What is the major problem with large point rating scale in performance appraisal?

What is the performance rating scale best suited for your organization? 3 points, 4 points, or 5 points? Read on!

The performance rating scale is a performance management system that uses sliding scales to measure an employee’s performance or achievements in a given time period. These scales also act as visualization tools that represent the performance level of an employee. One can even fix a minimum required level for an employee to be able to reach.

Employee performance rating scales are beneficial as it shows how your staff is performing in terms of work for the company to continue growing. Also, it helps the staff to know where they stand and what they can do to perform better.

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What is a performance rating? 

Performance rating is when an employee’s performance is measured against a set standard performance level. Rating factor can be defined as the ratio between observed performance to the normal performance. There are different systems that help in determining employee performance ratings.

Most performance ratings occur on a scale of 1-5, with depicting 1 being the least productive. The rating charts can either be denoted numerically or alphabetically. Employee ratings help in identifying training and education needs, motivating people to do better, proper assignment of work, and maintaining fairness in salaries, benefits, promotions, hiring, firing, etc.

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What is rating scale 1-5?

Performance review rating scale 1-5 is an overall performance rating method that uses a total of 5 different categories to measure employee performance. Let us see one of the types of rating scale examples 1-5,

• 1 – Poor
• 2 – Needs Improvement
• 3 – Meets expectations
• 4 – Exceeds requirement
• 5 – Exceptional work  

In the above rating scale 1-5 example, we can see that there are two categories for employees who weren’t able to meet expectations. One for meeting expectations performance review and the other two categories for the employees who have exceeded the bare minimum work requirement.  

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Benefits of 5 point rating scales 

The 5 point performance appraisal ratings system is the most commonly used performance rating scale across the world. Let us see the different benefits of a 5 point performance appraisal rating scale and what makes it a widely popular method of rating employees’ performance.

Well defined scale for meets expectations

A 1 to 5 rating scale has a total of 5 categories with 2 negative and 2 positive options. A middle option is a neutral option for those who have met the expectations in terms of work performance. Rating scale 1-5 is a well-defined scale with a separate category for the employees who neither fall in the below expectations performance review nor in the exceeds expectations.

Meets expectations scale is generally assigned at number “3” for all those who have done satisfactory work, been an average performer, and met the work deadlines.

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1 to 5 rating scale helps to better differentiate and compare employees

Performance appraisal rating scale 1-5 helps in differentiating and comparing employees based on their performance in given time duration. Employees with meet expectation performance reviews are put in the neutral category. Whereas, employees whose work has been beyond expectations are categorized under 4 or 5 under the performance rating scale 1-5.

Anyone who falls under the needs improvement definition is marked under 1 or 2 on the performance rating scale. This system of rating employee performance easily categorizes each employee based on their contribution at work.

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The 5 point employees rating system provides a midpoint

Performance rating scale 1 to 5 always has a midpoint for those who have got the average performance review. Below the midpoint is the employees who need improvement and above it are the employees who have worked beyond expectations.

Midpoint is beneficial for the managers who are indecisive about whether to put someone in the negative or positive category. Rating scales 1-5 are often provided with the number 3 as a midpoint which is the bare minimum an employee has to achieve in order to be considered for appraisals or bonus.

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Provides 2 options for exceeds expectations performance review

The 5 point performance rating scale definitions suggest that it has two categories for the employees who are marked under exceeds expectations performance review. The employees’ rating for exceptional work is marked as either 4 or a 5.

Employee rating 4 is generally given for working beyond expectations. Whereas, appraisal rating of 5 is given to those who have set a new standard of work. High appraisal ratings are given to a very less percentage of employees as compared to the average rating or neutral point rating which is awarded for meeting work expectations.

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Performance ratings are easier to understand

1 through 5 rating scale is easier to comprehend as compared to a more elaborative and broad 7 point performance rating scale or 10 points performance rating scale. Rating 1-5 is easily explainable as it has a mid pint which determines average performance. Anything beyond that would be exceptional and anything below that would fail to meet the desired standards.

The 1 to 5 rating scale performance method is very straightforward and makes scoring employees easy. Based on the data derived from the 1-5 scale wording, managers can take appraisal decisions for the employees.

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How to create effective performance rating scales? 

Each company should opt for a performance rating scale that works best for them. An effective performance appraisal scoring system should be capable of providing you the right kind of data which can help in improving the productivity of the company and the employee. An effective scale should be relevant, transparent, consist of the right range, and have a future-focused approach. Let us discuss these in more detail,

Choose an employee rating scale based on how detailed do you want the answers to be

There are several kinds of employee performance rating scales based on how detailed do you want the rating scale to be. A 3 point rating scale is a very basic appraisal rating scale with just 3 categories to put employees in. However, there are more elaborate 5 rating scales, 10 point review scales, 4 point performance evaluation rating scales, etc.

