The overwhelming majority of performance appraisal forms provide for either three, four, or five levels of performance. It is rare for an appraisal system to operate on the basis of pass/fail with only two levels of ratings. And there are some appraisal procedures that focus entirely on employee feedback and development with no link to compensation that provide for no final evaluation of performance at all. These too are rare.
It’s also extremely uncommon for an appraisal instrument to call for finer distinctions than five levels. In more than thirty years of consulting with organizations on performance appraisal, I have seen only one form with six performance levels, another with seven, and one with nine (not including categories devoted to such issues as ‘‘not applicable’’ or ‘‘too soon to judge’’).
For the most part, unless there is easily quantifiable and numerical information, together with a clear standard of performance—sales results or widgets per hour, for example—a scale of more than five points makes a claim to precision which may be difficult to justify.
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The usual levels of performance used in appraisals are illustrated. This figure provides the arguments for and against three, four, or five performance levels. As the chart indicates, however, no matter how many rating levels are provided, appraisers always tend to use fewer levels than they are offered.
In most cases a five-point rating scale provides for sufficient gradations in performance to be acceptable to most raters. Three-level scales regularly become five-point scales, since raters can’t resist putting notches between the three points. They find that some employees are better than satisfactory but not quite outstanding, while others are a little less than satisfactory but not quite unacceptable, so they add pluses and minuses to the form. Because three-point scales usually become five-point scales anyway, why not simply start that way?