The Art of Appraisals: Rating Scales, Systems and Reviews
Appraisal season is almost upon us and it’s that time of the year when employers and employees start preparing to achieve their respective goals.
Performance appraisals are an annual process that involves evaluating employee’s performance and productivity against the predetermined set of objectives or goals for that year. It also helps to evaluate employee’s strengths, skills and shortcomings.
In one of our previous articles, we dived deep in detail how the number one priority for HR leaders in 2023 is going to be talent retention. We also discussed how retention starts with identifying who the A-players are within an organisation.
Employee performance reviews are a great way to identify and reward top talent in your company, and align their goals with your company’s.
There are many ways to measure success (or the lack of it), but it all starts with having a scalable, tangible system in place. If you haven’t set up a performance identification, review and retention strategy till date, now is the time to get in action.
In this article, you will learn about how to build a functional and flexible performance rating system and what are the important tips to get started.
How to Rate and Evaluate A-Players
In some companies, top performers make up as little as 5 percent of the employee population while in others they constitute up to 30 percent.
Identifying top performers is the most important step in this process, and employers may struggle to determine who is most deserving.
Many organisations lack a standardised or analytical method for identifying high potential employees. Instead, they rely solely on the instincts of management staff or ad-hoc observations as part of the performance management or appraisal process.
However, there are tools and approaches which can help to identify high potential employees. Let’s understand them in detail below.
1. Numeric (5 or 10 Point Performance) Rating Scale:
This is, by far, the most commonly used performance review rating scale in the world. The 5-point, or 5-level, rating scale is relatively straightforward. You get to rate the employee out of 5. Each rating level out of 5 has its own unique definition.
This option is somewhat similar to the 5-point system. However, it has more options and resembles the action of a school test. 10-point scales are less common than the other two options stated above, but they are still used in many offices.
A 10-point scale has certain benefits that other scales do not offer. For example, this performance review method has a broader set of options to choose from than the Likert scale and 5-point method.
Due to the more extensive options, many employers believe that the 10-point scale offers a much clearer and in-depth assessment of an employee’s performance.
Many HR leaders argue that the 5-point scale is too limited to account for the “in-betweens,” or people who are better than three but not as good as 4, for example.
2. Likert Rating Scale:
The Likert scale is another common example of a rating scale. This type of scale typically has five options, too, but these options are written out rather than numeric.
Here is a sample of the options presented in the Likert scale:
Strongly Disagree — Disagree — Neither Agree nor Disagree — Agree — Strongly Agree.
A well-designed Likert scale will maintain the value of information symmetry in the sense that it will have an equal amount of negative and positive options, along with a neutral option for people to choose, if it is appropriate.
Most scales of this type have only five options. However, it is okay to have up to seven, or even as few as three. However, having only three options, including a neutral one, is sometimes too little. On the other hand, allowing seven options can sometimes complicate things.
3. Numeric + Likert Rating Scales:
Some companies also use a rating system that is both numerical and alphabetical, focused on whether or not employees meet company goals.
A 5-point rating scale can be used to assign abbreviations that coincide with each numerical ranking:
5 = FE (Far Exceeds)
4 = EX (Exceeds Expectations)
3 = ME (Meets Expectations)
2 = DR (Development Required)
1 = IR (Improvement Required)
Similarly, to measure performance of an employee, overall performance ratings are given on a 5-point scale, with each ranking depicting a level of performance:
5 = Leading
4 = Strong
3 = Satisfactory
2 = Below Expectations
1 = Poor
For example, if you want to analyse the creativity or the productivity level of an employee, you could include these attributes as one of the competencies and then assign a numeric value or rating to measure it.
Goal based scale is another variation for assigning an objective value to an employee’s performance, with each ranking or score depicting a level of achievement:
Goal Exceeded = 5
Goal Achieved = 4
Goal Met = 3
Goal Not Met = 2
Goal Deferred = 1
Many companies also use the rating scale to categorise the skills or the core competencies required for a specific role. These could include soft and hard skills to judge the overall ability and performance of an employee.
4. Behaviourally Anchored Rating Scale:
The BARS (behaviourally anchored rating scale) is a scale that assesses the performance of new employees or trainees based on well-defined behavioural patterns or ‘traits’. It offers both qualitative and quantitative data for your appraisal process.
BARS provides the advantages of narratives, quantified ratings, and critical incidents, as well as both qualitative and quantitative data.
For example — if you want to assess and evaluate the performance of an employee in a customer or client facing role, you could set up a criteria such as ‘goes out of their way to assist customers’ or ‘does not show interest in warming up to existing customers’.
Another examples — for identifying and evaluating the performance of your sales team, you can set up a BARS performance system, using pre-defined behavioural patterns such as:
‘Engages with prospects with enthusiasm’ (Desired trait) to ‘Does not follow-up with prospects on time’ (Non desired trait) and so forth.
