You are a newly hired HR professional in a medium-size community hospital, which is in a growing mid-western city. The hospital is a general health care services setting with no competition in the local area. The hospital has board-certified fellowship medical professionals who offer superior care to all the hospital's patients. The mission of the hospital is to support a comprehensive range of health care for the local community and surrounding area. The hospital has grown from two HR staff members to six HR professionals supporting over 700 employees and the same performance appraisal system has been in place for several years. The hospital administration team is not all that comfortable with any system of appraisal but has accepted that one is required. The hospital currently has a healthy employee engagement program. Part of the program is a yearly organizational satisfaction survey that over time has provided employee input about what they perceive as a lack of performance appraisal effectiveness. Some employees feel the current performance appraisal system is not capable of identifying struggling employees. The same small group of employees feel that the current performance appraisal system is inflated. At the same time, it is also described as not having the capacity to recognize the best performers in the organization. There is a stated desire from a small minority of employees for a performance appraisal system that can better differentiate performance outcomes. This is particularly important in an organization with a broad spectrum of health care professionals who range from surgeons to custodial staff, all essential to the hospital’s success. The current performance appraisal system is similar to the traditional academic evaluation system and it has five levels of performance: superior, outstanding, contributing substantively, developing, and needing improvement. The leadership in the hospital insists that a new three-level (3-superior, 2-contributing substantively, and 1-needing improvement) will favorably respond to the employees' viewpoint. This new appraisal system that tracks the assignment of each performance level by employee would limit how many threes would be given every year, thus most people in the organization would fall into the category of proficient. This has led to loud feedback from a majority of employees who feel they are not accurate recognized or valued. In fact, the new performance appraisal has negatively impacted overall employee morale. 

As an HR professional in the organization, you desire the best outcome for your organization and its employees, and are not sure if this three-level system would be best. Your challenge is to select the best course of action among the following options and recommend that action to the leadership team. You can recommend 

1) they retain the current five-level performance appraisal system, 

2) they adopt the three-level system with forced-distribution preferred by the leadership team (3-superior, 2-contributing substantively, and 1-needing improvement).

3) they adopt an alternative appraisal system from any source.