Rating systems: Are they relevant or should they be scrapped altogether?

Is there a perfect way of evaluating performance? Rating systems, ranking systems and objective based systems are just some of the common approaches to performance appraisal. Each of them has their advantages and limitations, hence it is important for managers to recognise the shortcomings of each system and know how to work around the limitations in evaluating their employees.

What are rating systems?

Rating systems are common and is popular in assessing performance in many workplaces. Why is that so? They require very little effort to complete them. Rating systems consists of 2 parts. First, there is a list of characteristics or behaviours to be assessed and the other list is a scale where numbers or categories that are supposed to represent the level of performance on each item. Below is an example of how a rating system looks like.

Typical use

Most of the time, companies who adopt rating systems for performance appraisal do so to standardise. Usually, the human resources department will provide managers with a standard form so that all employees will be assessed similarly. So who does the ratings? Some managers do all the ratings while there are those who will ask employees to do rate themselves and managers will use those ratings. There are also managers who will ask employees to do self ratings and they will also rate employees on their own, before both parties come together and reach a compromise on the final rating. It is typically a one-size fits all process.

 Strengths of rating systems

Rating systems are popular because it requires minimum effort and time to complete them. Such forms require only 15 to 20 minutes as everyone is familiar with how the forms work and does not require training. Hence it is a cheap and simple system that allows any department or jobs to fulfil performance appraisal requirements.

 Weaknesses of rating systems

The weakness of rating system also comes from its strength. Since rating systems are simple and easy to use and implement, managers forgot why they are doing them and get them done to get it out of the way. The objective of the rating system is not merely about completing the form, but to discuss with employees on how to identify areas for improvement. Thus, simple forms defeat the purpose of what performance appraisal sets out to do.

In addition, rating systems do not provide specific feedback for employees to know what they have done well and what they need improvement in. For example, if an employee is rated as “sometimes” in “displaying basic customer service”, that does not tell the employee what areas he or she needs to work on. Does the employee need to work on greeting the customer or does the employee needs help in being less aggressive? Ratings are done mostly on a yearly basis, thus it may not be timely enough to help employees improve too. It cannot solve problems or prevent problems if the issues are identified only during annual performance reviews.

Furthermore, the criteria used can be vague to both employees and managers. How does one define having creativity? Look for new ways to increase efficiency and reduce costs? Generates original ideas and follows through to completion? Will two people agree on the meaning of creativity? If no, what happens? Hence, it can be implied that the rating system is hardly an objective assessment of performance that is agreed on by managers and employees alike.

 Tips to make rating systems work

While some companies continue to use rating systems, here are some tips to take note to make it work:

1. Clarify the meaning of each performance criteria with the employee before doing the rating. Discuss what it means to you and ask the employee how he or she interpret it too.
2. Do the rating together with the employee. After discussing what each statement entails, negotiate the ratings to reach a mutual agreement.
3. Don’t stop with the rating. Even if the employee has perfect ratings on each statement, a good question to ask is how can the employee improve in the coming year or what can the manager do to support the employee in making better progress?
4. Supplement the rating systems with comments on each performance criteria and explain what the employee has done well and what are areas of weaknesses.
5. Bear in mind that most ratings are subjective and based on what each individual thinks of his or her performance, so it is not an accurate measurement of performance.