Which Performance Management Rating Scale Should You Use?

Moving to a smaller rating scale can increase distinction between high- and low-performing employees. Read the pros and cons of the Three, Four and Five-Point Scales. 

Over the years, I have gathered numerous papers and research from various sources about Performance Management Rating Scales. This is always a very sensitive discussion for companies as they determine which rating scale they should use for their employee performance management process and why they should change their current rating structure.   

Some of the research shows moving to a smaller rating scale approach (Five-Point, Four-Point, or Three-Point) because fewer categories hold the following benefits:

• Increased distinction between high and lower performers
• Decreased complexity
• Increased consistency between ratings

What I've experienced over time is that when organizations use larger scales (some up to 9 points), they don't use the full scale anyway. For instance, one company I worked with left the top rating on the scale for performers that could, as we called it, “walk on water." No one ever fell into this category, but it was there just in case. In another company, the lowest rating was left for the unacceptable performer, but they were always “weeded out” before the performance cycle began and never received the performance rating.

Some managers like larger scales because it gives them a sense of security; they can be safe giving a rating that falls in the middle somewhere versus on either end of the scale, and they won’t get as much grief from the employee.

Then there is the subjectivity that impacts the performance rating. If there are fewer categories, there is less subjectivity and inconsistency between the evaluators. To an organization, less subjectivity and inconsistency hopefully means more fairness.

Based on my best practices collection, I have a pros and cons list of the Three, Four and Five-Point rating scales. I thought I’d share the results -- maybe they will help you make decisions for your company as you make changes for the future. The list has already helped a number of Cornerstone clients I’ve talked with. Remember, since organizations are at different levels of maturity, some of what you see may not “fit” with your organization.

 Five-Point Scale

Four-Point Scale

Three-Point Scale

In the end, an organization needs to determine the direction of their rating scale and performance management process based on a number of factors:

• Organizational readiness
• Comfort level with change
• Current state of their performance management process and pain points
• Integration points with other talent management strategies
• Executive vision
• Board of directors' influence
• Implications that can hinder performance management process (i.e. time of year, business impact, etc.)

And one last recommendation: Build a collaborative approach with all business units that’s right for the organization today and can grow with the organization tomorrow 

Laura Durando is a Client Success Manager with Cornerstone OnDemand. She has over 25 years of business experience and has held executive positions in Talent Management and Organizational Development with multiple organizations.