[The following article was first published in _Personnel_Journal_.]
COMPANIES EVALUATE EMPLOYEES FROM ALL PERSPECTIVES
by Jayart Kirksey, et al
The days of traditional supervisor-subordinate performance
evaluations are numbered. Companies are turning to 360-degree
appraisals which pool feedback from both internal and external
customers to receive a broader, more accurate perspective on
employees.
Many supervisors get a little antsy right around performance review
time. In the formal performance appraisal system, there’s no way for
them to know whether an employee is an effective performer in all
interactions–or whether the worker is simply an effective performer
when the boss is around. What to do if a favored employee receives
applause by supervisors but creates an unpleasant buzz among co-workers?
How does a supervisor evaluate an employee he or she sees only a few
hours each week? Traditional performance appraisals at their worst can
be subjective, simplistic and political. Yet the need for accurate, fair
performance measurement has increased exponentially as most
organizations face increasingly flatter structures, greater internal
changes, and more external competitive pressures.
The solution may be provided by 360-degree performance appraisals.
Relatively new, they offer an alternative method by which organizations
can gain more useful performance information about employees-and make
them more accountable to their various customers.
The 360-degree appraisal significantly differs from the traditional
supervisor-subordinate performance evaluation. Rather than having a
single person play judge, a 360-degree appraisal acts more like a jury:
The people who actually deal with the employee each day create a pool of
information and perspectives on which the supervisor may act. This
group of individuals is made up of both internal and external customers.
Internal customers may include supervisors, top management,
subordinates, co-workers, and representatives from other departments who
interact with the ratee. External customers may include clients,
suppliers, consultants and community officials. Anyone who has useful
information on how the employee does the job may be a source in the
appraisal.
Using 360-degree appraisals provides a broader view of the employee’s
performance. The most obvious benefit of the 360-degree appraisal is its
ability to corral a range of customer feedback. Because each customer
offers a new, unique view, it produces a much more complete picture of
an employee’s performance. Karrie Jerman, HR representative at Colorado
Springs, Colorado-based Hamilton Standard Commercial Aircraft, says that
360-degree appraisals are becoming imperative in the lean and mean
’90s, where managers have less credibility with their employees due to
their larger spans of controls. “The thing we gain the most is input
from so many people that know !the employee’s^ work. Now their peers and
customers give feedback,” says Jerman. “They feel it’s more fair.”
Carol A. Norman, customer service specialist at Maynard,
Massachusetts-based Digital Equipment Corp., agrees that 360-degree
appraisals are more fair:
“Unlike with supervisors, employees can’t hide as easily in !360-degree^
appraisals because peers know their behaviors best and insist on giving
more valid ratings.”
For instance, a manager at Denver-based Johnson & Johnson Advanced
Behavioral Technology (JJABT) used a 360-degree appraisal to obtain
information about an employee with supervisory responsibilities from
that employee’s direct reports. The feedback revealed that the direct
reports believed the employee was not listening to them and was also
being overly critical towards them. This allowed the manager to take
corrective action. Prior to the appraisal, she could rely only on
grapevine murmurs and her own limited observations of the employee.
In addition to providing broader perspectives, the 360-degree appraisal
facilitates greater employee self-development. It enables an employee to
compare his or her own perceptions with the perception of others on the
employee’s skills, styles, and performance. And there’s a lot of power
in peer feedback. “You can change behavior more with feedback coming
from your peers,” says Karen Ripley, materials manager at Digital.
“There is often more power there than in managers’ feedback.”
Finally, the 360-degree appraisal provides formalized communication
links between employees and their customers. It makes the employee much
more accountable to his or her various internal and external customers,
because these people now have feedback into the employee’s performance
rating. Employees who previously might have concentrated a great deal on
impressing managers now have a powerful motivation to focus on working
well with all individuals inside and outside their department with whom
they interact.
At Hamilton Standard, the feedback from a number of employees also
helped to clarify job roles and expectations–frequent sources of
disagreement between employees from different functional areas.
