To rate, or not to rate - that is the question.

Performance ratings. No one loves them. Is that a gross generalization? Nope. Really, no one loves performance ratings. We don't like the process and we don't like getting a rating… or do we?

In this article we'll discuss the performance rating component of the performance management process, and I'll share with you where I stand and why.


To rate, or not to rate - that is the question we'll address.





But first, context

There has been great thought leadership on both sides of the argument on what to do about performance appraisals - ditch them or embrace them.

  • This article from David Rock, founder of the NeuroLeadership Institute, challenges us to "kill the performance rating" due to the psychological reaction the action of receiving a rating evokes in us. (On a side note, I like his SCARF model. It's worth checking out).

  • Marc Effron of Talent Strategy Group expounds that organizations are not really eliminating ratings in this article. Bonuses and merit compensation decisions still happen, thus by the nature of those processes, you have rated employees.

  • Josh Bersin summarizes what we've learned throughout this debate in this article. He shares a list of seven insights, and finally encourages that "the companies who implement performance management 'in the flow of work' are outperforming others."

And there are plenty of other articles leading us one way or the other. I am fully in support of performance management. When you have employees, you have a need to support, correct and encourage their performance. I just happen to believe the annual performance appraisal process is outdated and ineffective. And I tell you all about those thoughts in a series of two articles: first and second.

Now, please know that I am not an organizational or behavioral psychologist. The approach that I share with you here is from the lab of human experience, benchmarking, trial and error and sometimes asking people what they prefer to best support them at their work.

Discovering an employee-centered approach

When we embarked on the initiative to rethink the annual performance appraisal process at Southwest, we did what all expert talent folks do - we turned to Google. We scoped out all the organizations that had ditched the performance appraisal or engineered new programs. We reached out and asked to benchmark with them. We attended webinars and read articles. We sought to learn what worked and what didn't. Then, we gathered focus groups together to ask employees and leaders within Southwest what would work best for them.

After research and benchmarking we landed on a continuous performance management cadence that included ratings. Learning that employees desired performance ratings was one of the most interesting bits of data that we uncovered in our research. I suppose that we are conditioned from an early age to look for a grade. Grades gave us a clear indicator of how we're doing in school, just as ratings give us a clear indicator of how we're doing at work. Employees related that they wanted a clear indicator from their managers on how they were performing. They also wanted to pair the rating with clear feedback and guidance. And they wanted both frequently.

We delivered just such a process and so far, it's been working really well.


Guiding principles kept us focused on the end-user

Our guiding principles in evolving performance management were clear and simple, and we established a set of non-negotiables that we stuck with throughout process development.




To stay true to our guiding principles, we first tried ratings that were very simple: on target and off target. Those ratings were received with feedback of just "okay." So, we tried out a more direct scale of "not meeting expectations," "meeting expectations" and "exceeding expectations." Employees liked the clarity of these ratings. There's no guessing on how someone is doing. And that's what I like most about these - they are clear, simple and direct. I don't have to wonder how I'd get from a 3.4 to a 3.5 or what a rating like "strong" really means. Plus, having the conversation more frequently, such as quarterly, allows employees to hear critical feedback and where they stand with time to make adjustments before the next performance check-in. Or maybe you reinforce the great work I'm doing, and I take it to the next level for an "exceeding" mark for the next check-in period.

As you are thinking through performance management, remember that the primary reasons we engage in the activity at all is to support employees with delivering results and performing well. Ratings should be well defined and clear.

Let's talk ratings

I think you can ascertain by now that I fall on the "yes" side of manager-assigned performance ratings, and I'll tell you why:

  • Ratings give us clarity on how we are performing from the individual who typically sees us "play" the most, our leader.

  • Ratings are transparent. I don't have to guess at how compensation was applied to me. I appreciate this quote from a CultureAmp article on the importance of transparency: "Transparency helps build trust and perceptions of fairness around how employees are being measured. One of the biggest mistakes you can make is to tell employees you’re eliminating the rating system only to use it behind closed doors with the executive and management teams."

  • Ratings are one way to be equitable with compensation decisions. Without ratings compensation rewards will seem arbitrary or laced with favoritism (and they probably are). I agree with this advice from Josh Bersin: "Nothing alienates people more than getting a sense that their pay is unfair, behind, or unrepresentative of their achievement and contribution. So, it’s critical to create a pay process that has clearly defined criteria, one that is transparent and easy to understand, and that managers are trained and supported in communicating it." Hear, hear!

Your ratings should be fit for your organization

While I advocate that performance ratings are an essential component of performance management, you need to do what best fits your organization. Based on the lessons we learned in rethinking performance management at Southwest, here are a few things to keep in mind:

  • Do a thorough job of researching and benchmarking. Read up on what thought leaders are sharing. Be sure you can defend the direction you are recommending. Do your homework with those within the organization, too. Involve the HR team, employees, leaders and other interested partners. You shouldn't be making the decision in a silo. Performance management shouldn't be something we, in HR, do to the organization.

  • Whatever you decide, build out a continuous performance management process. Yes, it must address improvements needed, but it should then quickly move to a forward focus to improve performance, develop skills or continue outstanding results.

  • Be sure to include employees in the process of revamping performance management. Again, performance management shouldn't be something HR does to the organization. I also advocate for giving employees a staring role in the process. Give them the initiating role to kick-off the process and ensure they have a way to speak up if their managers are not prioritizing a performance conversation.

  • Finally, be really, really clear on the meaning or definition of each performance rating. In fact, begin by defining the rating before you name it. Ensure there is clear differentiation between each rating. Shoot for transparency and consistency as you plan for how the ratings will be used.

To get you thinking, here is a sample four-point rating scale that the Southwest team developed in preparation for a focus group we conducted with employees and leaders to get their input on scale options and rating names.


What's your stance?

To rate, or not to rate - where do you land? I’m eager to hear your perspective and best practices on where you land with the debate. Leave a comment, then off you go. Go update those processes before the new year begins.