What is a performance rating: A Comprehensive Guide To Rating Employee Performance

When asked what is a performance rating, it’s tempting say they are an employee’s ‘score’ against their performance goals. Simple, right?

Out of the gate, we believe it is a mistake to call performance ratings ‘scores’. We don’t like to use the term ‘score’ in PerformanceHub. Performance management is not a game, so it shouldn’t have a score. So, from now on, we will talk about performance ratings and rating schemes.

Ratings are so much more than ranking or scoring performance. And to define a rating scheme properly requires a lot of thought.

Performance ratings are important for organisations to grow, develop, and manage employee effectively. They are not just numbers or labels and are central to a functioning performance management process. A good performance rating scheme can improve culture, engage employees, and help with career development. However, despite their significance, the concept often remains misunderstood or poorly implemented.

This article aims to demystify the term “performance rating” and delve into its many facets. We will explore;

• The Definition of A Performance Rating
• Different Elements Rated in Performance Reviews
• Types of Performance Ratings
• The Influence of Rating Choices
• How to Design an Effective Performance Rating Scheme
• Example Performance Rating Schemes

HR professionals, managers, or employees eager to learn how to measure performance will find this guide to performance ratings invaluable (or at least we hope!)

Definition of Performance Rating

What is a performance rating? It’s simply a measure of performance against whatever it is you are measuring. It could be an Objective, Competency, Behaviour or some combination. It’s not just giving a number or label; it’s about grasping the full extent of an employee’s contributions to an organisation.

The significance of performance ratings goes beyond mere evaluation. They serve as a mirror, reflecting an employee’s strengths, areas of improvement, and potential. When effectively implemented, these ratings can:

• Highlight Achievements: Recognising when an employee consistently meets or exceeds expectations, driving them towards even greater accomplishments.
• Identify Areas for Growth: Pinpointing where an employee might need additional training or resources to meet their job requirements.
• Empower Decision-Making: Assisting managers in making informed decisions about promotions, bonuses, and other career-related opportunities.
• Promote Continuous Improvement: Encouraging a culture where feedback is valued, leading to ongoing personal and professional development.

In essence, performance ratings are not just about assessing where an employee stands at a particular moment in time. They are about understanding their journey, their growth, and their potential for the future. It’s a tool that, when used correctly, can lead to remarkable outcomes for both the individual and the organisation.

Elements Rated in Performance Reviews

Performance reviews are an integral part of the employee performance development process. They provide a structured framework to assess various facets of an employee’s contributions and potential.

Let’s explore the main elements typically rated in these performance reviews:

• Objectives: These are the clear benchmarks set for an employee’s work related deliverables.
• Goals: Goals encompass both the long-term and short-term aspirations set for employees. They provide a roadmap for where the employee should be heading, ensuring alignment with the company’s broader objectives.
• Competencies: Competencies refer to the specific skills and knowledge relevant to the job. This element evaluates how well an employee possesses and applies the necessary competencies in their role. Competency rating are a subject all on their own, so we wrote a guide to rating competencies to help you.
• Behaviours: This element focuses on how an employee conducts themselves in the workplace. It assesses attributes like teamwork, communication, adaptability, and other behaviour traits that influence the work environment.
• Potential: Potential gauges an employee’s capacity for growth and their ability to take on bigger roles in the future. It’s a forward-looking assessment, considering the employee’s aptitude for future leadership or specialised roles.
• Overall Performance: This offers a holistic view of an employee’s contributions to the organisation. It takes into account their achievements, challenges, and overall impact on team and organisational success

Including these elements in performance reviews ensures a thorough review, capturing the many aspects of an employee’s role and contributions. By understanding and rating these elements, organisations can create a culture of improvement and drive growth for individuals and the company. It is even possible to combine ratings to make a grid, like we discuss in our What is a 9-Box Grid article. 

Types of Performance Ratings

Looking at employee performance reviews, understanding the various types of performance ratings is crucial. These ratings not only provide a structured framework for feedback but also ensure that reviews are consistent, fair, and aligned with organisational goals.

Let’s explore the two primary types of performance ratings. You can read more details in a previous Words vs Numbers post too. 

Numerical Ratings:

This is one of the most common scales used in performance reviews. An employee’s performance is rated on a numerical scale, e.g. 1 to 5, with 1 typically representing “Poor Performance” and 5 indicating “Outstanding Performance.” The middle numbers capture varying degrees of performance, allowing for a nuanced assessment. 

Pros and Cons:

• Pros:
  • Numerical ratings are straightforward, easy to understand, and provide a quick snapshot of an employee’s performance.
  • In theory, they also facilitate quantitative analysis, making it easier to track performance trends over time. Although this was true in the ‘old days’ when companies used Excel to document performance. It’s not true anymore with performance management software like PerformanceHub as it does the calculations for you. 
• Cons:
  • They can sometimes oversimplify complex performance aspects, and employees might focus more on the number rather than the feedback.
  • People often mix up which is the best rating – is it 1 (as in first in a race) or 5 (as in highest ‘score’).

