Are employee rating scales still up to date?

The question of whether it is still appropriate to use rating in performance reviews today is a much-discussed topic. Dissatisfaction is very common as performance reviews are not only perceived as time-consuming, inaccurate, and confusing, but also unfair and demotivating. Experience shows that people are biased in performance appraisals and tend to be "nice" rather than "accurate". According to a Gallup study, only 1 of 5 employees say that performance reviews at their own company have a motivating effect. ^[1]

Above all, companies such as Adobe, Microsoft, Accenture or Deloitte no longer define their performance on the basis of a number. Instead of performance ratings, quality discussions and regular feedbacks are to be used.

Sounds amazing ... In practice, however, it turns out that it doesn't work entirely without ratings. If you take a closer look at the companies without rating systems, you will see that programs and methods for employee involvement and performance development were introduced parallel to the changeover. Disappointment could be high if the newly deployed comment fields actually change anything about the situation.

How can performance reviews be rethought?

Performance management is based on the assumption that employees develop and that improved performance and results can be achieved through appropriate measures and efforts. ^[2]

In order to initiate appropriate personnel development measures, it is first necessary to identify where and by whom there is a need for such measures. To do this, performance, behavior, and development potential must be assessed. ^[3] The company needs to know how its employees are performing in order to remain competitive and to enable growth.

The positive thing about evaluations is that they give a quantifiable view of performance. Which employees are most effective? Which ones could develop into leaders? Are there deficits that become apparent, etc.

Data-driven decisions provide a basis when it comes to promotions, salary increases, or advancement because otherwise decisions will be inaccurate or biased. It is also important for employees to understand the background to these decisions and what is expected of them.

Problems with scaling

The problem with rating scales is not the rating system itself, but the poor data, as they are applied to all areas of assessment for the sake of simplicity. This can result in unintentionally not promoting the right people and overlooking employees with potential.

Most often, 5-point scales are used (from 5 - Outstanding to 1 - Unacceptable) ranging from goals to competencies. The critical point is that it is not possible to evaluate certain criteria because, for example, goals cannot be classified in a scale and another definition such as "achieved" or "in progress" would have to be found here. The same is true for development tasks or achievements. The development may be 100% complete, still open to a certain percentage, or may not have been started at all.

The task is to adapt the rating scale and realign it to the criteria. With the help of a text-status scale, employee evaluation is based on actions, thus eliminating the negative aspect of evaluation, which can be demotivating.

Another problem and phenomenon is hindsight bias, i.e. managers tend to rate their employees better. In the case of centrality bias, the evaluation occurs in the middle of the scale and provides equally inaccurate data.

Other studies point to another problem that is evident in the goal-setting approach, which has disadvantages, especially in agile organizations.

Concrete objectives as blinders

Concrete goals that provide a clear focus can also act like blinders, preventing out-of-the-box thinking. ^[4]

A well-known example of this is the gorilla experiment conducted by psychologists Christopher Chabris and Daniel Simons. In this experiment, test persons were given the task of observing six basketball players throwing the ball to each other. Three were dressed in white T-shirts, and three wore black. The task was to count the passes made by the white-clad players. At one point, an actor in a gorilla costume walked through the picture, but most of the subjects didn't even notice.

According to this, the most intrusive things are overlooked when attention is focused on something else entirely. Inferentially, it means that specific targets can blind you. Thus, in agile and creative work, some degree of goal blurring would be helpful in responding to a changing environment.

Ambitious goals as a risk

Too ambitious goals can degrade people's self-efficacy, which is, however, necessary if the setting is to be curious, open, and proactive.

In overconfident people, ambitious goals generate such a strong will that any means is justified to achieve the goal, causing gambling behavior. In addition, emotional exhaustion can occur, even leading to unethical behavior.

The target agreements should also be questioned. The SMART goals (specific, measurable, accepted, realistic, scheduled) can often not be implemented in numerous task worlds or are not useful at all. A high degree of repetitive tasks in a wide variety of professions do not pursue an annual goal at all, but rather general performance and quality standards. Here it would make more sense to define standards or jointly agreed performance and quality requirements, which rarely affect the individual, but usually several employees. According to Armin Trost, this would save a lot of time in many places, increase the sense of purpose and avoid irritations.

Returning to assessments, industry analyst Josh Bersin says the key is to use lots of data and feedback to make decisions in a transparent and fair way, communicate clearly what is valued in the company, and give employees insight into the goals and projects of others.

The trend shows that companies are increasingly replacing rigid and costly rating systems with advanced and alternative performance management models (Donkor & Slobodjanjuk, 2014). Depending on the context of the company, it seems appropriate to question the instrument of ratings before hastily saying goodbye to ratings.

FLOWIT offers a revolutionary employee evaluation. Self- and peer assessments by superiors as well as colleagues can be called up in real time and one's own development can be managed. The visual development maps help to intuitively adjust personal goals. Commitment and leadership culture are promoted within seconds and in a target-oriented manner. FLOWIT provides an agile approach to people development goals for companies of all sizes.

^[1] Harvard Business Review, Frank V. Caspedes, 8.7.2022

^[2] Studer, 2009, S. 24

^[3] Seibt et al., 2017, S. 251

^[4] The Dark Side of OKR, Antoinette Weibl, 2021

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