How to Calculate a Performance Review Score With a Rating Scale

How To Effectively Use an Employee Rating Scale

Do you have to calculate your employees’ year-end performance bonuses? Are you nervous? Don’t be! We’ve got you covered!

You are not alone in dreading employee reviews. As a small business owner or manager, you rely on your employees for success, and they rely on you for their livelihood. Your staff is likely nervous about performance reviews because they have a lot riding on them. That's why standardizing your procedure will help you and your team: everyone will know what to expect.

Why Rate Employee Performance?

Employee performance rating scales are used to grade all employees in a company based on the same metrics. The metrics themselves are selected based on how the organization is set up and its goals. For several reasons, it's very useful to compare performance assessment scores to see how each person stacks up.

For one thing, they help employers find the best people in their company. Knowing this can help businesses choose the right people to give corporate prizes and bonuses to, which leads us to the next point.

Besides being able to reward the right people, managers will also figure out who should be promoted when the time comes. When an older employee leaves a senior position, the only logical thing to do is find a new person who fits the job. But who should you pick? Performance rating scales start to play a role at this point.

By looking at a worker's total rating score, an employer can get a good sense of how much they care about their job and whether or not they deserve to be promoted.

There are many more benefits to keeping track of employee performance review ratings, such as using them to decide a worker's raise, whether they should be given extra vacation time, and how much money they should get.

Difficulties of Performance Assessments

Because traditional performance assessments do not consider the behaviors and business impact that should be considered, they are frequently the source of inaccurate data. This is one of the reasons why some individuals dislike rating scales. There's the risk that you're accidentally promoting the wrong people and failing to recognize those who are talented in their fields. Furthermore, many traditional performance evaluation techniques rely on numerical evaluations or rankings, which can demotivate employees.

Another typical issue is that assessor biases are not addressed, which can cause employee ratings to climb or fall depending on the situation. This has the potential to have a significant impact on performance reports. It is possible to alter the design of a rating scale to reduce licensing bias and centrality bias, which are two common performance evaluation biases that can be reduced by using a different rating scale. A manager who is not aware of these biases or has not received adequate training may produce neither useful nor accurate ratings in their decision-making.

How To Calculate Employee Evaluation Scores

Many companies use the same rating scale for all employees, no matter what they do or what their goals are. The company's performance can suffer when this happens. A skewed choice is made, which can negatively affect the company. It is ideal to have a rating scale that can help avoid common biases to ensure that an employee performance evaluation scale is fair.

Here are three tips for making employee rating scales that can help you figure out what you want your employees to do.

Tip 1: Understand “spread” and “validity” 

Traditional rating methods have problems with spread and validity. Create a scale with clearly defined options for how you want to respond. Find out if the scale measures what is important and valid and what the company cares about.

Tip 2: Allow customized words

Allow for a wide range of queries and responses, as well as individual responses. Do not give too much weight to the number of responses you get. Make your statements based on what your employees do and the parameters you want to track.

Tip 2: Maintain Transparency

It's important to ensure that your employees know how your company measures success. Transparency is an important part of building trust.

Step-by-Step Guide to Creating a Rating Scale

How can you make performance rating scales that aren't biased? Just follow the steps below:

Step 1: Find out who the best people are and aren't.

The first step to making a good performance rating scale is to determine which people are good and which people aren't. Is everyone treated the same? Do they all have the same jobs? You must figure out who the best people are in each field, and they must make up at least 25% of the total workforce. This can be a difficult task even if the organization is working well. Separating them would help make an unbiased performance review rating scale.

Step 2: Choose the best of the best.

Afterward, you need to figure out which top performers are the best. They should make up about 5% to 10% of the total employees. The best people in the company are chosen to be role models and mentors for the rest of the company, and they will decide how big it will be. Five stars because they are the best. They all get a score of four.

Step 3: Sort everybody else. 

You've taken care of 25% of them. Sort the rest of the population into groups of 25% and give a 1 to the people who did the worst. Anyone who doesn't do well but can improve with help from trainers is number 2. Anybody who isn't a high performer or a low performer is a middle performer and falls into category 3.

Step 4: Choose the right scale type.

You can do everything right and still fail if you don't use the right rating system to objectively measure how well your staff is doing at work. We’ll address the most common types of scales next.

How To Choose the Right Performance Rating Scale System

There are plenty of ways to rate employees in the HR industry, but not all of them are effective. Some of them may be less effective than others, and choosing the wrong ones could lead to the company's demise.

Here are three performance review grading scales that are commonly used to help clarify things:

1. The 5-Point Performance Scale

This is by far the most common method of evaluating a job's performance worldwide. The five-point, or five-level, the grading scale is simple to comprehend. You get to offer the employee a five-star rating. Each of the five levels has a distinct meaning. 

The reviewers will, in most situations, develop a set of questions to examine how employees behave. They may inquire about individual performance, collaborative abilities, on-time work submission, or staff output. Because every workplace is distinct, there is no one-size-fits-all answer to these questions. Here are some popular responses to some of the most often asked questions.

