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Pros and Cons of Performance-Appraisal Rating Systems

May 5, 2002
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Related Topics: Performance Appraisals, Featured Article, HR & Business Administration
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Each rating option communicates a different message to your employees, and each has a different outcome.

Five Levels
Advantages
·Provides for the finest distinctions in performance
·More consistent with bell-curve distribution
·Most managers believe they can discriminate among five levels of performance
·Consistent with familiar "A-F" school-grading model
·Most familiar rating scheme -- less training required
Disadvantages
·May be harder for supervisors to communicate how to attain higher performance levels
·Typically only four levels are used
·Middle rating usually perceived negatively -- as average, or mediocre, or a "C" student
·May encourage central tendency
Four Levels
Advantages
·Does not include a middle rating which may be perceived as "average"
·Eliminates "central tendency" rating error
·May skew raters in a positive or negative direction
·Provides for finer distinctions than a three-level scale
Disadvantages
·May not provide a way to distinguish between those who can improve and those who should be terminated
·May skew raters in a positive or negative direction
·Typically, only three levels are used
Three Levels
Advantages
·Supervisors find it easy to categorize performance into three categories
·Supervisors tend to be more consistent if given fewer choices -- higher reliability
·Some jobs may be better appraised on a "pass/fail" basis
·Only three levels of performance can be proved empirically
·Middle rating implies expected performance, not average performance
·More consistent with TQM principles
Disadvantages
·May not provide fine enough distinctions in performance
·Managers frequently alter system by adding plusses and minuses
·Does not distinguish between those who can improve and those who should be terminated
·Typically only two levels are used
·Does not allow for identifying the truly exceptional 2-5 percent

Source: Grote Consulting Corporation

Adapted from The Performance Appraisal Question and Answer Book, 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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