past performance.
Understandably. A proper assessment is, after all, more than just a mere report – it’s about encouraging staff to continue growing and improving.
6. Use words instead of numbers
Words often work better than numbers. They’re more personal while emphasizing observations made of actual behavior and performance. What’s more, textual feedback offers far greater possibility for nuance than a grade or rating in the form of a number or stars.
Berkeley University is a prime example of an organization that has applied most of the above mentioned principles with its performance rating system.
It uses the following categories:
- Level 1: Unsatisfactory – Performance was consistently below expectations in most essential areas of responsibility, and/or reasonable progress toward critical goals was not made. Significant improvement is needed in one or more important areas. A plan to correct performance, including timelines, must be outlined and monitored to measure progress.
- Level 2: Improvement needed – Performance did not consistently meet expectations – performance failed to meet expectations in one or more essential areas of responsibility, and/or one or more of the most critical goals were not met. A professional development plan to improve performance must be attached, including timelines, and monitored to measure progress.
- Level 3: Meets expectations – Performance consistently met expectations in all essential areas of responsibility, at times possibly exceeding expectations, and the quality of work overall was very good. The most critical annual goals were met.
- Level 4: Exceeds expectations – Performance consistently exceeded expectations in all essential areas of responsibility, and the quality of work overall was excellent. Annual goals were met.
- Level 5: Exceptional – Performance far exceeded expectations due to exceptionally high quality of work performed in all essential areas of responsibility, resulting in an overall quality of work that was superior; and either 1) included the completion of a major goal or project, or 2) made an exceptional or unique contribution in support of unit, department, or University objectives. This rating is achievable by any employee though given infrequently.
Of course, there’s plenty of room to insert extra categories between any of the five levels defined above. And this allows you to tailor your performance rating scales to your organization’s specific objectives.
Performance rating scales are a useful method for objectively determining which skills exist within your organization. Make sure that they have sufficient relevance, range, and gradation. Clear definitions are also extremely important. And last, but by no means least, be honest, open, and transparent about their use and purpose.
To get the most out of your performance rating scales, it’s vital that you address the administrative side of such a system. AG5’s skills management software is a useful tool for this very purpose. You can replace all the information recorded about staff skills, knowledge, and performance, which is most often saved in multiple locations (probably in Excel spreadsheets), with a single, centralized, cloud based system. Once you’ve done this, you can assign access rights to determine who can view what information at an employee, team, or department level.