Rating and Ranking in Performance Appraisals

If you've worked under the annual ritual of ratings and rankings, you know how tough it is, both from the managerial side and the employee side. It is very hard to hear that you are rated average and low in the rankings, and it's equally tough to take part in setting the ranking in your organization. And it also doesn't help you all that much to find out you were rated "exceeds expectations." What does it all really mean?

This method of appraisal has received a fair amount of press lately. The Wall Street Journal had an above-the-fold article on page B1 on Microsoft abandoning their ranking system, which they called the "stack." Bloomberg BusinessWeek ran an article on performance reviews. Letters to the editor ensued after both articles, and there have been even more since.

How do these systems work? They are supposed to start at the beginning of the year with setting goals and specific objectives. These goals should be measurable, attainable, and all the other attributes of good goal setting. They should also be paid attention to, but often they are not. For instance, when reviewing my employees with my manager one time at AT&T, I noted that one of my employees met all his objectives set for the year and did much more, so I had rated him "exceeds expectations." Her response? She told me those things didn't matter. She said that this employee didn't really go out of his way to get to know others, rarely spoke up in meetings, and when he did, he spoke so slowly that it drove people crazy (even though they knew that English was his third language!). I never really got an explanation of what did matter besides social networking and speaking faster, but I managed to salvage a "met expectations" rating for that particular employee, which wound up saving his job, since a downsizing came shortly thereafter.

But that was hopefully an isolated incident. Goals and objectives are thus set for the year, and when the annual performance appraisal comes around, each employee is rated based on the scale of "does meet expectations" to "exceeds expectations." Sometimes numbered scales are used, such as 1 (low) to 5 (high). These ratings are generally done by the supervising manager, and as in the case above, frequently reviewed with the management one level above that. Then a set organization's managers get together to review everyone's ratings again, and the ranking begins. This is where it tends to get, shall we say, interesting.

Some of what takes place depends on the size of the organization where the ranking is taking place. This varies by company, but I've seen it done with a group as small as 15 and as large as 50. When you are ranking professional, white collar positions, it becomes extremely difficult to determine if employee X, who was a sales person, should be ranked higher or lower than employee Y, who produces marketing collateral. It is also difficult when one manager wants to measure on pure counts, such as how many customized pricing approvals were created, and another wants to measure how much revenue was brought in. Both are quantifiable measures, but when a salesperson is dependent on the pricing organization producing customized pricing that is within a reasonable range for their client, the quantity of pricing advisories becomes less important than the quality of them. These kinds of situations virtually always lead to heated discussions, even acrimony.

These ranking sessions, though, can hold the future of each employee in their hands. This was the case with my downsizing example above. It is also the case when the company goes further, and always eliminates the bottom X percentage (usually 10 percent) of the rankings in each organization. Yes, there will always be laggards who underperform, and maybe it is best to simply fire them. However, often, with good management and some training, these laggards can become good, solid performers. But beyond that, if you continue to eliminate the bottom 10 percent each year, it is not long before you are no longer cutting fat; you are now cutting bone. Does this continue to make sense? I think not.

As noted in the Bloomberg BusinessWeek article, performance reviews should not be done once a year. They need to be done frequently, with determinations made on the need for additional training or perhaps a transfer to a different organization that better suits the skills of an employee before it gets to the point that the employee may be slated for firing. A manager's job is not simply to get work done through others; a manager is also responsible for developing his or her employees, helping them reach their full potential, whether it is within that organization or another one. This is not a once-a-year item to check off a list. Good managers, those who are true leaders, are constantly evaluating their employees, having developmental conversations with them, and working with them to constantly improve performance and perhaps taking on more responsibility and gaining additional exposure within the company.

In many companies today, performance appraisals are all about what is going wrong. That should be turned around, so that there is more of a conversation of what is going right, and if it isn't, how that can be fixed. It should not be about simply getting rid of those who aren't up to par; let's work to see if we can help those employees through training or additional education before we determine the next round of layoffs.

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