With more and more major corporations moving away from traditional annual reviews and employee ratings, you might be debating whether to follow their example or stick with your current model. So, let’s dive into the debate and consider the reasons why employee rating scales should Stay or Go.
Employee ratings provide quantifiable metrics that can guide leaders’ decision-making and improve processes. Ratings make it easy to identify employees with the strongest leadership potential as well as those employees who aren’t performing up to standard. These metrics also make it easier to determine promotions and raises, and they help executives identify trends—Which departments and managers are consistently rated the highest?Ratings can make it easier to determine promotions and raises. Click To Tweet
A numbered rating system also gives employees a clear indication of where they stand—usually on a 1 to 5 scale—which can provide a jumping-off point for development-focused conversations.
There can be a tendency toward bias when managers are asked to boil down an employee’s annual performance to a few numbers. And these numbers actually lead to a drop in engagement for the majority of employees.
One company found that—based on monthly surveys—engagement declined for 80% of employees following performance rating meetings. Employees rated four or lower on a five-point scale showed the biggest dip in engagement. And that decline sustained for as long as three months, meaning that engagement was always lowest during the first quarter of the year.Performance ratings can lead to manager bias and decreased employee engagement. Click To Tweet
Even those employees rated as a five out of five showed a 15% decrease in engagement, although they did recover more quickly. Employee ratings are intended to boost engagement, but the numbers show that it actually has the opposite effect for many.
The decision for most companies isn’t as simple as Stay or Go. Employee ratings are one piece of a larger puzzle, and organizations need to take a holistic view of the performance management process.
One factor in the employee engagement decline is the shock factor that comes with having one number define an entire year’s work. If employees perform well, they may breathe a sigh of relief and coast for a little while. If they perform poorly, their confidence may be damaged and/or they may feel that all their hard work was for nothing.
So, companies should focus on providing regular feedback and engaging employees in ongoing conversations. This will give employees a clearer understanding of how they’re performing and how they can improve, so that the end-of-year review doesn’t come as a shock.Companies should focus on providing regular feedback and engaging employees in feedback. Click To Tweet
Whether companies should use ratings isn’t the issue here. It’s really about how an employee is managed in the days, weeks, and months leading up to that rating.