Glossary of HR Terms

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Performance Ratings

Performance Ratings for HR

What Are Performance Ratings?

Employee performance is one of the biggest factors in the success of your business strategy. But to understand the impact of performance and how to improve it, you need data. Fortunately, you can use employee performance ratings to gather reliable data from your workforce.

Assigning value to a team member’s performance may not come naturally to managers. Make no mistake, this is a crucial responsibility for you and your HR team. Any employee rating system you devise must be fair, objective, and in alignment with your culture.

Our quick guide explains performance ratings, highlights important participants in the performance management process, and shares best practices for improving employee performance.

Performance Ratings 101

Put simply, performance ratings are tools for assessing an employee’s output based on a performance standard. Employers can use them to track employee performance over time, identify areas where an individual needs to improve, and track progress on those improvement plans. They’re a critical tool for not only managing but tracking and improving employee performance over time.

Performance ratings benefit employers and employees alike. Employers use them to track individual employee growth. Without a window into individual performance, you can’t assess the success of your HR programs, such as performance management or learning and development. By aggregating individual data, you can see the workforce’s overall performance and identify trends.

Performance ratings matter at the individual level, too, since employees can use ratings as a tool for thinking critically about their potential and setting future performance goals.

Performance ratings have potential drawbacks. A primary concern is that they can be subjective. Two people might rate the same employee differently, for instance, based on personal biases or the unique experiences they’ve had with that worker. Another concern is that ratings create unhealthy levels of competition among employees, which can lead to tension and workplace conflict.

Finally, one of the drawbacks of performance ratings lies in the traditional performance management system. If managers are assigning performance ratings based entirely on an annual review, they’re missing a lot of detail and any opportunities for followup.

Despite these valid concerns, performance ratings can be a powerful and popular tool for employers when you are aware of these potential problems and head them off. To solve for subjectivity, for example, establish a clear rubric that’s tailored to each role. Doing so empowers managers to evaluate employee performance more objectively and consistently. You can also bring others — team members, customers, peers across departments — into the process for a more complete picture of a person’s performance.

When used correctly, performance ratings help you assess employee performance with reliable data, see what’s going well, and identify areas for improvement.

Types of Employee Rating Scales

There are several ways to rate employee performance, but most use an ordered list to rank performance relative to two extremes (poor vs. excellent performance).

A typical performance rating scale rates employee performance on a scale of one to five, with “five” being the highest possible score. With this model, a rating of “one” typically means the employee didn’t meet expectations as outlined in the job description. A rating of “three” says the employee’s performance is right in line with expectations. Earning a “five” on this scale means that an employee’s performance significantly exceeds expectations.

Three-point scales are fairly common, too, but tend to be less effective at determining where an employee’s performance truly lies. Without enough options, managers may lean into centrality or leniency biases.

Centrality bias occurs when a manager struggles to choose between two extremes, so consistently selects the neutral middle — which doesn’t produce actionable data. Leniency bias occurs when managers favor the more positive extreme because they feel bad giving an honest negative review. That skews the data and makes it difficult to identify top performers.

For a much more nuanced five-point scale, some employers use behaviorally anchored rating scales, or BARS. Using this scale, each core job responsibility is ranked based on representative behaviors rather than general “expectations.” The BARS model provides more detail into an employee’s performance and offers more direction for growth. But drafting a clear and effective scale requires you to examine each job description closely and work with managers to identify the behaviors that are most important, which can take more time.

How Do Employee Performance Ratings Influence Overall Performance?

Performance ratings are part of a larger performance evaluation system. As managers have real-time conversations with employees about their performance, they provide feedback that can help to improve overall organizational performance.

Employee performance ratings influence overall performance in several ways.

Firstly, ratings provide employees clear directions on how to improve their performance. If employees know that their performance is being tracked, they’re likely to work harder to prove their potential to both themselves and their managers.

Secondly, ratings can help to identify opportunities where employees have room to grow. Whether during ongoing, regular check-ins or through performance improvement conversations, managers can identify areas where training and development will help. From there, they can establish a growth plan to help employees smash those performance goals. In the next round of performance ratings, you’ll be able to see where employees reached their performance goals and where they didn’t.

That data tells you a lot about the success of your learning and development programs, not to mention your performance improvement processes. Employees benefit, too, because when they see their long-term growth potential, they’re motivated to work toward it.

Finally, you can use performance ratings to assess the impact of organizational changes on employee performance. By observing changes in employee performance over time, organizations can adapt their policies and procedures to better suit the needs of the workforce.

How to Rate Employee Performance

Rating employee performance doesn’t have to be a mystery. Empower managers with the right tools, resources, and education to assess performance accurately and fairly.

