Advantages and disadvantages of rating scale method of performance appraisal

Employees, as well as managers, often question why organizations do employee performance appraisals.

Anyone who has ever been on the receiving end of a performance appraisal could argue why they perceive it to be ineffective and a complete waste of time.

Employees often feel unjustly assessed, and managers often go through a forced annual process to comply with job expectations. This doesn’t make it easy for either party.

So what exactly is a performance appraisal?

A performance appraisal is an evaluation done on an employee’s job performance over a specific period of time.

It is the equivalent of a report card on an employee and how their manager assessed their performance over the prior year.

Anyone who has worked in more than one department or at more than one organization can attest to the fact that not all performance appraisal processes are the same.

The varying systems and processes are all over the map.

Unfortunately, some are done so poorly that they are not only designed to fail, but also to create a negative experience for both the manager as well as the employee.

So why do organizations do performance appraisals?

There are many varying opinions on the subject of performance appraisals and why they are done.

Some organizations do performance appraisals because they feel obligated to do them – because everyone else does.

Other organizations do performance appraisals to make sure they have a piece of paper in the employee’s file – in case they ever need to do corrective action.

But successful organizations understand the importance of incorporating performance appraisals into their performance management process and strategy.

They use this tool to encourage, engage, and develop their talent pool.

Advantages of Performance Appraisals

Documentation: A PA provides a document of employee performance over a specific period of time.  It’s a piece of paper that can be placed in an employee file.

Structure: This process creates a structure where a manager can meet and discuss performance with an employee. It forces the uncomfortable conversations that often need to happen.

Feedback: Employees crave feedback, and this process allows a manager the opportunity to provide the employee with feedback about their performance and discuss how well the employee goals were accomplished. It also provides an opportunity to discuss employee development opportunities.

Clarify Expectations: Employees need to understand what is expected of them and the PA process allows for a manager to clarify expectations and discuss issues with their employee.

Annual Planning: It provides a structure for thinking through and planning the upcoming year and developing employee goals.

Motivation: The process should motivate employees by rewarding them with a merit increase and as part of a comprehensive compensation strategy.

Disadvantages of Performance Appraisals

Creates Negative Experience: If not done right, the performance appraisal can create a negative experience for both the employee as well as the manager. Proper training on processes and techniques can help with this.

Time Consuming: Performance appraisals are very time consuming and can be overwhelming to managers with many employees. I’ve known managers who were responsible for doing an annual PA on hundreds of employees.

Natural Biases: Human assessment are subject to natural biases that result in rater errors. Managers need to understand these biases to eliminate them from the process.

Waste of Time: The entire process can be a waste of time if not done appropriately. Think about the time investment when the end result is negative. It is time wasted on all fronts.

Stressful Workplace:  Performance appraisals can create stressful work environments for both employees and managers. Proper training can help to reduce the stress involved in the process.

Finally, performance appraisals are only as good as the performance management system it operates within.  

Organizations that only do performance appraisals for the sake of doing them are wasting their time.

But organizations that incorporate performance appraisals into a comprehensive performance management system and use them to implement business goals have an advantage for accomplishing their goals and ultimately their strategic plan.

If you are interested in learning more about performance appraisals, you might find the book Performance Appraisal Source Book: A Collection of Practical Samples helpful.

A graphic rating scale lists the traits each employee should have and rates workers on a numbered scale for each trait. The scores are meant to separate employees into tiers of performers, which can play a role in determining promotions and salary adjustments. However, the scale has disadvantages that make it difficult to use as an effective management tool.

The disadvantages include differences among how people score evaluations, perceptions of ratings, a feedback block, a halo effect and a difficulty in separating employees who land in the middle.

If a company uses 15 people to evaluate personnel, there may be 15 different rating scales. Even with intense training, some evaluators will be too strict while some will be too lenient, and others may find it hard to screen out their personal agendas. A graphic rating scale works best when managers and employees agree on the definition and degree of factors included in the evaluation, and that's difficult to achieve.

You'd think that since everyone in the company is using the same graphic rating form, the way they rate employees would be similar. But it's human nature to perceive the scale differently from the next person. No matter how the rungs on the rating scale are labeled, people can view them differently.

What is meant as a compliment by the evaluator – "you sometimes exceed my 'high' expectations" – may sound like a C+ to the person being evaluated. And C+ sounds way too average to most employees.

Many times, when employees are given a grade or a number rating, that's all they hear. Workers may not hear the positive feedback in any essay part of the evaluation because they're fuming at a rating-scale grade they perceive to be too low.

It becomes an overall label, and the employee thinks, "I'm just a number five." Or they may miss the suggestions for improvement because they're basking in a grade that suggests their work is already superior. A rating scale becomes an obstacle to substantive give-and-take about an employee's work.

Adding up to a final score assumes that an exceptional strength in one area can mitigate deficiencies in others. Evaluators may allow the "halo effect" to skew the evaluation, letting an obvious strength subtly boost ratings in other areas. On the other hand, one glaring weakness can pull down areas of strength, too.

Graphic rating scales have proved best at identifying the very highest performers and the very lowest performers. Because evaluators find it safer to operate in one zone of the scale, it becomes difficult to differentiate employees who land in the middle group, especially when those employees have different combinations of strengths and weaknesses.

It may be unfair to try to differentiate them anyway. Few people are strong in every area. A group of employees tends to have different strengths and weaknesses. By differentiating those in the middle, you're effectively giving more weight to some strengths than others, and the same for the weaknesses, even when that isn't your intention.

In a graphic rating system, employers and managers are encouraged to maintain performance logs. Yet, even with repeated cautions and admonitions to maintain performance logs, they're only valuable when evaluators review them thoroughly before performance reviews. When they don't take the time to do that, they may naturally give more weight to employees' most recent behavior in performance reviews because they remember it better.

Two employees might have the same number of errors over the evaluation period. However, the worker whose mistakes occurred recently typically is judged more harshly than the one whose mistakes occurred awhile ago and the memory of them has faded. Some evaluators will be better at rereading the logs and having all activities in front of them, while other evaluators will have a much more vivid recollection of recent activities.