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Performance Management Series

Market Analysis


The Real Impact of Eliminating Performance Ratings

Seeking to repair failing performance management systems, more than 20% of organizations have eliminated or are planning to eliminate ratings, and another 30% are considering it. With the growing momentum around this change, HR leaders feel pressure to at least evaluate whether or not removing performance ratings is the right choice for their organizations. They want to know whether eliminating ratings will have the desirable effects on talent outcomes, like performance, that they expect.

This research brief answers that question based on data from managers and employees at organizations that still use performance ratings and those that do not. Our conclusion: The ROI of removing performance ratings is not what is many organizations expect. For most organizations, performance and related talent outcomes suffer when ratings are removed because managers struggle to make and communicate performance and pay decisions without ratings. Regardless of ratings, organizations should instead focus on improving performance management through ongoing feedback, forward-looking reviews, and peer feedback.

Use this brief:

  • If you do not plan to eliminate ratings, for help with communicating the impact of removing ratings to senior stakeholders and focusing attention on what is needed to make performance management a success.

  • If you are considering removing ratings, to make an informed decision about removing ratings considering both your organization’s situation and the impact of removing ratings on managers and employees.

  • If you have eliminated ratings, to focus attention on three strategy shifts that will make your performance management system a success.

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