Employee productivity better with a rating performance review

Employee performance suffers when ratings are removed from the performance review process, according to CEB, a best practice insight and technology company. On average, employee performance drops 10% when ratings are absent from the review process, largely due to the inability of managers to effectively manage talent without ratings.

Impact on employees
In an effort to better their performance management systems, some companies have removed numeric or qualitative performance ratings. However, while there is often an initial positive reaction after eliminating ratings, key performance outcomes such as quality of manager feedback and employee engagement ultimately suffer.

This has a greater impact on high-performing employees than average or low performers. High performers are less satisfied with the amount of time managers spend on performance management and manager conversations in environments without ratings. On the other hand, lower performing employees are happy when ratings are removed and they are not confronted with a score.

Without a rating to point to, managers struggle to explain how pay decisions are made and link to individual contributions. Employees notice this – in organisations where there are no ratings, the number of employees who believe their organisation connects performance to pay decisions dropped 8%. Unsurprisingly, in these workplaces high performers are less likely to feel that they are rewarded appropriately for their contributions.

“Performance ratings are crucial for organisations that desire a high-performing and engaged workforce,” said Brian Kropp, HR Practice Leader at CEB. “Without the tangible symbol of a rating, employees don’t understand the processes or the philosophies behind their organisation’s performance management, which causes them to put forth less effort at work and become disengaged.”

Managing managers
Without ratings, managers struggle when trying to explain to employees how they performed in the past and what steps to take to improve future performance. In fact, employees working at organisations that have eliminated ratings from the review process score their performance conversations with managers 14% lower than at organisations that use ratings. Managers at organisations that have abolished ratings also spend fewer hours on informal performance management conversations – 24 hours per direct report per year, versus 36 hours at organisations with ratings.

“When performance ratings are removed, two things happen for managers – they spend less time on performance management and they have difficulty providing concrete evidence of how the employee is performing and progressing,” added Kropp.