Your end goal should be meeting expectations performance review

Determine the end goal that you wish to achieve through the performance review rating scale. Check if your performance evaluation rating scale is able to meet those expectations. You can customize the different existing appraisal rating scales according to your own requirements by changing the wording. If you wish to remove centrality bias then make sure you remove the neutral options from the performance rating scale.

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Employee rating data must lead to significant results

The end goal of any performance management rating scale is to score each employee based on their productivity and determine the amount of bonus, appraisal, promotion, etc for them.

Create a performance rating scale that helps you achieve significant results and provide you with clear and concise data based on which these decisions can be made. Number-based employee rating scales are more effective in providing straightforward scores.

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Decide how accurate do you want the evaluation scale results to be

While creating an effective performance rating scale, it is important to decide what kind of accuracy are you looking for. The more accurate you want the employee evaluation rating scale to be, the more options are provided in the evaluation scale. For example, a 10 point competency rating scale is more accurate than a 1-5 rating scale due to the presence of more options.

Levels of performance must be depicted with transparency

Be prepared to train your employees on the chosen method of performance appraisal rating and how they should interpret each option. Everyone in the organization should be made aware of the performance rating scale and must know how the organization measures success.

Transparency in the system will help build trust amongst the employees and provide fairness in the way employees are being evaluated for their performance.

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Rating scale examples 

There are several performance rating scale examples that can be chosen based on your requirement. For more detailed coverage, choose a scale with more options such as 7 point or 10 point performance scale. Let us look into different rating scale examples based on their complexity and effectiveness,

The 5 point rating scale

The 5 point rating scales are one of the most widely used performance rating scales in the world. The method to rate an employee is fairly simple. The reviewer has to rate each employee out of 5 with 3 being the midpoint. Anything beyond 3 is considered that the employee is exceeding expectations. A rating of 2 signifies improvement needed.

The reviewer will observe employees over a given duration and look into their work ethics. Based on which the final rating is generated. The work ethics include quality of work, discipline, punctuality, team player, workplace enthusiasm, etc. Every workplace has its own unique set of evaluation criteria based on which employees are rated.

The 5 point evaluation scale however is not always effective as each reviewer has their own understanding of what each rating number means. Some raters might give a higher rating for average quality work.

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Likert performance review rating scale

Likert scale is another common example of the performance rating system. It also uses 5 options just like the “five-point rating scale” but the options are written out rather than numeric. Here are the five options presented in the Likert employee rating system,

1. Strongly Disagree
2. Disagree
3. Neither Agree or Disagree
4. Agree
5. Strongly Agree

A well-designed Likert scale is supposed to have an equal number of negative and positive options with one neutral option. Few systems can also have as minimum as just three options or even seven options to make it more elaborate.

There are a few downsides to this method which makes doesn’t make it completely effective. The presence of a neutral option is an easy way out for the raters who are slacking at their job. The rating system doesn’t provide a straightforward method to score employees unless 5 point rating scale method is fused.

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The three-point rating scale

A three-point rating scale is a common form of performance rating scale used by several companies due to its simplicity. It includes standard three points,

1. Below Expectation – Anyone who fails to meet the desired standards is put into this category. These employees need coaching and training to help them reach the expectation level.
2. Meeting Expectation – Anyone who is meeting expectations performance review and is consistent with their work falls under this category.
3. Exceeding Expectation –  Employees who are achievers and have worked beyond the average expectations. Those who bring new standards of working are rewarded under this category. They influence others to perform better.

In a three-point rating scale, the performance evaluation ratings are straightforward without any discrepancy. A large percentage of employees fall under the “meeting expectation” category. The cons of this kind of performance management rating system are that they give birth to centrality bias amongst managers.

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The 10 point performance rating scale

The 10 point performance rating scale method is almost similar to the 5 point performance rating scale method. However, it has more options and is not as commonly used in the offices. The performance evaluation rating scale 1- 10 provides more set of options to choose from as compared to the Likert scale and 5 point performance evaluation scale.

The more elaborative 10 point system of rating employees gives a much clearer picture of the employee’s performance. With the 5 point scale rating it is difficult to rate someone who is better than a 3 but not as good as a 4. Whereas, the 10 point performance review ratings have more options to choose from.

The downside of such a system is that sometimes it can get complicated due to the presence of more numbers. It gets more time-consuming for the rater to evaluate an employee.

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The 4 point performance rating scale

The 4 point performance rating scale has been proven to be the best option for few companies. As the name indicates, it has 4 options to choose from which are in the written form. The 4 options of the 4 point employee rating scale are,

1. Needs Development
2. Consistently meets expectations
3. Often exceeds expectations
4. Sets a new standard

The 4 point evaluation rating scale provides more options for the top performance and fewer options for low-performing employees. This helps in making the ratings more fine-grained and out the underperforming candidates in a single needs improvement scale as you do not need multiple gradations for that.

This evaluation scale removes the centrality bias and forces the raters to make a clear choice. They are no longer provided the option to put indecisive candidates in the average category but rather have to determine the meaningful differences.