Stop Giving Performance Ratings like "Exceeds Expectations"

Traditionally, employees were given ratings like Needs Improvement, Meets Expectations and Exceeds Expectations.

Some companies have now abolished these, and for a good reason: they’re useless.

If someone is doing an excellent job, instead of giving them a rating like Exceeds Expectations, tell them they’re doing an excellent job. Give them more autonomy, trust and flexibility. Promote them, give them a raise, or a big bonus or equity. When they falter, take their earlier excellent performance into account. These are all things that matter to the person. A HR rating doesn’t matter.

On the other hand, if someone is bad, tell them that they’re not meeting expectations required for this job, and that they need to improve to continue, that you’re prepared to help them however you can but they need to take the initiative, and so on.

In both cases — exceeding expectations and needing improvement — giving the rating is only an intermediate step towards an action or conversation. The rating itself has no value. Nothing is going to happen as a result of giving one. Why not skip the bureaucratic rating and get to the next step right away?

Ratings cause people to obsess about the rating itself: Why am I only Meets? This other guy is Exceeds, and we’re similar. Am I on the low end of Meets? Am I not valued? Should I be worried? Joel Spolsky wrote that we all have a slightly inflated view of ourselves, so even if the ratings were perfectly accurate, people will feel disappointed when they receive them. In my experience, there were a few weeks of demotivation after performance reviews.

Giving a rating also runs the risk of giving the wrong rating. Even if happens rarely, it has a disproportionate impact: rating someone Needs Improvement when they’re doing fine will demotivate them. On the other hand, if you rate someone Exceeds Expectations once by mistake when they’re only Meeting, and rate them Meets accurately next time, they’ll be disappointed then and wonder why they’re falling behind.

Some companies make them even more fine-grained than three ratings — Needs Improvement, Meets Expectations and Exceeds Expectations. For example, they may have Strongly Exceeds Expectations. That causes employees to wonder more about its meaning. If they did an exceptional job and they expect Strongly Exceeds, and you rate them only Exceeds, they might be disappointed.

Google at one time even had 41 ratings on a numerical scale from 1.0 to 5.0! I think there were 19 sub-levels within Needs Improvement (1.0 to 2.9), five within Meets Expectations (3.0 to 3.4), five within Exceeds Expectations (3.5 to 4.0) and so on. This caused people to obsess that they’re only a 3.2 when the next guy is 3.3.

Whether you use words (“Meets Expectations”) or numbers (3.2), ratings have no value, and a lot of downsides. Eliminate meaningless HR bureaucracy.