How many points on your performance rating scale ?

In this instalment of Reader Question, I deal with a common issue when designing the performance appraisal system. I was asked recently about the number of points you should have on the rating scale for your performance management system. Which number is right ? 3 ? 4 ? 5 ? or even 6 or 7 ?

I don’t want to dive into research results, serious academics or even what the trendsetting companies are doing. My view here is pretty simple : do whatever works for your organisation.

Proponents of an even number of performance ratings (eg 4 or 6) say it forces managers to make tough decisions about where the performance of the employee really is, given that there is no “middle” or “at target” section. It is true. But this requires a high level of managerial maturity – to a point which I have not witnessed very frequently so far.

In order to be accepted by employees, it also especially requires that the managers provide on-going performance feedback to their team members, so that they know where they are standing and can make some efforts to improve if needed. (Because not performing on some objectives may have such a radical impact on your overall rating). In my experience, most managers are not delivering on this on-going feedback, especially to the people who need it the most. After all, even if you know you have to or should, who likes to have a tough or uncomfortable conversation with an employee who is not delivering what is expected of them ?

Furthermore, in our regional Gulf culture, face-saving is very important. When you have an even number of performance ratings, you have no possibility to let someone be at “meets expectations” and you have to divide the employee population in 2 buckets (the over expectations achievers and the under expectations achievers). So it is culturally very difficult to implement this kind of approach in the region. Not impossible, but tricky.

For these two reasons, I tend to like a 5-point rating scale. It reflects the fact that a majority of employees deliver roughly what is expected of them (sometimes a bit more, sometimes a bit less) and are therefore rated into the “3″ category which is the at-target rating. In reality, given the struggle HR face in meeting the curve and convincing managers to really differentiate performance and rate some employees to below expectations, what happens is that in effect we end up managing the vast majority of employees on 4 scales anyway, as the bottom one is often nearly empty…

I’ll make an exception for a few companies (often multinationals) where performance feedback and a culture of performance management have been in place for many, many years. The year-end appraisal is not seen as a burden in those rare organisations, because there have been employee/manager meetings on a very regular basis throughout the year. As a result, the final rating comes as no surprise and the whole process is managed quickly and efficiently. These few companies have a deeply ingrained culture of performance management, and may find it somewhat easier to handle a 4-point rating scale… maybe…

I’d love to hear from you. Is there such a debate in your organisation every time that year-end approaches ? Do you have strong views on how many levels there should be in a performance rating scale ? Please share your views in the comments below !

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