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For a prfomace appraisal, what' more effective, a 5-point rating scale, a 6-point rating scale, or none at all? What are the pro and cons of each option?
Hello! Thanks for asking Wonder about performance appraisal and which rating scales are the most effective. The sources we found most useful for this research are InfoSurv and SHRM. In short, the effectiveness of performance rating scales depends on the goals of an individual company, however preference tends to be shown for the 5-point scale by both employers and researchers. You will find a deep dive of our findings below.
METHODOLOGY
In order to answer your question, we analyzed academic databases, corporate websites, industry reports, trusted media sites, and review sites. We comprised a list of pros and cons for each scale (5-point, 6-point, and no scale) based on excerpts from studies, articles, and employer opinion forums. While Wonder generally aims to keep research relevant (no older than two years), we did utilize one older piece of research (from 2006), because it analyzed the data and opinions of survey researchers regarding whether a 5-point or 6-point scale was better. While these findings report the opinions of survey analysts, not employers conducting performance appraisals, we felt the insight and opinions from researchers who work with 5-point and 6-point scales on a regular basis was very compelling and highly-interesting to consider, because performance appraisals are, in a sense, a "survey" of employee performance. Additionally, while this report is from 2006, we felt that the data and information reported in this study was not highly time-sensitive, is still relevant to today, and there were no other more recent collections of this particular data available.
5-POINT SCALE
Pros:
--A 5-point scale is effective if you want to separate levels of performance in order to determine certain competitive elements, such as compensation, or in the development of succession planning.
--Some employers report that, in comparing and contrasting performance levels among employees, a 5-point scale is the easiest option.
--5-point scales help to better differentiate and compare employees to one another, because it offers a mid-point, wherein there are two levels above satisfactory, and two levels below satisfactory.
--A study of survey researchers reflected that 71% of researchers prefer a 5-point scale over a 6-point scale.
--Most survey researchers that believe the neutral mid-point provided by a 5-point scale is a necessary component, because neutral (or in the case of a performance review, "Satisfactory") is a legitimate perspective.
--A 5-point scale is also preferred for mathematical purposes; "when calculating the mean weighted average you have a standard point of comparison. You will know instantly that an average rating of
3.4 is above neutral and a 2.8 is below"
Cons:
--Some evidence suggests that "managers are not effective in making such fine distinctions and that they often focus on the middle ratings or tend to drift upward in ratings."
--Some employers report that, although they consider a "3" to be a good performer, employees tend to feel frustrated that they are being labeled as average and believe they should receive a higher score.
--"According to HBR, when 4,492 managers were rated [using a 5-point scale] on particular performance dimensions by two bosses, two peers, and two subordinates, 62% of the ratings’ variance was a result of individual raters’ 'peculiarities of perception,' while only 21% of the variance was attributed to actual employee performance."
6-POINT SCALE
Pros:
--6-point scales can counteract a manager's tendency to focus on the middle and "reduce the tendency to drift upward."
--A 6-point scale may be best if wanting to avoid average ratings and force a score which rates either above or below average.
--A 6-point scale may be more beneficial to an organization that is more "results-oriented and that manages a more competitive environment. Some competency models, like Lominger's, use a six point rating scale, reserving the 6th rating level to identify a competency that is overused, to the employee's detriment."
--12% of survey researchers prefer a 6-point scale.
--Some researchers prefer a 6-point scale, because it does not allow for ambivalence when making a choice.
Cons:
--A scale with no mid-point "can introduce respondent bias, as respondents are forced to chose a more positive or negative response."
--"Some researchers point out that in many cases respondents will accentuate the negative in an experience."
NO SCALE (OBJECTIVE PERFORMANCE RATING)
Pros:
--Ratings are replaced by specific goals and objectives. The ability to reach these goals and fulfill objectives determines performance ability.
--Employees will know and understand what "performance is based on and how it is measured".
--Performance reports occur more frequently, allowing the employee to know where they stand at any given moment.
Cons:
--Requires more frequent face-to-face meetings between employees and employers.
--Goals and objectives are not rigid and can change in certain situations, requiring the need for re-establishing goals and reassigning priorities.
--"New resources have to be harnessed to accomplish the goals. Often revisions become necessary either in the goals or in their time limits."
ADDITIONAL RESEARCH
During our research, we came across a new trend which we felt might be interesting to you. This trend revolves around the idea of completely eliminating performance reviews. An article published by Better Team titled, "How to Best Approach Performance Evaluations Now" gives some detailed insights about this trend, how companies are going about it, and provides employee perspectives. We felt it was a good idea to share this article with you, in case you are inspired to learn more on this topic.
CONCLUSION
To wrap it up, the effectiveness of performance rating scales depends on the goals of an individual company, however preference tends to be shown for the 5-point scale by both employers and researchers. Thanks for using Wonder! Please let us know if we can help with anything else!