Companies can also use feedback from the various raters to create more
customer-oriented goals in the next year.
Companies must resolve a number of issues to use 360-degree appraisals
effectively. The first issue employers must solve in implementing
360-degree appraisals is how many raters should be involved, and, more
importantly, who should do the rating.
As a rule of thumb, companies generally select between five and 10
raters. Why? Less than five raters unnecessarily limits the perspective
on an employee; exceeding 10 raters typically makes the appraisal system
too complex and time consuming.
The most important consideration, however, is to choose the fight
individuals to be raters. One of the first things companies should do is
develop a workable definition of what exactly constitutes a peer, an
internal customer, etc. Potential raters should be identified as all of
those internal and external customers who have significant interactions
with the ratee. At JJABT, which has many teams but still retains
traditional hierarchical reporting relationships, the ratee develops a
list of key internal and external customers that he or she interacts
with and then recommends five to 10 individuals to serve as raters. The
supervisor still has the ultimate responsibility for the appraisal and
ensures that the appropriate raters are selected, thereby preventing the
ratee from stacking the deck with supportive customers who will give
high ratings.
Unlike JJABT, the Digital Equipment Corporation’s and Hamilton
Standard’s Colorado Springs divisions are organized into self-directed
work teams with extremely flat organizational hierarchies. At Digital,
the ratee has the primary responsibility for selecting the raters. The
Digital ratee works with his or her team leader to select a panel
consisting of the coach and three other employees to be objective
advocates for the ratee’s 360-degree appraisal. Raters are then selected
at random from the ratee’s team by a computer-generated system and
notified by E-mail to participate in the appraisal. The random system
ensures that a fair distribution of raters is created.
The most effective 360-degree appraisal elicits feedback from external
clients. However, Digital’s Ripley warns that companies shouldn’t survey
external customers excessively. The client may feel uncomfortable with
the idea, particularly if it’s a new situation. For instance, one
Digital client was even concerned about any potential legal issues
involved if they gave a bad rating. “Remember that ‘reviewing
performance’ is not the customer’s core business,” says Ripley.
“Providing feedback for our employees should not take away from the
!customer’s profitability. You need to make sure this is a mutually
beneficial process.” Be strategic in deciding how much information to
solicit from clients. When possible, companies may use existing customer
satisfaction data or other quantifiable measures of performance in
place of a formal appraisal by the client.
Once a company decides who will do the rating, it must create the
criteria by which the employee will be judged. The criteria or questions
used in 360-degree appraisals should be based on areas with which the
rater is familiar. But organizations should fashion the appraisal to fit
their unique needs. For instance, in Digital’s self-directed teams,
each ratee distributes his or her personal-development and work goals to
the entire team at the beginning of the appraisal year. Thus, all
members of the team have the ability to evaluate each ratee’s goals at
year end.
With the more traditional hierarchy at JJABT, the supervisor is most
aware of the ratee’s individual work tasks and goals. Therefore, the
various raters ideally evaluate the ratee only on the behaviors or work
incidents that they have directly observed.
The JJABT 360-degree appraisal form includes items such as:
Does the employee:
* Follow up on problems, decisions, and requests in a timely fashion
* Clearly communicate his or her needs/expectations
* Share information or help others
* Listen to others
* Establish plans to meet future needs
* Adhere to schedules?
The raters score these items on a scale from 1 (needs improvement) to 5
(outstanding). Space is also provided for the raters to make written
comments. The ratee’s final performance appraisal consists of a
combination of the comments and ratings from the various raters and the
supervisor’s own feedback on the ratee’s performance.
An important consideration involves how many items to include in the
appraisal form. A carefully thought out tradeoff must be made between a
large number of questions, which provides greater validity, and fewer
questions, which require less time. Because each employee is rated by
five to 10 other individuals, the appraisal can entail a major time
commitment. For this reason, a practical guideline is to keep the
appraisal simple by using a one- to two-page form with five to 15
questions taking 10 to 30 minutes to complete.
