Can Companies Improve Performance Without Performance Ratings?

This essay critically evaluates the effectiveness of performance rating systems in promoting employee performance. It discusses the importance of performance management and whether performance ratings are essential for improving employee output. The literature review presents arguments for and against performance ratings, highlighting potential biases, inaccuracies, and negative impacts on employee motivation. Alternative methods, such as focusing on employee accomplishments, future goals, and talent management, are also explored. The essay concludes that performance rating systems are not the most effective way to enhance employee performance in the modern business environment and that companies are increasingly moving towards more holistic approaches focused on employee growth and engagement. Desklib provides solved assignments and study resources for students.

Running head: PERFORMANCE AND REWARD MANAGEMENT
Performance and Reward Management
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As stated by Shields et al., (2015), performance management is one of the crucial factors
for gaining competitive advantage in the modern business environment. Performance
management is the process of continuously measuring, identifying and developing performance
in firms. This is done by aligning the personal gaols and objectives of the employees with that of
the organization. Mone and London, (2018) stated, performance rating can be effectively used by
the organization to increase the productivity of the employees. On the contrary, Pulakos et al.,
(2015) opined that there are other effective ways of evaluating the performance of the employees
and help them in improving their quality of the performance. This literature will critically
evaluate the importance of performance rating in elevating the performance of employees and
whether companies can improve the employee performance without using performance ratings.
As put forward by Judge and Zapata, (2015), performance rating is a part of performance
management which is continuous process and aim at improving the overall growth of the
organization. Performance rating is essential as it enables the managers to identify the strength
and weaknesses of each of the employees. Moreover, the rating system will also reflect upon the
growth of the employees in a particular time span. Therefore, the contribution of the employees
towards the organization, their development in their respective career, promotional opportunities
and pay increases and training needs are discussed within the organization. The rating system is
the accurate reflection of employee performances which can be effectively used for their
professional growth.
On the other hand, Barrick et al., (2015) states, employee performance can be effectively
evaluated without using the performance rating systems. The employees can be evaluated based
on their accomplishments and the goals that they can achieve within a certain period of time.
The employees can also be evaluated based on their future actions instead of their past

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performances. The performance rating system can also be avoided by discussing about their
accomplishments and their future goals. As stated by Li, Bagger and Cropanzano, (2017),
performance rating system contributes negatively more often than positively. Moreover, there are
occasions where the rating systems are biased and inaccurate. It has been seen quite often that
the performance measurement system is not an accurate measure of the organization and leads to
an environment that is stressful.
According to Borman, (2017), traditional approach of performance management are still
used many organization and all companies rate their employee performance. This enables them
to identify the contribution of the employees to the organization. Maslow’s hierarchy of needs
states that employee motivations to work are driven by their needs and wants. Moreover, there
are certain needs that have higher priority than the others. Performance rating system is used to
provide the employees with better monetary rewards and compensation packages so the
employees driven by monetary urge will be able to perform in a better way. On the other hand,
DeNisi and Murphy, (2017) states, recent research suggested that most of the employees are
driven by growth than rewards, benefits and incentives.
As stated by Bernardin, Orban and Carlyle, (2017), performance rating system should be
developed according to the requirement of the organization. This will facilitate in development
of an effective working environment and work culture. The work culture should always be
congenial and conductive and this would facilitate the employees in sharing information and
knowledge among each other so that the organizational goals can be achieved. However, in most
occasions the inappropriate use of performance rating system makes the employees more
oriented towards their personal goals. Performance rating system cannot be considered as the
most effective system for promoting employee performance. Performance ratings system has

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been used by all companies in one way or the other and most of the cases the companies are
unable to develop an effective performance rating system. The majority of the global
organizations are more oriented towards employee growth than performance rating.
The basic problems in performance rating system are lack of differentiation, recency
effect, horn effect and personal bias. The managers are either reluctant to judge the employees
or lack self confidence to justify the rating they have provided to the employees. Schuh et al.,
(2018) states, in most scenarios it has been seen that employees are given average ratings or
similar ratings. This leads to either lower ratings for everyone or higher rating for everyone
which means that this is a management failure. This will definitely have an adverse effect on the
employees and their performance. Recency effect is another major issue where the managers
become more diligent than before (Rock & Jones, 2015). Therefore, continuous evaluations of
the employees are not done which will highly affect the employees’ performance. Horn effect is
very much frequent where the employees are judged on areas where they are highly competent or
incompetent. This evaluation is not exactly true to the organization. Personal biases are a
common bias where the employees are rated based on their personal feelings and impressions
about them. These drawbacks majorly hamper the employee performances and most of the
employees will be highly demotivated due to these practices.
According to Smith et al., (2016), managers should be able to inspire the employees in
order to improve their performance. Employee engagement is more important in this context and
can be used effectively to increase the efficiency of the employees. This is the reason that most
of the companies are not using the simple rating system for improving the employee
performance. There are other complex systems of continuous evaluation of the process such as
performance curve and forced ranking which has been effective for motivating the employees.

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The employee performance ratings are hurting the productivity of the organization as they do not
assist in improving the performance of the employees. This is because of the fact that the
employees provided with top ratings become complacent while the ones provided with lower
ratings are disappointed and angry. The rating system is the area where the employees are
focused on and they do not even listen to the valuable feedback that is being provided to them.
The employees are more focused on the numbers on the assessment sheet that they have received
(Latham, 2016). The rating system is practically meaningless as there are managers that are too
strict about the ratings and others are too lenient. There are instances when employees have tried
their level best to contribute to the organization and they have made an effort to improve the
performance. Moreover, their improvements have been well received by the management but at
the end of the day they received the same ratings as their last year. This will result in
development of all negative emotions within the employees which will highly affect their
performance of the employees.
Therefore, these instances shows that the performance rating systems have not been used
the way they should in an organizational setting. As stated by Rosen et al., (2017), the purpose of
the reviewing the performance of the employees is to develop their hidden talents and motivate
them to perform in a better way. The ineffectiveness in the employee rating system increases the
attrition rate of the organization which increases the organizational cost. The most relevant
example is Microsoft where the removal of the rating system increased the collaboration within
the employees and they have been able to increase the performance of the employees
significantly. The removal of the rating system exhibited collaboration, agile and customer
orientation which is essential for companies to gain competitive advantage in the market
(Latham, 2016). The employees in the modern generation are looking for growth in their

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respective careers and talent management is more effective in which the managers had a frequent
conversation with their employees so that employee engagement can be increased. These have
increased the growth rate of the employees significantly and the employees are developing at
faster rate.
The tradition process showed that employees and managers spent a lot of time in
discussing about their past performances. These have been a complete waste of time as the
organizations should be more focused on the future development of the employees (Rock &
Jones, 2015). Therefore, instead of assessing the ability and talents of the employees it is
essential for the organizations to provide suitable job roles according to their talents which will
benefit the organization.
The importance of employee management and growth is high so majority of the
companies are getting rid of the performance rating system in order to increase their
organizational efficiency. Therefore, the argumentative literature has been able to throw a light
on the advantages and disadvantages of using performance rating system. Performance rating
system is not the most effective way of increasing the performance of the employees which is the
very reason that most of the global organization shave changed their human resource policies.
Thus, it can be concluded that performance rating system is not effective in respect to the
changing modern environment and has more adverse affects that positive effects on the
employees.

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References
Barrick, M. R., Thurgood, G. R., Smith, T. A., & Courtright, S. H. (2015). Collective
organizational engagement: Linking motivational antecedents, strategic implementation,
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Bernardin, H. J., Orban, J. A., & Carlyle, J. J. (2017, November). Performance Rating as a
Function of Trust in Appraisal and Rater Individual Differences. In Academy of
Management Proceedings. Academy of Management Briarcliff Manor, NY 10510.
Borman, W. C. (2017). Implications of personality theory and research for the rating of work
performance in organizations. In Performance measurement and theory (pp. 127-172).
Routledge.
DeNisi, A. S., & Murphy, K. R. (2017). Performance appraisal and performance management:
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Judge, T. A., & Zapata, C. P. (2015). The person–situation debate revisited: Effect of situation
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Latham, A. (2016). Forbes Welcome. Forbes.com. Retrieved 7 April 2018, from
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ratings-are-hurting-your-organization/#7c50c365410f
Li, A., Bagger, J., & Cropanzano, R. (2017). The impact of stereotypes and supervisor
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Mone, E. M., & London, M. (2018). Employee engagement through effective performance
management: A practical guide for managers. Routledge.
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