To start with implementing BARS to evaluate employees, you must write out critical incident techniques (CIT) which are the specific or desired behavioural patterns you want to see. Then you should compare an employee’s behaviour against these reference points, and assign a numerical rating, ranging from 1 to 5 or 1 to 10.
Building an Employee Rating and Review Calculator
Using an employee rating calculator will help you speed up your review process, and give you an equal, clear view into the performance of your employees.
This calculator can include multiple sections. Inside each of these parameters, there can be several content items.
These items can be: qualities, skills, or qualifications of employees. You can include any quality or skill you want.
If you want to create one for your company, you can start with the following components:
- Content item — as we previously mentioned, a content item is a quality, a skill, or a qualification of an employee. These are the core of your calculations.
- Sections — each section includes several content items that belong to the same group. For example, the Competency or the Performance goals section.
- Rating models — the scale you can use to judge employees. For example purposes, we have included a range from 1 to 5. Here, number 5 is a maximum numeric rating.
- Competencies — these are all qualities that employees should have when working in a particular position. For instance, ideal skills required for that position, their knowledge of tools, processes or the role, or any other attribute.
- Performance goals — the purpose here is to evaluate how well an employee is doing towards predetermined goals.
- Weight — not all content items will have equal value. So, the best way to separate them is to add different weights to each item. For example — you can use weights to give an objective score for non quantifiable items.
Template: Employee Rating Calculator for an Employee
Let’s say you want to measure and evaluate the performance of an employee. You can divide the overall performance into two main sections — KPI or Goals driven (directly quantifiable) and Behavioral or Personality driven (not directly quantifiable).
For the sake of explanation, we have put together a sample calculation template for you, including two sections, which are:
- Goals: Increasing sales, improving customer service, improving deal close ration,etc.
- Behaviors: Punctuality, productivity, creativity, communication, attendance, integrity.
Here’s how a rating calculator will work for the above scenario:
Calculating Goal-Based performance:
The maximum numeric rating for all is 5. Then, we have the item numeric rating that shows how successful an employee is in each area.
In this example, we can tell that an employee has an average score for improving sales (3) and profits, and a good score for improving deal close ration (4)
First, you can use the calculator to sum up the total decimal score for all competencies:
Competency 1: 3 / 5 = 0.6;
Competency 2: 4/5 = 0.8;
Competency 3: 4/5 = 0.8
Once you input all item numeric ratings, you can calculate the sum total.
In the above example, 0.6 + 0.8 + 0.8 = 2.2
Since there are three goals here, the total maximum decimal score is three, which gives us
2.2 / 3 = 0.73
Once you get the above score, multiply it by the maximum numeric rating to get the rating of a particular section (In above example, we’ll multiply it by 5 as it is the maximum rating given to a competency).
0.73 x 5 = 3.65 (Rounded off to 3.7) which gives you the final rating for the Goals/KPI section of an employee performance review.
Calculating Behavior-Based performance:
As you can see from the table above, we have compiled a list of six competencies.
The maximum numeric rating for all is 5.
Then, we have the item numeric rating that shows how successful an employee is in each area. In this example, we can tell that a worker has high marks for productivity and punctuality, and a very low mark for attendance.
First, you can use the calculator to sum up the total decimal score for all competencies:
In this example: 0.8 + 1.0 + 0.6 + 0.8 + 1.0 + 0.4 = 4.6
Now, since you also need a rating for the entire section for the final score, the calculator takes the total decimal score and divides it by the total maximum decimal score.
The total maximum decimal score = the number of skills/competencies that you add to the calculator. In this example, it’s 6.
Thus, it will come down to: 4.6 / 6 = 0.76
Once you get the above score, multiply it by the maximum numeric rating to get the rating of a particular section. (In above example, we’ll multiply it by 5 as it is the maximum rating given to a competency).
0.76 x 5 = 3.8 which is the final rating for the Behaviour/Personality section.
Calculating Final Score
Now, if you were to evaluate the performance of an employee on the above sections only, you can easily calculate the final performance rating by taking the average of the above scores.
Thus, in this example, the final performance score can be calculated as:
3.7 + 3.8 / 2 = 3.75 on a scale of 5
Note that for senior employees, you can also introduce a third section to evaluate them on the basis of their managerial or leadership skills and competencies.
In Conclusion
Performance review and ratings are a core part of the annual appraisal process, and different industries might require different solutions and approaches.
As discussed above, take some time to figure out what’s the most suitable way for your workplace to recognize, reward and appraise your A-players.
Lastly, it is important to keep in consideration that appraising top talent requires more than just monetary rewards, it should also be about social recognition.
For example — during the appraisal process, take a moment to acknowledge their contributions to the company, as it can boost their morale, and foster a sense of achievement.
For HR teams, it is important to show respect, earnesty and gratitude to your company’s A-players. Sometimes it’s the little things that can make a lasting impact and pay off a great deal for your company.