Effective 360-degree appraisals aren’t knee-jerk judgments–they require
consideration. Once the data is collected from the various raters, it
must be analyzed and summarized for the ratee’s final performance
appraisal. At JJABT the employee’s supervisor is responsible for
summarizing the data and determining the final performance rating, which
generally includes a mean score and distribution range for each item.
Their experience reveals that feedback can’t always be taken at face
value. For instance, care must be exercised when only one rater has
given highly negative or positive feedback. The JJABT managers stress
that the key is to look for trends or patterns in the data. If there are
questions or ambiguity in the raters’ feedback, the supervisor will
often solicit additional feedback from the same or new raters. After
summarizing the data, the supervisor conducts the formal appraisal
interview with the ratee.
At Digital, where self-directed work teams are used, the ratee is
responsible for summarizing the feedback from the various raters. The
ratee automatically throws out the lowest and highest overall ratings to
ensure more objective overall ratings. The ratee then submits a summary
analysis of the remaining ratings to his or her panel of advocates. The
ratee and the panel of advocates then meet jointly to determine the
ratee’s final performance rating and development plan.
Another issue all organizations must face is whether the feedback from
the various raters should be kept anonymous or be identified openly to
the employee being reviewed. Confidentiality can reduce the possibility
that the employee will later confront the raters, and thus encourages
raters to be more open and honest with their feedback. Jay Kirksey, a
member of the leadership team at Hamilton Standard, agrees that it is
difficult to ensure completely honest, open feedback when raters are
identified: “Organizational maturity is needed to give and receive
constructive feedback. Some people had hidden agendas. We found
employees were giving lukewarm and fuzzy feedback because of the fear
about the feedback coming back to them. The motto was ‘Do unto others as
they would do unto you.’”
However, confidentiality has its own baggage: Ratees often try to “hunt
the ghost down” or figure out which rater provided the negative
feedback. It’s also sometimes difficult for the supervisor to give clear
and specific feedback without giving away the identity of the original
source of the feedback.
In an attempt to deal with these issues, JJABT provides raters with the
option of being open or anonymous in their feedback. If the rarer
requests anonymity, then the supervisor must not compromise his or her
identity. However, if the rater is willing to be open, then the
supervisor may refer the ratee with questions about his or her feedback
to the rater.
In keeping with the self-directed team concept, all ratees at Digital
have knowledge of the various raters’ comments and ratings. To help make
this system work, Digital has instituted a role that no rater can give
negative feedback in the appraisal unless the rater has previously given
the feedback directly to the ratee. If a ratee challenges the appraisal
feedback, then he or she must face the entire team about the issue.
Both Hamilton Standard and Digital stress that it takes time to develop
open and effective 360-degree appraisals and suggest that most
organizations should start with confidentiality until sufficient
understanding, maturity and trust is achieved.
Employers must build a bridge over 360-degree appraisals’ potential
pitfalls. Although 360-degree appraisals can be extremely effective,
fair and useful at their best, like any form of performance review, they
have their own potential weaknesses and disadvantages. For one thing,
receiving a performance feedback from a multitude of sources, including
one’s peers, can be intimidating. Hamilton Standard’s Jerman agrees that
360-degree appraisals don’t eliminate the sting of criticism: “Feedback
is still hard to take. It’s not always fun.”
While employees may have trouble receiving feedback, providing feedback
is often troublesome for some. Says Sandy Bermester, staffing and
training manager for financial services at Palo Alto-based Hewlett
Packard: “It’s hard for people to give constructive feedback when they
have to. People have to have the right mindset and skills to do it well.
It takes time to internalize.” For these reasons. it’s important that
the company create a non-threatening atmosphere by emphasizing that the
major purpose of 360-degree appraisals is to facilitate the employee’s
development and performance improvement.
