How to Make a Numeric Employee Ratings System Work

three young people holding up judges' rating cards
••• OrangeDukeProductions / Getty Images

Numeric ratings are one of the most abused components of any measurement and assessment system. They make people angry, destroy fragile working relationships, make one employee judge another, and create an artificial, thoroughly uncomfortable situation for both the person rating and the person whose work is being rated.

The wonder to me, the way most numeric rating systems are designed, is why you would expect anything different from their use. If an organization takes unsubstantiated, undocumented, uncommunicated, secret numbers and springs a numeric rating on employees periodically, expect the worst.

Do numeric ratings make a contribution in the workplace? Done well, I believe numeric ratings can motivate excellent work performance; done poorly, numeric ratings undermine your positive work environment. Can you use your performance rating system as part of a process to promote a culture of organizational excellence?

Yes, in fact, according to Dick Grote, in The Secrets of Performance Appraisal: Best Practices from the Masters, in a landmark performance-management benchmarking study conducted by the American Productivity and Quality Center (APQC) and Linkage Inc., rigorous assessments of talent and potential are helping companies make major progress in developing cultures of performance.

In Current Legal Issues in Performance Appraisal, Stanley B. Malos, J.D., Ph.D. makes six Substantive Recommendations for Legally Sound Performance Appraisals. Even if legalities are not your concern, these six recommendations set the stage for what makes an appraisal rating system, for employees or non-employees, sound, and potentially - motivational.

According to Malos, appraisal criteria:

  1. should be objective rather than subjective;
  2. should be job-related or based on job analysis;
  3. should be based on behaviors rather than traits
  4. should be within the control of the ratee
  5. should relate to specific functions, not global assessments,
  6. should be communicated to the employee.

Malos cites procedural recommendations for legally sound performance appraisals as well. His recommendations include: procedures should be standardized for all people within a job group; they: "should provide notice of performance deficiencies, and opportunities to correct them; should provide written instructions and training for raters; should require thorough and consistent documentation across raters that include specific examples of performance based on personal knowledge."

Performance measurement and numeric rating system guidelines

The following ten guidelines, examples, and ideas will assist you to develop a performance measurement and rating system which is motivational rather than confrontational.

  • Take great care in establishing what it is that you want to measure. Jack Zigon, an expert in performance management and measurement, in Performance Appraisal Lessons from Thirteen Years in the Trenches, states that "the hardest part of creating performance standards is deciding which accomplishments to measure." Once you decide, my experience is that people will focus the majority of their energies on those aspects of their work for which they believe they are "receiving credit."
  • Develop effective measurements that tell people how they are doing. To the degree these numbers measure what is actually important in the person’s work, they are effective in molding performance. Don’t pick the outcomes to measure just because they are easy to assign a numerical target. Some of the most important outcomes from any job, and especially as more jobs become information based, are not easily measurable. As an example, during my consulting engagements, organizations often suggest we measure our success in working together by the number of training classes they offered and the number of people who attended the training sessions. I always countered by stating that I wanted to have an impact on their productivity, customer delivery performance, and staff morale; these measurements were worth their time, even if the impact of training was harder to isolate.
  • Establish straightforward, honest criteria that tell people exactly what they must do to achieve a particular numeric rating. Too often organizations fail to establish criteria beyond the judgment of a manager. If they have criteria, they fail to share them with employees. Both of these make up a recipe for disaster in employee performance. While organizations are unlikely to eliminate the judgment of the manager as part of the criteria mix anytime soon, the impact of her opinion should be minimized, where possible.
  • In the APQC/Linkage study cited earlier, the best practice companies placed a significantly greater emphasis on the identification and assessment of competencies. These differ from goals in that they are formulated company-wide, usually by the executive group. They form an unchanging communication of what is most important for success in your organization. Grote found the best practice organizations identified competencies, and then "defined mastery descriptions-narrative portraits of the behavior that one who mastered the area would likely engage in. While they are much more challenging to create, mastery descriptions give the appraiser a benchmark against which to compare the actual activities of the individual she is assessing. Even better, they provide the appraisee with a clear picture of exactly what the organization expects."
  • Communicate the established criteria to the people who need the information to perform effectively. If the information translates poorly to a number, communicate a picture of outcomes expected that is vivid and understandable.

In an example, from a university student center, criteria for the manager’s appraisal and success included measurements such as the following. You will receive the highest numeric rating if you increase customer satisfaction by 50 percent as measured by customer comment cards; increase the profitability of the snack shop by 20 percent, and present an environment of cleanliness and efficiency in which no paper litters the floor, tables are wiped clean and cleared as soon as customers leave, trash is emptied prior to trash exceeding the containers, and so on.

Criteria were also established and communicated for a mid-range numeric rating, and a poor numeric rating in the same categories. This manager had absolutely no questions about what was expected and how the expectations would be measured. She was free to devote her energies to obtaining the most positive numeric ratings.

  • Obtain employee input when establishing the criteria and the measurements for the numeric ratings. The above manager, in the university student center, helped to establish the numeric rating criteria based on what she thought would improve the student experience of her center. She helped create the picture of what would constitute success for her function. The manager of the catering department, as an example, had different, but no less challenging criteria, based on the needs of his customers.
  • Review the employee’s progress on the defined criteria, goals, and competencies regularly. Quarterly is minimally sufficient to discuss the staff member’s progress. Monthly is better. Annually is not often enough to impact the culture and performance. Ideally, each employee knows how they are performing every day.
  • Avoid the "horns," or "halo" effect. If an individual meets all established criteria for two months and then misses the target for the third month in a quarterly reporting period, take into consideration all three months. Too many times, the person’s performance is assessed based on the down month. While you want to help the employee problem solve and look at opportunities for improvement, the one down month should not define the person’s performance for that quarter. You will want to watch for a trend and address it as soon as the trend is apparent.
  • The employee needs to see and read his performance ratings, rankings, the judgment calls, and the previously established criteria that came together to form his ratings.

Jack Zigon also recommends having the employee collect their own performance feedback data as often as possible. This can save the time and energy of the manager and allows the employee, who is most familiar with his data, to present it. This helps the employee take ownership of the data and reduces disagreement and suspicion over reported results.

Done well, performance criteria and ratings can contribute to a positive, powerfully motivating experience for organization members. The presence of numeric ratings and performance criteria in your performance management system can help you formulate the culture you need for success as an organization. Employees know what is expected of them, and they experience few surprises. People know what to work toward, and they know the rewards and recognition they will achieve.

How many people do you know who get up in the morning, and go to work thinking, "Gee, I want to be a 3.0 employee on a scale of 5.0 today?" Not many. Most people want to do a great job and see their contribution to the success of their organization. What stops them?

Unformulated and unclear criteria for success. An uncommunicated numeric rating system tied to unestablished and unsubstantiated performance expectations. Infrequent feedback. An environment of "guess how to be great, because we sure aren’t going to tell you." Get real, managers. We can help our organizations do better than this.