What’s the easiest way to dip your employee engagement levels for an entire quarter? You guessed it—performance ratings. And we’re not just talking about employees with poor ratings, even the highest-rated employees show a 15% dip in engagement immediately after the annual performance rating process.

To understand why, let’s first look at the concept of ratings.

Ratings can work like labels, like when you organize the socks in your sock drawer by color; or they can work like rankings, like when you list your top 10 hip hop songs. But what they simply can't function as are holistic performance evaluation mechanisms. They can group your employees into high performers and low performers, but they’re just not ideal evaluators of individual performance.

They demotivate low-performers, pit employees against each other, and create an uncomfortable, tense atmosphere—like Hunger Games, but you’re fighting for a chance to stay employed. One could easily conclude that that’s why they’re such a wrecking ball on engagement, but that’s not it—the reality is people hate ratings because they effectively reduce an entire year’s worth of dedicated work into a single, anticlimactic, numerical digit.

We most definitely need performance reviews—just not in the form of mere numbers.

“The single biggest barrier to effective leadership is, in my view, the leadership industry itself. Instead of telling people the skills and behaviors they need to be effective in getting things done, we tell them almost the opposite — blandishments about how we wish people would be, and how we wish workplaces were.
That information is worse than useless as, to the extent people believe it, they often wind up losing their jobs.”
— Jeffrey Pfeffer, Professor of Organizational Behavior, Stanford

True performance evaluation lies outside the scope of your rating scale

One-size-fits-all approaches rarely bode well in performance management, and the 4 or 5-point rating scales are no exception. While these scales can provide a broad overview of an individual’s performance, they often miss out on the nuances and finer aspects of their contribution to the organization. 

Performance is not just about meeting goals and targets, it’s also about how someone goes about achieving them. It's about their work ethic, their attitude, their ability to work collaboratively, and their willingness to go above and beyond what is expected of them.

Think about it - can a simple rating scale truly capture the value that an employee brings to your organization? Can it measure the intangible qualities that make a great employee? 

To answer this, let’s consider a sales representative who consistently meets their sales targets and receives a rating of 4 or 5 on the rating scale. While this rating may seem positive on the surface, does it reflect other aspects of their performance such as their customer service skills, ability to work in a team, or their contribution to the overall success of the sales department?

The rating may be arrived at after observing the performance on these fronts, but it’s not a true representation of all that the sales rep had to do and be on a daily basis.

A rating scale may be useful for providing a quick snapshot of an employee's performance. But it’s not a substitute for a more in-depth evaluation that takes into account the complex and multifaceted nature of employee performance.

Performance reviews should be aimed at improving, not rating performance

In his book Performance Management: Changing Behavior that Drives Organizational Effectiveness, Aubrey Daniels defined performance management as "the process of creating and maintaining an environment in which people can perform to the best of their abilities." He went on to describe performance management as a continuous process that involves setting clear goals and expectations, providing feedback and reinforcement, measuring progress and results, and making adjustments as needed to ensure continued improvement.

Imagine his disappointment on seeing his system of continuous feedback and progress being reduced to a system of annual ratings tied to compensation. Prioritizing ratings creates a toxic environment where employees compete against each other rather than working collaboratively to achieve company goals. Not to mention, it places an unnecessary burden on managers who are forced to assign arbitrary scores to their team members. What we need is a system of performance reviews that is centered on employee development over ratings.

In a nutshell, we need improvement-based performance reviews. 

Instead of focusing on just ratings, this approach aims to help your employees identify their strengths and weaknesses and develop a plan to improve their performance. Prioritizing improvement empowers them to take ownership of their professional development and take the necessary steps to achieve their goals. It also creates a more positive work environment where employees feel supported and encouraged to grow.

Holistic approaches to improve employee performance

As organizations continue to move away from traditional performance management practices, it is becoming increasingly clear that a holistic approach is necessary to improve employee performance. Rather than relying on a single metric or annual review, organizations must embrace a more comprehensive approach that takes into account the whole employee and the broader context in which they work.

One approach that has shown promise is the use of continuous feedback and coaching. Employees who receive regular feedback and coaching are more engaged and productive, and are more likely to stay with their organization long-term. Ongoing support and guidance enable managers to help employees identify their strengths and weaknesses, set goals, and track progress over time.

Interestingly, performance ratings are notorious for their rampage on engagement scores and productivity. It’s a no-brainer that employees who are happy, healthy, and fulfilled are more productive and engaged. 

So how do you make evaluations a happier ritual? Instead of reducing an employee and the expanse of their skills and experience to a single digit, try giving them a more holistic overview of their performance that adequately recognizes their strengths and addresses areas for improvement.

Lastly, no approach to employee management is complete without data and analytics. Collecting and analyzing data on employee performance helps organizations identify trends and patterns and gain insights into the factors that contribute to high performance. This information can then be used to inform decision-making and identify areas for improvement.

It pays to be more employee-centered

We get it—performance evaluations, in general, can be tedious and uncomfortable and often feel like a chore for the evaluator as well as the one being evaluated. They’re a necessary evil, like flossing. Ratings are like flossing too, but with barbed wire.

While they may have been the norm for decades, ratings, if used as the only assessment metric, are ultimately reductive and counterproductive in their purpose. For performance management to work, it needs to evolve from a rating-based compensation determinant to a holistic employee development system.

Investing in employee development means investing in the future of your company. It means acknowledging that employees are not just a means to an end but rather the very backbone of your organization. Give your people the holistic performance evaluation they need to grow. That’s how you advance from a backward-looking system of performance management to one that looks forward.

The returns are worth it. You can take our word for it.