Why Companies Are Discontinuing the Performance Ratings Scale

The times have changed and so have the way we need to approach an employee evaluation. There has been a lot of research around this topic and many differing opinions. This article is going to discuss the reasons why performance ratings are no longer working, and what you can do instead.

There are many reasons why companies are discontinuing performance ratings, which include social stigma, inhibiting collaboration, inability to measure work, deferring talent and retention, and slower development. Although the need to evaluate an employee is critical for companies, doing so on a numerical scale could present more risk than reward.

5 Reasons Companies are Ditching the Performance Ratings Scale

It is important to have frequent dialogue with your employees about their performance and development. A ratings scale can make it difficult to iterate a year’s worth of performance. Below are the five main reasons why companies such as Deloitte, Cigna and GE have ditched the performance ratings scale.

1. Social Stigma. Social threat and reward does not sit well with the human brain. Our brain reacts intensely to a ratings scale naturally, causing us to believe it is influenced by popularity, status, fairness or even physical looks.

2. Inhibiting Collaboration. When promotions and raises are involved, top ratings can’t be given out to everyone. As a result, people begin to compete directly with each other and therefore hurts collaboration. According to Microsoft, when they removed ratings from their performance reviews, employee collaboration sky-rocketed.

3. Inability to Measure Work. Unfortunately, not all work produces the result that we are looking for. A ratings scale that measures performance does not take into account the work that caused the final result. An employee could have worked extremely hard and put all of their effort in to a task for a result that may have been out of their control. The work environment has also changed, where employees are working on multiple teams or projects. It is hard to numerically rate performance accurately in a multi-team environment.

4. Deferring Talent & Retention. Discussing an employee’s performance on a regular basis rather than once a year eliminates surprises, which can decrease turnover. Employees should know exactly what to expect in their annual review. The times have also changed where more and more employees crave feedback and recognition. If a company displays this type of practice, it will help boost attraction for new talent.

5. Slow Development. It can be very difficult to learn over the course of a year if you aren’t receiving feedback. It can also be overwhelming to receive an entire year of feedback all at once. But even worse, receiving a ratings scale as your feedback can become open to interpretation, leading to slow and minimal development.

The idea of changing your approach to how employees are evaluated can be stressful. The traditional way with a ratings scale may be all you have ever known. A good place to start is developing a cadence for frequent dialogues with your employees, such as monthly one-on-ones. These frequent dialogues will support growth and development, while promoting recognition.

If an employee works on multiple teams, you can reach out for feedback from the team leaders. This will give you an encompassing view of each employee’s performance. This will eliminate inaccurate measuring of work and promote collaboration.

Making The Change

Creating a work environment where employees feel valued and supported through their development will improve retention and attract greater talent to your organization. There are many innovative approaches to employee evaluation but ratings scales have become outdated and unpopular.

If you are feeling uneasy about making a big change to the way you handle your staff, consider hiring Allied Forces. Allied Forces is a leader in staffing solutions with over 30 years of experience in the staffing industry. We are staffing pros focused on matching the right employee to the right jobs without affecting a business's day-to-day productivity. For more information about our services, call us at 855.423.8367.