Descriptive Ratings:

Descriptive or word-based ratings use terms to evaluate performance. Common descriptors range from “Needs Improvement” to “Excellent.” These terms provide qualitative feedback, offering a more detailed insight into an employee’s strengths and areas of growth.

Benefits Over Numerical Ratings:

Descriptive ratings can capture the nuances of performance more effectively than numbers. They reduce the risk of employees fixating on a specific score and promote a deeper understanding of their performance areas. Additionally, they can be more relatable and provide clearer guidance for improvement.

In summary, both numerical and descriptive ratings offer value, but we always recommend descriptive text over numbers.  However, organisations should choose based on their goals, culture, and the roles they’re evaluating. 

The Influence of Number of Rating Choices

Performance evaluations are more than just assigning a number or label to an employee’s performance. The choice of rating scale can significantly influence the feedback process, affecting both the evaluator and the employee. Let’s explore the intricacies of rating choices:

Odd vs. Even Numbered Scales:

The Psychological Effect of a Middle Option: Odd-numbered scales, such as 1-5 or 1-7, offer a neutral option. This can be good because it lets employees who don’t have strong feelings about something to stay neutral. However, it can also lead to overuse of the middle option, potentially masking genuine feedback.

How Even Numbers Force a Positive or Negative Choice: Even-numbered scales compel evaluators to lean either towards the positive or negative side, eliminating the neutral option. This can result in more decisive feedback but may also pressure evaluators into making a choice they don’t entirely agree with.

Number of Choices:

Pros and Cons of Having More or Fewer Rating Choices:

• Pros: A larger number of choices can capture nuances in performance more effectively, providing a detailed gradient of feedback.
• Cons: Too many choices can overwhelm evaluators and lead to confusion. It can also make it challenging to differentiate between adjacent ratings.

Influence on Feedback Clarity: The number of choices in a rating scale can directly impact the clarity of feedback. A well-chosen scale ensures that feedback is precise, actionable, and easy to interpret, driving meaningful discussions and development plans.

To sum up, the choice of rating scale in performance reviews is hugely important. It’s critical for employee to get feedback that is clear, actionable, and truly reflects the employee’s performance and potential.

Designing an Effective Performance Rating Scheme

Crafting an effective rating scheme is pivotal for evaluating employee performance. A well-designed scheme not only ensures accurate assessments but also fosters a culture of continuous feedback and growth.

Here’s a guide to creating a rating scheme that truly resonates with your organisational needs:

Clarity

• Clearly define every rating choice. Ambiguity can lead to inconsistent evaluations and confusion. For instance, if using a 1-5 scale, each number should have a specific descriptor, such as 1 being “Poor Performance” and 5 being “Outstanding Performance.”
• Write with what you are rating in mind. If you are creating a rating scheme for rating performance against individual objectives, use words that refer to a singular objective, e.g. “Met expectations. All success criteria were met for this objective”. Don’t be tempted to reuse words from an overall performance scheme such as “Met all expectations, and regularly exceeded some.”

Relevance

• The rating choices should align with the job role and the broader objectives of the organisation. For a sales role, metrics like “Number of Deals Closed” or “Customer Feedback” might be more relevant than “Team Collaboration.”

Consistency

• Organisations must apply ratings consistently across the board. This ensures fairness and avoids potential biases. Regular training sessions for evaluators can help maintain this consistency.

Feedback Mechanism

• Beyond just assigning a rating, there should be a system in place for employees to understand the rationale behind their ratings. This could be in the form of detailed feedback, one-on-one discussions, or even workshops. Such mechanisms empower employees to learn from their evaluations and chart a path for improvement.

Using these elements into your rating scheme design ensures that evaluations are not just a routine process but a powerful tool for organisational growth and employee development.

Example Performance Rating Schemes

Performance reviews are important for organisational growth, and the rating scheme chosen is crucial for accurate and meaningful assessments. Over time, different rating schemes have evolved to meet diverse organisational needs.

Here are some commonly used examples:

Choosing the right rating scheme is essential to ensure that evaluations are meaningful, actionable, and aligned with organisational objectives. It’s crucial to consider the nature of roles, organisational culture, and the desired outcomes from the evaluation process when selecting or designing a rating scheme.

Concluding What Is A Performance Rating

Performance ratings, as we’ve explored, are important for the growth of employees and organisations.. They go beyond mere numbers or labels, serving as a reflection of an employee’s journey, strengths, and potential areas for growth. The choice of rating scheme plays an important role in ensuring reviews are meaningful and actionable. Moreover, the design of these schemes, from clarity to feedback mechanisms, determines their effectiveness in driving continuous improvement.

It’s essential for organisations to recognise the profound impact of performance ratings. When implemented thoughtfully, they not only provide a structured framework for feedback but also foster a culture of recognition, development, and growth. As we wrap-up, it’s obvious that performance ratings, when used effectively, can be a powerful catalyst for organisational success and employee satisfaction.

So, the next time someone asks you, “what is a performance rating,” you’re well-equipped to provide a thorough answer.

Now you have defined your performance rating scheme and are collecting solid performance data, consider using a performance management system. Online performance appraisals make it super simple to rate employee performance and report on the data you have collected.