• Is it true that they always meet their deadlines?
• Does the employee get along with others?
• Yes, the employee knows where they work at the company.
• Is the employee eager to generate new ideas?
• Interns and new employees should rely on the employee for assistance.
• Is the person enthusiastic about their job?
• How would you grade the employee's work ethics on a scale of 1 to 5?

The 5-point scale approach does, however, have significant disadvantages. These are on the list below:

• Definition bias: The five-point scale depends on each individual's interpretation of each number. For different people, the word "satisfying" denotes different things. As a result, a rating could be thrown off. Because setting high employee criteria can be difficult for HR professionals, some HR professionals offer their staff a four instead of a five. Other HR professionals assign a three-star rating to employees who only do the bare minimum.
• Leniency bias: Because they don't want to shatter their employees' dreams, raters may award everyone a 4 or 5.
• Number bias: If there isn't a key or standard metric to compare them to, people who score items will have various opinions about what each number represents. When people conduct employee analysis, this is a very common occurrence.

2. Likert Scale

Another form of the rating scale is the Likert scale, which is popular and used in many situations. Like the previous one, this rating scale contains five variables, but they are text-based rather than numerical.

Here is a sample of the options presented in the Likert scale:

Strongly Disagree – Disagree – Neither Agree nor Disagree – Agree – Strongly Agree

This scale can be found in a variety of places, such as the MBTI Personality Type Test, among other things.

The importance of symmetry will be maintained by using a well-designed Likert scale. There will also be a neutral option available, and people will be able to select it if they believe it is the best option for them.

The majority of these scales have only five possible outcomes. However, having seven or three is OK. As a result, there are instances when having simply three options, one of which is neutral, is insufficient. On the other hand, giving individuals seven options may make things more difficult at times and make things more difficult in general. In any case, it's an ingenious method of expanding that's being employed in offices worldwide.

Some people believe that using a Likert scale to rate items is not the greatest method. The neutral choice on this scale indicates that the reviewer does not have an opinion on the subject under consideration. This can be used by people who aren't working to fill out the review form and otherwise do nothing productive.

In addition, there is no simple way to assign a Likert scale rating to employees in the workplace. If the 5-point approach and the Likert scale were not utilized, calculating an average response rate would not be easy.

3. Comparative Scale

When you use the comparative technique, you compare and contrast an employee's performance with other people in the group. People are ranked from the best to the worst regarding how well they do. Forced distribution, paired comparison, and a visual rating scale are ways to compare things. Forced distribution is used to rank employees in groups.

Among other things, a group of top performers makes up 10%, a group of average performers makes up 40%, and the third group of good performers makes up 40% of the group. Finally, the last 10% comprises people who don't do well.

This ensures that the best people get paid. These top performers can move up the management ladder with the right training and guidance. Poor performers get another chance to improve or are fired if their performance doesn't meet the standards. A new person will be hired because of this.

According to classification standards, employees aren't ranked based on how well they do their job. In these cases, even if the employees didn't deserve it, they would get more money than those who didn't.

This is called the Paired Comparison Technique. The organization compares one person to the other and gives the person who did better a one. The sum of all the points that the person won determines the final performance score.

A comparative method is used when a company has a small group of employees who all do the same thing. Consequently, it is not good for businesses with many employees or businesses with a lot of different jobs. As a result, there is a high risk of bias because the scale is based on what people think.

Examples of Rating Scales in Action

To figure out how many scales points to use, think about what kind of question you're asking for this performance rating example. 

• A 1-7 point scale with a middle or neutral point is what you'll need when dealing with a concept or idea that goes from positive to negative, like how satisfied you are with your job (these are known as bi-polar constructs).
• Use a 1-5 point scale if you're dealing with an idea or concept that ranges from 0 to positive – for example, how well it works (these are known as unipolar constructs). This is the best way to use a five-point scale because it doesn't make sense to measure how bad things work.
• Always use bipolar scales for bipolar constructs and unipolar scales for unipolar constructs, even if they look the same. In other words, the goal is to make sure that respondents can respond in a way that allows them to stand out as much as possible while not giving in so many points that the measure is too noisy or unreliable. Even on an 11-point (0-10) scale, people have a hard time consistently rating themselves, which lowers the quality of the rating scale. Having so many more levels of contentment than the standard 5 or 7 makes survey measurements more difficult. This is because three isn't all that different from 4, and 6 isn't all that different from 7.

Are You Ready to Implement a Rating Scale?

Setting objectives and standards is a vital part of inspiring your team. Lower-performing employees must understand that poor performance will not be tolerated. Others on your team will look to you for guidance, and they will need structure and guidelines to succeed. While goal-oriented team members are self-motivated, they rely on you for constructive criticism.

Overall, performance reviews are a must for any small business owner. Setting up a performance evaluation system and continually enhancing it will pay off in the long run. And, we’ve got some good news for you! With Lanteria, the premier HR management system, performance evaluation has never been easier. You can configure review workflows, provide 260 feedback, set quantitative and qualitative goals, and much more. Reach out today to learn more about how Lanteria can boost your HR processes.