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360-Degree Feedback Revisited:
September/October 2009, Volume 41, No. 5
By Tracy Maylett, Ed.D
Successfully using 360-degree feedback for both employee development and performance appraisal requires a clear understanding of objectives and possible outcomes.
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The need to measure performance has become critical. The ability to understand and evaluate true performance has been the elusive target of human resources and compensation professionals for decades. Understanding performance levels affects compensation, goal setting, training and development, succession, administrative action and appraisal. Fortunately, numerous tools and methods have been developed to provide input into these levels of performance. Among these, 360-degree feedback has become a common source of input for both development and appraisal purposes.
Despite general acceptance, a great deal of controversy still exists as to whether 360-degree feedback should be used for appraisal, with administrative consequences, or strictly for development. With the recent shifts in the economy, the case for using 360s is again under the microscope. Whether a company currently uses 360-degree feedback, is considering the use of 360s or dismisses this method altogether, understanding how 360-degree feedback can be used in appraisal and compensation is an important tool in the repertoire of any HR or OD professional.
Multirater feedback processes, if not correctly implemented, can be costly to implement, administratively complex and time-consuming. Especially during times of cost cutting, when all expenses are scrutinized, a 360-degree feedback process may be considered by some as a nonessential "nice-to-have" tool. On the other hand, it is even more important today to understand levels of employee performance, and 360-degree feedback is considered by many to be an essential input component in evaluating performance.
Ensuring that an organization's limited human resources generate a return on investment is essential. Equally important in the present-day economy is ensuring that these valuable resources are taken care of and remain actively engaged in their work. For many, 360-degree feedback plays an important investment in the development of employees as well as the evaluation of their performance.
The use of multirater feedback has increased dramatically over the past two decades. Some estimates suggest that as many as 90% of all Fortune 500 firms use some type of multirater feedback with their managers. However, the purpose behind these assessments varies greatly.
Originally used almost exclusively for developmental purposes, using 360-degree feedback for purposes other than employee development increased significantly over the past decade. One application increasing in popularity is the use of multirater feedback for performance appraisal. This, in turn, serves as input into administrative decisions, such as compensation. Opinions are mixed as to whether multirater feedback should also be used for appraisal purposes or used exclusively for development. Where two very opinionated camps once existed on this issue, the lines are beginning to blur.
Whether one agrees with it or not, economic reality has caused an increasing number of organizations to begin using 360-degree feedback for appraisal rather than exclusively for development. This carries with it some significant pros and cons. Multirater feedback can be used for both development and appraisal purposes. There are, however, important differences between the two, and understanding and designing the feedback process to account for these differences could determine whether an organization's formal evaluation processes succeed or fail.
Before determining whether to use multirater feedback for development or for appraisal, it is important to understand the role of feedback within an organization. Feedback is a vital part of performance, growth and development. Understanding oneself and how one interacts with others helps to understand the impact one has on one's surroundings. The perceptions of others within one's circle of influence, whether those perceptions are accurate or inaccurate, determine each employee's level of success. This is where 360-degree feedback comes into the picture.
As many companies saw the advantages that multirater feedback carried within employee development programs, some organizations quickly perceived 360-degree feedback as the panacea for their appraisal woes. Many also found that making administrative decisions based solely on a single manager's opinion in annual performance evaluations may be incomplete. Going back to the old adage, "two heads are better than one," multirater feedback was found to provide a more complete and, hopefully, a more accurate picture of overall performance.
In using multiple sources of information as input into the performance appraisal process, organizations had additional points of data on which to base appraisal and compensation decisions. This also helped to partially squelch some of the legal concerns that arose related to compensation practices, as compensation could be better tied to input from multiple sources.
As cost-constrained organizations began to look for ways to get the biggest bang for their evaluation buck, using 360-degree feedback for both performance appraisal and development seemed to be an attractive solution. The question from many executives soon became, "Why not just combine the two?" However, most managers failed to realize that these two forms of feedback, although similar in design, produce significantly different results.
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