Stop Promoting the Rating

Leader view

If your top performers all look "ready now," how sure are you that you're promoting capability - not just the rating?

The executive director is contemplating her succession plan. She has two top performers; both received the highest rating on their performance review for the last three years. She nods her head. Yes, these are the leaders ready for promotion to director. They deliver results. The team thrives under their direction. The customers love them. Of course they are ready for this increase in responsibility.

Companies make a serious mistake when they lean too heavily on the performance rating to make promotion and succession decisions.

A strong appraisal tells you who performed well in the job they have. It reveals almost nothing about who will succeed in a job they have never done. Yet when the succession slate gets built, that rating carries more weight than anything else, and that is a large part of why so many "ready now" leaders struggle once they arrive.

A performance appraisal answers one question: how did this person do in the job they have? But this is a backward-looking question.

A promotion decision needs two more questions: first, what could this person do in a bigger job, and second, when will they be ready? Those are forward-looking questions, and they demand different evidence. Consider this: the Corporate Leadership Council found that only about 29 percent of high performers have the potential for bigger roles.

Your best performer and your next leader are often not the same person.

Your appraisal form never mentions potential, and the form is not the problem. The problem is what happens to the rating after the performance review ends. The rating travels into succession decisions and into assumptions like "she’s a top performer, so she must be ready." A rating designed to answer one question ends up influencing a question it was never built to answer.

So how does that single number become a "ready now" label? It happens in three stages.

Stage one: the self-appraisal

Psychologists Kruger and Dunning documented a pattern back in 1999. In their studies, the lowest performers placed themselves around the 62nd percentile while actually performing near the 12th, and top performers underestimated themselves. The inaccuracy of the self-rating influences the ratings leaders give.

Stage two: the leader’s rating

Most leaders try to be fair, and most still fall into familiar traps. The recent win looms largest. A strong impression in one area colors everything else. And nearly everyone gets rated a little higher than earned, because the merit increase budget is tied to the rating. Beneath all of that is something simpler: leaders tend to reward the people who make their work lives easier. People who are reliable, drama-free, and hit the numbers. The problem is that this describes expertise in the

current role, and it says nothing about whether someone can handle what the next role brings: ambiguity, a new game to learn, or leading people who used to be peers.

Stage three: the talent review meeting

The talent review meeting is where a subjective rating becomes a documented fact. The rating is spoken in a conference room as one leader’s judgment and comes out stamped "ready in one to two years." Its “precision” applied to a guess. The 9-box tool was designed to prevent exactly this by keeping performance and potential on separate axes, but the performance axis wins every time, and potential becomes its shadow.

Maybe you don’t have a talent review at your company. The same thing happens but with fewer witnesses. The “hallway” version of a talent review leads to a quiet tap on the shoulder; congratulations, you are ready to be promoted. One leader’s gut feeling becomes the entire succession plan, with no calibration, no second opinion, and nobody asking hard questions. And without a process, advocacy becomes the process, and the loudest voice wins.

The cost

The cost shows up first in human terms: the "ready now" successor who fails in eighteen months, the team that absorbs the damage, and the person who genuinely had potential but left the company because the succession plan was full of polished performers and their potential was not valued.

Then there is the financial cost, which is easier to count than most leaders expect. SHRM puts the cost of replacing an employee at half to twice their annual salary, depending on the role, and Gallup’s estimate for leaders and managers reaches 200 percent. SHRM’s 2025 benchmarking puts the average cost per hire near $5,500 for most roles and almost $36,000 for executive ones, and that doesn’t count the cost of the seat that sits empty for months. Gallup estimates that a 100-person company loses between $660,000 and $2.6 million a year to turnover.

Here is what to do instead – three steps

None of it requires new software.

There are three questions. 1. How did the person perform in the past? We know this from the performance appraisal. 2. What could they do in the future? 3. Are they ready now to perform at the next level?

The three questions frame the decision. To answer the second and third, run the Potential Check:

1. Perform The Three-Demands Test. Set aside fifteen minutes mid-year, alone. Take a blank page and draw a line down the middle. On the left, write the three hardest demands of the next role. Be specific. Perhaps the most difficult demands are leading people who used to be peers, making decisions with half the information, or influencing people they do not manage. On the right, write down the evidence; what have you actually seen this person do that resembles those demands on the left side of the page? It’s not about what they could do. It’s about evidence: what you have seen. If the right side of the page is blank, they are not ready now. They may have performed well recently, but that is a different thing. This step is private and diagnostic. Knowing the gaps gives you the information you need to develop the

person and give them the training and experiences needed to master the demands. You are forming a judgment here, not yet making a promotion case.

2. Get one second opinion when a role opens. Gathering feedback from another helps validate your perceptions - or invalidate them. One person’s opinion is enough, provided they have seen the candidate under real pressure. This is simple calibration and it doesn’t need a fancy process. It just needs a second pair of eyes.

3. Make "ready now" testable at the talent review meeting when the succession slate is set. The first test was private and diagnostic; this step is public and committal. State your call out loud, in front of peers, in the form where they can challenge. Consider the specific role, name the evidence, and name what would change your mind. If you cannot do all three, the label is fiction. Here is an example:

"I'm calling Marcus ready now for the director role based on how he led the systems rollout. What would change my mind: if his 360 shows peers still don't bring him cross-functional problems, or if he ducks the pricing decision in Q4."

No talent review meetings? Make your case to your leader and HR partner.

What is in it for you?

Think about the last promotion that blew up. You owned the mess, the backfill, and the months of repair afterward. The Potential Check is how you stop repeating it. The most expensive item in this article is not the test or the validation conversations. It is promoting the wrong person.

How to do it, without the bureaucracy

You do not need a new process. You need to keep the rating from traveling beyond the review it belongs to.

Performance review: leave the form alone. It was never the problem. Think about how the individual’s self-rating influences you. Consider how effectively you utilize the rating scale when you give out ratings. In any case, the rating stops at the performance review. It gets no say in the readiness call; only the evidence does.

Mid-year: Conduct The Three-Demands Test (15 minutes). Make note of the evidence for readiness and/or the gaps to close. If the individual is ready, then validate it.

When a role actually opens: Hold a 20-minute conversation to get a second opinion on your assessment of readiness.

Talent review meeting: if you run one, flip the agenda. Ratings are pre-read, not debated. Nobody spends an hour defending a three versus a four. Room time goes to evidence for potential and for testing the evidence as a leadership team. Leaders who arrive without their Three-Demands sheet do not get airtime; the slate is not discussed until the page is on the table.

HR’s role

If you are in HR, you do not need a program launch. Your form was never the problem; the rating’s shadow is the problem. Teach your leaders to utilize the performance rating scale impartially and effectively. But also take thirty minutes to teach The Three-Demands Test in the manager training

you already run. Build a guardrail into the succession input: every name on the slate needs evidence beyond the rating, or it does not get discussed. The implementation is simple and powerful. The payoff: lower turnover costs and stronger engagement and production.

Bottom line

Your appraisal tells you who performed. It does not tell you who is ready. Stop promoting the rating and start testing for the role.

From insight to action

This is the gap MentorRINGS™ was built to close. Cohorts starting in January 2027 will challenge leaders’ thinking and give them the mentoring and coaching that reveal whether they can operate at the next level. Leaders learn what the next role truly demands and how to demonstrate readiness in real situations.

For more information, contact Kathy Kilroy, Midwest President, CMP | kkilroy@careermp.com | 847.602.0405

Schedule a Conversation: kkilroy@careermp.com | 847-602-0405