The rating scale you use to score employees during performance reviews can have a big impact on your organisation. Get it right, and you’ll ensure consistent ratings, fair compensation and happy, engaged employees.
But get it wrong? You could face disengagement and retention problems. Plus, because performance ratings are often directly tied to compensation decisions, a poorly designed scale could lead to problems with pay equity and fairness.
In this article, we’ll walk through some of the most common types of performance rating scales companies use to evaluate employees. We’ll also explore the process of creating a scale that encourages fairness and paves the way for equitable and transparent compensation.
What is a performance rating scale?
Performance rating scales offer a structured way of evaluating each employee’s work based on pre-determined criteria. For example, many companies give each employee a rating of between one and five based on certain key aspects of their performance over a given period.
A well-designed performance rating scale (alongside effective performance evaluation processes) can help you:
- Standardise performance reviews across the organisation
- Reduce the impact of bias on performance evaluations
- Identify top performers and those who need extra support
- Provide clarity on expected standards for employees
- Simplify decision-making on promotions, raises, training and more
There are a few different types of performance rating scales that companies can choose from — and each one comes with its own strengths and weaknesses. The right performance rating scale for you depends on your company’s culture and organisational goals.
Types of performance rating scales
In most organisations, employees are rated on a numeric scale (for example, from 1–4 or 1–5) where each rating corresponds to an adjective or description. There are specific arguments for using scales with an odd or even number of ratings, which we’ll get into in the section below.
For example, a simple five-point scale might assign each employee one of the following ratings:
- Not meeting expectations
- Meeting expectations
- Sometimes exceeding expectations
- Always exceeding expectations
- Stand-out performer
Alternatively, a four-point scale might include the following ratings:
- Needs development
- Meets expectations
- Exceeds expectations
- Sets a new standard
There are also various other types of rating scales you might want to consider, including:
- Behavioural Anchored Rating Scale (BARS): These aim to provide a more objective approach to performance evaluations by linking ratings to specific, observable behaviours. For example, a BARS scale might include ratings like ‘regularly fails to meet deadlines’, ‘always meets deadlines’, and ‘usually meets deadlines with occasional reminders’.
- Competency-based rating scale: A competency-based rating scale focuses on the key competencies required for each role, such as leadership, communication and teamwork. Like BARS scales, they often use frequency-based language and may have ratings like ‘rarely observed’, ‘occasionally observed’ and ‘often observed’ for each listed competency.
When performance ratings go wrong
Without careful thought, the scale you use to assess employees can skew the results of your performance evaluations. Here are some of the major problems you might run into:
- Poor design can distort results: The design of your scale itself can easily cause problems if you haven’t given it enough thought. For example, some performance rating scales don’t offer meaningful distinctions between different performance levels, while others are too open to bias.
- Manager bias impacts fairness: Various types of bias can skew the performance evaluation process. For example, leniency bias can mean managers tend to score everyone more highly than they deserve, and centrality bias leads them to rate everyone towards the middle of the scale. Careful scale design can help you overcome these problems.
- Lack of training leads to inconsistency: Even if your scale is well-designed, managers need thorough training on how to use it. Otherwise, they might interpret ratings differently, leading to inconsistent performance evaluations in different parts of the business. Effective calibration sessions can also be part of the solution.
Designing a performance rating scale that works
Ready to start designing a performance rating scale for your organisation? Follow the steps below.
1. Choose the right number of points
The first step in designing your performance rating scale is to decide how many points it will include. A good scale should feel evenly balanced, with a similar ‘jump’ between each rating. It should enable managers to pick up on nuanced differences in performance and differentiate between good and great employees.
While many companies use five-point rating scales, one problem with this structure is that it may encourage managers to engage in centrality bias (i.e. rating too many employees in the middle of the scale). Using a scale with an even number of points, such as a four-point scale, could be a good idea as it forces them to commit one way or the other.
2. Define each rating level clearly
Next, you’ll need to assign a label to each rating (we saw a few examples above). You should also include a detailed description that helps managers to apply rating scales consistently and fairly. Ratings should be tied to your organisation’s brand, values and goals.
It’s important to be mindful of the words you use in your descriptions, as they could impact results. For example, using the word ‘average’ in your ratings (e.g. ’above average’, ‘below average’) can lead to managers giving higher ratings to middle-of-the-road employees. Choosing more neutral ways to describe performance in the middle of the range, like ‘consistent’ or ‘meets expectations’, can help managers to stay objective.
3. Provide training and examples
Not all managers have completed performance reviews before. And even if they have, they may not understand exactly how ratings should be assigned at your organisation. That’s why providing thorough training for managers on your performance rating scale is crucial to ensuring fairness.
Your training sessions should involve concrete examples of behaviours, traits and competencies that managers can expect to see at each performance level. You should also provide clear training on delivering information about performance ratings to employees, helping managers to build trust with their teams.
4. Hold calibration sessions
Even with clear scales and adequate training, performance evaluations are inherently subjective. That means there may be differences in how different managers apply performance ratings.
Calibration sessions, in which managers come together to discuss and validate ratings, act as a final check to ensure performance evaluations are fair and unbiased. They help ensure ratings are awarded consistently across the organisation and not left down to gut feelings and intuition. You can read more about the importance of effective calibration sessions in our full guide.
5. Be transparent with employees
Your performance rating scale shouldn’t be a secret — it should be open and understandable to employees. Otherwise, ratings can feel arbitrary and confusing, which makes it harder for employees to take feedback on board.
Transparency on rating scales also provides crucial context that managers can use in conversations about compensation and performance. Manager training sessions should include content on setting expectations with employees and adequately communicating about performance and pay.
Why performance rating scales matter for pay equity
In many organisations, the rating an employee receives in their annual performance review has a direct impact on their compensation. For example, some companies provide raises to all employees who are at least meeting expectations, while others dish them out only to top performers. This means that if your performance rating scale is badly designed or inconsistently applied, it could lead to unfair pay decisions.
A well-designed performance rating scale and strong evaluation processes can help organisations ensure performance ratings — and, therefore, compensation decisions — are fair, objective and consistent. Taking the time to get this right can significantly impact everything from legal compliance to team morale to employee engagement and retention.
Learn more about pay equity and performance reviews
Performance management and pay are closely linked in many organisations. That means that every decision made during the performance evaluation process is also a question of pay equity. You can learn more about the link between these two important topics in these articles from our blog archive:
