A 5-point System Is Best for Performance Reviews

Let’s acknowledge some assumptions about performance reviews

Performance reviews are subjective by nature, and that makes them an opportunity for managers to have a positive impact on employees’ performance. Performance reviews have a profound emotional impact that can either strengthen or strain relationships between employees and their managers, and these relationships ultimately influence the organization’s overall health. Your managers must understand the power of influence and how to use any scale you choose.

Why are 5 points better than 3?

Opinions about the “right” number of points vary. Some researchers claim that 3-point scales are sufficient (Jacoby and Mattel). Others argue that when a researcher is interested in averages across people or combines several individual rating scales to create a new scale, then 2- or 3-point scales are "good enough" (Lehman and Hulbert). If, however, the researcher is working with a single rating scale and is interested in individual behavior, more scale points are required, and the recommendation is to use a five- to seven-point rating scale. There is also evidence that the more scale points used, the more reliable the scale (Churchill and Peter).

One thing is clear: a rating scale needs enough points to extract meaningful data. Friedman and Friedman conclude that researchers should consider using scales ranging from 5 to 11 points. At Insight, we believe this is especially true when making observations and conclusions about human behavior and its implications for development and improvement.

BLOOM’s 5-point approach to performance reviews

A 5‐point scale gives an opportunity to communicate all conditions of employee development:

• 5 – Exceptional performance. The employee changed the way the company operates and has provided tremendous value to customer experience and profitability.

• 4 – Above average performance. The employee excels over others in a specific talent area. (It is the manager’s job to find and cultivate these talents.)

• 3 – Performance meets expectations. Every job has tasks that must be performed consistently well. Discuss and acknowledge these so that employees can focus on the most opportunistic aspects of their jobs.

• 2 – Needs improvement. Without this rating, there is no opportunity to identify areas where an employee appears to be struggling and requires support. This is an excellent opportunity for the manager to develop a better relationship with the employee.

• 1 – Poor performance. Behavior occurs when an employee experiences apathy over a period of time, even after receiving developmental interventions.

What you can do to improve your organization’s performance reviews

Educate managers about how the review system affects the sense of connection between manager and employee. It's unrealistic to believe that a strict performance system can achieve company goals without potentially damaging the relationships required to make those goals happen. That’s why we stress the importance of addressing the use and purpose of the rating scale from the top down in your organization.

Build flexibility into your new review system. Managers must be trained on how to understand and communicate with different types of people in relevant ways to achieve results. They should use performance reviews as a tool to inspire employees and to help them grow. A well-developed performance review system will engage the skills, talents, and interests that ultimately contribute to the organization’s goals.

What scales have your organization considered? What are you currently using, and what are you learning?

Works Cited

Churchill, Gilbert A. Jr. and J. Paul Peter, (1984), "Research Design Effects on the Reliability of Rating Scales: A Meta Analysis," Journal of Marketing Research, 21(4), 360‐375.

Friedman, Hershey H. and Esther M. Friedman (1997), "A Comparison of Six Overall Evaluation Rating Scales," Journal of International Marketing and Marketing Research, 22(3), 129‐138.

Jacoby, Jacob and Michael S. Matell (1971), "Three‐Point Likert Scales are Good Enough," Journal of Marketing Research, 8(4), 495‐500.

Lehmann, Donald R. and James Hulbert (1972), "Are Three‐Point Scales Always Good Enough?" Journal of Marketing Research, 9(4), 444‐446.