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How to Reward Employees without Ratings and Rankings


Communication is the cornerstone of employee satisfaction. Organizations need to make the right change, as most of companies existing performance rating process could be significantly improved instead of completely eliminating them.


Most of the organization are facing frustration due to lack of results from performance ratings and engagement due to which more than four-fifth of companies are planning to make big changes in their HR performance management systems. The elimination of performance ratings will allow the organization to resort to use of numeric scores or qualitative labels, ranking against colleagues where company is going to grade not only employees past performance , but also their future goal accomplishment. Since these compensation decision seems to be positive, it’s still too early to say whether eliminating ratings will do what managers want that is improve employee and company performance.
The process of rating and ranking employees can be challenging , especially in case of high performing team resulting in distribution curve which can simplified for managers to determine salary increases. The act of “rating” involves placing employees in categories based on their value to the organization. Any time a company puts one group of employees in a category that is perceived to be more beneficial than another, based on rating . Manager ratings can be valuable if collected as part of an appropriately designed performance management process. But for some companies collecting manager ratings creates more problems than it solves.


Why there is need to change Performance Management


Since only handful managers are capable and more effective without ratings , rather than getting sidetracked by the rating debate , organization need to employ better performance management practices in following ways :


  • Need to provide on-going performance feedback : when there is increase in frequency of informal performance conversations, this allows manager to provide more timely feedback to employees and make adjustment to what is expected or required from employee given the organizational changes or past performance.
  • Performance reviews need to be forward looking rather than backward looking : Discussing about future performance and assessing them based on forward looking provides managers and employees with more accurate understanding of their abilities to meet the future business needs and how to improve those abilities.
  • Feedback from peers should also be considered in evaluating performance rather than just manager : Since employees are spending crucial hour of work with their team mates, collecting feedback from peers who understand employees better , helps managers in assessing and discussing employee performance in given environment , as employees must increasingly work with peers to be more effective.


Why there is need to remove rating


Managers generally do expect that removing ratings is definitely going to improve employee performance, as in many of cases organization has received positive feedback from employees after eliminating performance ratings. Following are positive outcomes of removing ratings in particular:


  • • There will be improvement in manager conversations , as managers now will spend less time in defending rating and more time in discussing about past and future performance.
  • • Since now bureaucracy around deciding the rating matching with performance has been simplified , this will give managers more time for informal feedback to respective employees under him.
  • • Since managers will now be having more discretion power in differentiating pay for their teams without being linked to rating , this will help them differentiate the pay more accurately.
  • • This process of removal of rating will improve employee engagement and help them learn better in their job as performance management process which is bound to create anxiety among managers has been removed.


How to Eliminate Rating still Reward Employee Performance


Following are the ways by which company can eliminate manager ratings still can accurately identify, measure and reward the employee performance.


  • Need to Evaluate Employees based on goal accomplishment :This process starts with managers working with employees to establish clear job goals and meet their employees on regular basis to discuss , clarify and modify goals throughout the year. The discussion should be ongoing to focus on improving goal clarity, supporting goal accomplishment and evaluating individual goals , tasks and projects are on right track. Managers then refer employees’ goal accomplishments when making subsequent decisions about pay or overall performance.
  • Rate employees based on future action instead of past performance : Under this approach managers are not asked to rate employees based on performance, but instead rate employees based on recommended future actions that are typically associated with performance. The advantage of this approach is it skips the whole issue of measuring performance and focuses specifically on what actions to take with employees.
  • Need to shift rating from employee assessment to manager calibration : In case of traditional performance review, employee and manage used to sit down on annual or quarterly basis to review what the employee has accomplished and discuss about future plans for employee development. Many companies have been eliminating the second part of this process from the review, which is most important as now. Now the information on employee accomplishment used in talent review will be used to see what employees are contributing the most to the organization. This approach removes the anxiety and distraction created by including an overall manager rating in the performance review conversation. It also creates an incentive for employees to accurately document their accomplishments since this information will be used in subsequent talent reviews to determine their overall performance level.


Now it’s time to make right change


Hence now it ‘s time to change, organization need to make sure that it’s the right change, as most of companies existing performance rating process could be significantly improved instead of completely eliminating them. Care must be taken when change in ratings with severely impact employee pay, promotions and other career opportunities. The challenge of performance management is effectively dealing with the reality that all employees are valuable but some employees are more valuable than others. Hence one need to assess people’s performance without making employees feel like they have been divided into winners and losers.

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