Refer to the Job Description

You can’t rate team members without a standard to compare them against. Job descriptions offer a great starting point as you create role-specific rubrics. Job descriptions lay out what’s expected of employees in each role and establish clear benchmarks for measuring each person’s performance.

Of course, job descriptions aren’t always 100% accurate or up to date. Roles and responsibilities can change a lot over time. The job description you used to hire someone might not reflect today’s reality, but it still provides a valuable baseline. To that end, review your job descriptions every one or two years to make sure they’re still accurate.

By reviewing job descriptions and comparing them with employees’ actual duties and performance, you can get a better understanding of how their performance measures up against the standard. A clear rubric can give managers better information as they make fact-based evaluations of employee performance.

Assess Each Person’s Quality of Work

Assessing individual performance will give you a good idea of where everyone stands and what areas need improvement.

Determining performance ratings should be a process that occurs over time rather than as an in-the-moment measurement. To fairly assess employee performance, managers need a sense of the employee’s trajectory.

Train managers to pay attention to how team members handle critical tasks, for example, or how they interact with customers and clients. Prompt managers to look for patterns in employee work. This could include consistently meeting deadlines, producing high-quality work, and establishing good working relationships. Employee performance patterns can also indicate personal strengths or weaknesses.

Outline a Regular Performance Assessment Process

Prompt managers to apply their observations in regular performance conversations. These can be formal or informal, but either way, they should involve meeting with the employee and giving honest feedback about their work. These conversations are a great opportunity to identify strengths, areas for improvement, and what steps need to happen next.

Bring other key players into this process, too. No one person can provide a complete picture of performance. You need feedback from team members who work closely with the employee if you want a fuller and more nuanced perspective. You might talk to peers within the department, teammates in cross-functional groups, or customers and clients, among others.

Getting outside input can help managers assess employee performance in greater detail.

Finally, nudge employees to perform regular self-assessments. When employees see mismatches between their self-rating and how their manager rates them, they can open up conversations about the discrepancy and work on setting clear expectations.

How to Improve Employee Performance Ratings

Once team members know what their performance ratings are, they can set goals for getting their ratings up before the next review. Here are a few ways you can help.

Align Individual Goals With Company Goals

Aligning employee and company goals creates a sense of common purpose and shared responsibility for achieving results. Creating alignment helps employees feel motivated and engaged, which can improve performance and contribute to a positive workplace environment.

Companies have options for aligning individual goals with company goals. First, make sure that everyone understands the company’s vision and mission. Employees can’t prioritize the right goals unless they know what they’re ultimately working toward. Achieving that alignment guarantees that everyone is working toward the same goals.

Second, communicate regularly with employees about how their individual goals fit into the overall company strategy. This will help employees see how their work is contributing to the success of the organization in terms of specific business outcomes. To make this connection, you need to provide transparency into top level strategic planning. Train managers to interpret and communicate those goals in the context of their teams.

Finally, provide opportunities for employees to set their own goals, including how they plan to meet them. It’s critical that employees feel like they have a say in their work.

Identify Trends in Employee Performance Review Data

Taking a high-level view of performance can help you identify systemic barriers to great performance. Start by gathering employee performance review data from a variety of sources, including regular employee performance reviews, informal conversations, and skills assessments.

Then, look for patterns or trends. Are there certain departments or job roles with consistently lower performance ratings, for example? Are there common themes in the feedback that’s being given by managers or employees?

When employers identify these trends, they have a fighting chance of addressing them. Your next steps might include new policies and procedures, additional training for employees, or changes to how performance is measured. By taking these proactive steps, employers can improve performance ratings while creating a more positive work environment for all employees.

Facilitate Trust and Connection

Trust and connection between managers and employees are essential if you want honest, productive performance conversations. Having the right conversations at the right time provides a strong foundation for good performance. These meetings prompt managers to recognize their team members for work done well, providing crucial positive reinforcement to keep employees moving in the right direction.
These connections don’t always form organically, especially in remote work settings. Design an employee experience that prompts organic interactions between managers and their reports. Build those into set workflows within your workforce management system.
Another way to connect management and employees is to create opportunities for teamwork, such as on projects. When your people work closely together, they’ll develop closer relationships, improve team morale, and foster a sense of cooperation, including across departments.

By taking these steps, employers create a more connected workforce and, over time, improve their performance ratings. Employees will feel valued, appreciated, and informed about their performance. And, with knowledge of their performance rating and how to improve it, they’ll be more likely to go above and beyond.

Power Your Workforce to Better Performance Ratings

When you understand performance, you improve your management and employee development strategies, ultimately driving business success. Employee performance ratings provide the data you need to make great people management decisions and empower employees to perform better.