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Pros and Cons of Performance-Appraisal Rating Systems

April 21, 2002
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Related Topics: Performance Appraisals, Featured Article, HR & Business Administration
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Eachrating option communicates a different message to your employees, and each has adifferent outcome.

Five Levels
Advantages
·Provides forthe finest distinctions in performance
·More consistentwith bell-curve distribution
·Most managersbelieve they can discriminate among five levels of performance
·Consistent withfamiliar "A-F" school-grading model
·Most familiarrating scheme -- less training required
Disadvantages
·May be harderfor supervisors to communicate how to attain higher performancelevels
·Typically onlyfour levels are used
·Middle ratingusually perceived negatively -- as average, or mediocre, or a"C" student
·May encouragecentral tendency
Four Levels
Advantages
·Does notinclude a middle rating which may be perceived as"average"
·Eliminates"central tendency" rating error
·May skew ratersin a positive or negative direction
·Provides forfiner distinctions than a three-level scale
Disadvantages
·May not providea way to distinguish between those who can improve and those whoshould be terminated
·May skew ratersin a positive or negative direction
·Typically, onlythree levels are used
Three Levels
Advantages
·Supervisorsfind it easy to categorize performance into three categories
·Supervisorstend to be more consistent if given fewer choices -- higherreliability
·Some jobs maybe better appraised on a "pass/fail" basis
·Only threelevels of performance can be proved empirically
·Middle ratingimplies expected performance, not average performance
·More consistentwith TQM principles
Disadvantages
·May not providefine enough distinctions in performance
·Managersfrequently alter system by adding plusses and minuses
·Does notdistinguish between those who can improve and those who should beterminated
·Typically onlytwo levels are used
·Does not allowfor identifying the truly exceptional 2-5 percent

Source: Grote Consulting Corporation

Adapted from The Performance Appraisal Question and AnswerBook, Copyright 2002 by Dick Grote. Published by AMACOM Books, a division of American Management Association, New York, NY. Used with permission. All rights reserved.http://www.amacombooks.org.

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