During the last couple of years, I’ve had the opportunity to host executive forums with CHROs, EVPs, and other senior leaders looking to evolve (and sometimes revolutionize) the foundations of HR – compensation structures, performance processes, and more. In many ways, it’s been enlightening to be a facilitator of these sessions to hear how some of the most innovative minds in human resources, talent management, compensation and benefits think about a process that has been in place for decades – the annual performance review, especially the performance rating.
Performance management is evolving. That evolution is taking many forms and directions as organizational leaders are seeking the most effective ways to give employees the feedback they need (both positive and constructive) to grow their careers. As part of this evolution, the performance rating is coming under deeper scrutiny. Most companies have some kind of rating scale for employees. Some have thrown it out entirely. Others tried to eliminate it, only to add it back again. Many hedge the discussion on performance ratings, believing that process to be the best justifier of pay raises or distribution of annual merit increases.
And yet, we all know the challenges of performance ratings, namely the lack of relevance or consistency in how ratings are applied and understood:
- Rating categories are inconsistently applied by managers. Some managers grade more harshly than others. And some managers hold individuals to higher standards for the same rating, even within the same team.
- Rating categories are inconsistently understood by employees. The lack of clarity on what a “meets expectations” means as compared to an “exceeds expectations” – especially on a 5-point scale – leaves employees confused on the quality of their contributions and potential within the company.
Let me share a story to illustrate. Circulating within my team is this example of a poorly applied performance rating given to an aide in an Oregon nursing home (from the Not Always Right website):
(I have just received my first annual performance review. I am widely known as being one of, if not THE, most productive and efficient aides in the entire facility. I have received stellar marks almost across the board, but am shocked to see that I am given a three out of five in productivity. I immediately bring it up to my supervisor.)
Me: “How could I possibly get a three out of five in productivity? Most everybody agrees I deserve a five, but I would even accept a four as everyone always has room for improvement. But a three is solid mediocrity, and I know for a fact that [multiple far less productive co-workers] have received fours. Can you explain?”
Supervisor: “Well, you simply set the bar too high for yourself. When we see you come in here and always strive to give 110% of yourself, we come to expect that from you all the time. Thus, if you’re feeling tired or under the weather and are only able to give 100% or 90%, it makes it look like you’re being lazy in comparison.”
Me: “O … OK. But you gave a higher mark to [specific co-worker who is exceptionally lazy], for example, and everybody knows that she spends the majority of her shift at the desk playing with her phone when she should be in the patients’ rooms helping them!”
Supervisor: “Well, see, with her, we know that she usually only gives about 50%, but occasionally she’s having a good day and gives us more like 60%. Those good days in comparison to her usual make her look more productive than you on your bad days as compared to YOUR usual.”
Me: “OK, just so we’re on the same page here: You really believe that someone who gives 90% on their WORST day deserves a lower score in productivity than someone who gives 60% on their BEST day?”
Supervisor: “Yes. I’m glad you understand. Did you have any more questions?”
Me: “… No, I think I pretty much got it. Thanks.”
Ratings are only as good as the people giving them. That’s why a wisdom of the crowd approach can help add needed data points on performance from more than a single manager, ideally throughout the year instead of a single point in time. Such an approach also helps (improving a sense of equity in pay practices) while supporting an overall pay for performance model.
How does your organization evaluate employee performance and offer feedback to help employees grow their careers to fulfill their potential? What holds you to a performance ratings scale? What enabled you to break free?
As Globoforce’s Vice President of Client Strategy and Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. He is the co-author of "The Power of Thanks" and his articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.