In a business culture increasingly based on data, it's no surprise many employers opt for a performance review process that's numbers-based. The problem is, numerical ratings aren't nearly as objective as you think.
At least so says Marcus Buckingham, author of "StandOut: Find your Edge, Win at Work," and the founder of TMBC.
"I argued that such rating systems don't accomplish the task managers expect from them, which is to accelerate the performance of their people," he writes in the Harvard Business Review. "At best, they serve other goals: allocating compensation fairly, and aligning each individual's goals with the values and strategies of the company."
Buckingham says even if these two objectives above were all you wanted to find out, these numerical approaches--called Human Capital Management (HCM) systems--have "intractable problems." Below, read why Buckingham says you should find a new rating system for your employees.
Don't rely on assumptions.
HCM systems are entirely based on the assumption that a manager can be a reliable rater of employees' strengths, weaknesses, and skills, Buckingham says. This is a dangerous assumption, Buckingham says, for there is no evidence that shows "inter-rater reliability" (meaning two managers will rate the same employee exactly the same) will happen within your company. In fact, it's possible you'll see two totally different ratings from two managers. So, if you are using these ratings to identify and fire low performers, promote top performers, and give out bonuses, you're in trouble.
Subjectivity is difficult to root out, Buckingham writes. "It appears that, when it comes to rating someone else, our own strengths, skills, and biases get in the way and we end up rating the person not on some wonderfully objective scale, but on our own scale." He says that managers will rate your employees' skills by comparison--"Does she have more or less of this strength or skill than I do?" If the employee has more, the rating is high; if she doesn't, the rating is low. Buckingham calls this "false precision."
Do not ignore the individual.
Your best managers will get to know each of your employees--weaknesses and strengths--and help them achieve the goals you set out for the company. But Buckingham says numerical rating systems do not differentiate between individual employees. "[The rating systems] ignore the person and instead tell the manager to rate the person on a disembodied list of strengths and skills, often called competencies, and then to teach the person how to acquire the competencies she lacks," he writes. But often these competencies, such as strategic thinking and learning agility, aren't the sort of things that a manager can measure easily with numbers. Good managers recognize an employee's unique traits as the "raw material" that can be shaped in order to "create the performance they want."