Companies Evaluate Employees From All Perspectives

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 favoured 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 behaviour
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 right 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 analysed 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 rater 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 rule 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 mid-year 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.

By John F. Milliman, Robert A. Zawacki, Brian Schulz, Sally Wiggins and Carol A. Norman,
Personnel Journal, November 1994, Vol. 73, No.11, pp. 99-103.

Task:

Prepare for discussion in class - Lessons learnt from this article.