Also, companies that use 360-degree appraisals may find that their
biggest disadvantage is the time involved to select raters, fill out
forms, and analyze the various information. It’s imperative that
organizations strike a balance: appraisals must be intricate enough to
be meaningful, but simple enough to be completed easily. The time
commitment involved is also one reason why many companies conduct formal
appraisals only once a year, although semi-annual appraisals may be
given to low-performing employees. Hamilton Standard does do informal
360-degree appraisals at midyear to allow employees to hear feedback and
make any necessary adjustments in their work or alter their goals.
There’s also the problem of different expectations by the raters. Lynda
Powell, regional director of sales at JJABT, says, “Raters tend to have
different expectations. Some rate very low while others are lenient and
rate very high. For example, one rater wrote in the appraisal that the
employee was a very good planner, but then gave that employee only a 3
on a 5-point scale on planning.”
Finally, 360-degree appraisals, although potentially more accurate, are
still only a means to an end. There will never be a cut-and-dried,
objective, final judgment. Another senior-level manager at JJABT has
several concerns about feedback: “One, does the employee know enough
about the person to rate them’? The people doing the ratings do not
always understand the situation the employee is in. Two, the inputs of
all raters are often treated equally regardless of that raters’ position
or level of knowledge about the person. The feedback is often
summarized overall and is not broken down into different areas to
facilitate follow up.”
Because of these disadvantages and potential employee concerns, it’s
essential that organizations develop an effective plan and change
process to implement 360-degree appraisals.
First, top management needs to buy in to and clearly communicate the
goals of the 360-degree appraisal and how it relates to the company’s
business strategy and competitiveness. Top management should also
appoint a committee of representative managers and employees to develop
the appraisal forms and process.
Second, perhaps the single most important key is to provide training to
employees on:
* The specific details of the new appraisal process and instrument
* How to give constructive feedback in a productive, noncritical
manner. For example, employees at Ford received training on how to
evaluate specific critical incidents and to give feedback before they
took part in 360-degree performance appraisals.
Learning to receive feedback is just as important as giving feedback.
“What we particularly don’t do enough training on is receiving
constructive feedback and having to deal with it,” says Hamilton
Standard’s Jerman. “If we don’t take it well, people stop giving it.
It’s a talent that you develop.”
The appraisal should first be pilot tested with a select group of
employees before it is instituted elsewhere in the organization. Once
instituted, it’s essential that top management reinforce the goals and
responsibilities of employees related to this new appraisal process on
an ongoing basis. Tying the appraisal results to the company’s reward
and recognition systems can also provide added motivation for employees.
An organization must develop an effective change process and orient the
appraisal to its particular needs and culture. It takes time and much
effort, but when implemented properly, a 360-degree performance
appraisal system can enable companies to obtain better performance
information and increase employee development and accountability.
Key Steps to Effectively Implement 360-Degree Appraisals
1. Top management communicates goals and need for the 360 appraisal.
2. A team of employees and managers should participate in the
development of the appraisal criteria and process.
3. Train employees on giving and receiving constructive feedback.
4. Instruct employees on the nature of the 360 appraisal instrument and
process.
5. Pilot test the appraisal first in one part of the company.
6. Continually reinforce the goals of the 360-degree appraisal and be
ready to change the process when needed.
Advantages and Disadvantages of 360-degree Performance Appraisals
ADVANTAGES
1. Provides a more comprehensive view of employee performance.
2. Increases credibility of performance appraisal.
3. Feedback from peers enhances employee self-development.
4. Increases accountability of employees to their customers.
DISADVANTAGES
1. Time consuming and more administratively complex.
2. Extensive giving and receiving feedback can be intimidating to some
employees.
3. Requires training and significant change effort to work effectively.
[About the authors:]
John F. Milliman is an assistant professor of management at the
University of Colorado at Colorado Springs. Robert A. Zawacki is
professor emeritus of management and international business at the
University of Colorado and KPMG Peat Marwick Distinguished Scholar in
Residence. Carol A. Norman is principal systems specialist at Digital
Equipment Corp. in Colorado Springs. Lynda C. Powell is a regional
director of sales for JJABT. Jay Kirksey is director of HR for the Alert
Center in Denver.
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