KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT

Term Paper on

360 Degree Performance Appraisal

Submitted To:Ms. Sabina Baniya

Employee Performance Management

Submitted By:Anisha Adhikari

(15301)

Table of ContentsIntroduction:....................................................................................................................3

Objectives of 360 Degree Appraisal:...............................................................................3

Components of 360 Degree Appraisal:............................................................................5

Advantages and Disadvantages of 360 Degree Appraisal:..............................................8

Literature Review:...........................................................................................................9

Application of 360° Appraisal in Organizations:..........................................................11

Recommendations:........................................................................................................13

References..........................................................................................................................16

Introduction:

Typically, performance appraisal has been limited to a feedback process between

employees and supervisors. However, with the increased focus on teamwork, employee

development, and customer service, the emphasis has shifted to employee feedback from the full

circle of sources. (360 Degree Assessment: An Overview, 1997) This method of generating

employee feedback and appraising an employee using feedback collected from a number of

sources is termed as 360 degree performance appraisal. The sources of information regarding

employee performance include supervisors, peers, subordinates, customers and the employees

themselves.

The traditional approach of evaluation of employees by single supervisors was more

prone to biases because there were no other ratings and evaluations to verify whether the

evaluation was correctly done. The inclusion of the ratings from different persons who are

acquainted with the performance of the employee allows the validation of the evaluation from

the supervisors. Because of these characteristics, 360 degree performance appraisal is becoming

popular among companies today. It is almost universally used by fortune 500 companies. Some

of the large companies using this form of performance appraisal include AT&T, Mass Mutual

Insurance, Bank of America, Digital Tenneco, Amoco, Exxon, General Electric, TRW,

Caterpillar, GTE, Syntex, and Chrysler. (Antonioni, 1996)

Objectives of 360 Degree Appraisal:

Similar to that of other performance appraisal methods, 360 degree appraisal is aimed at

identifying the performance level of the employees, their strengths and weaknesses and behavior

at workplace from the point of view of different stakeholders. The information obtained through

this type of appraisal is used to make different decisions regarding the employee’s development

and training, promotions, rewards and punishments. Basically, 360 degree appraisal allows the

management to get wholesome views of an employee’s performance which will help them

determine further career path of the employee. Generally, 360 degree appraisals are used for

developmental purposes rather than assigning rewards and punishments. (Ghimire)

Though 360 degree appraisals are used for a number of purposes, they work better for

some reasons than others. The major reasons for which organizations should use 360 degree

appraisal system are listed below:

- 360 degree appraisal can be used by employees to develop their own understanding of

their strengths, weaknesses and performance level. This increases the self awareness of

the employees and can have positive impact on their self efficacy.

- As 360 degree appraisal gives the snapshot of how others perceive an employee, s/he can

use that information to identify the areas that need to be worked on. This will encourage

self development of the employees.

- It increases effectiveness of the organization by identifying the competencies and skills

associated with the job performance which can be used to formulate strategies that align

with organization’s goals and objectives.

- Another reason for the use of 360 degree appraisal/ feedback is that it increases mutual

trust in the organization, especially when it is used for developmental purposes only, not

hiring and firing.

- Based on the results of the 360-degree assessment, leaders often will collaborate with

their supervisors to define expectations, develop goals and set up accountability systems.

- Most importantly, the reason that organizations should use 360 feedback because it is the

first step towards initiating individual and organizational change by identifying

weaknesses and areas requiring improvement. (Mashihi, 2015)

Components of 360 Degree Appraisal:

A number of people are involved in giving feedback to an employee under 360 degree

appraisal system. The major participants/ sources of 360 degree appraisal, their roles in the

feedback giving process and possible biases are given below:

- Evaluation by Supervisors:

The supervisors of the employee have the opportunity to directly observe the

performance of the employee. So, they have been the main source of information of

employee performance and feedback even under traditional appraisal system. Supervisors are

also involved in planning and maintenance of performance due to which they have step by

step knowledge of performance of employees and the areas where they are strong and weak

in. This makes them the first source of information.

But there are some issues that might rise while a supervisor rates an employee. If the

rating done by supervisor is not cross verified, there are chances of rating being inflated or

deflated depending upon their relationship with the employee. Also, sometimes one

supervisor may have many employees working under him/her or in a different location,

which result in the supervisor not being able to observe the employee properly, rendering

rating ineffective.

- Self Appraisal:

Self appraisal is another component of 360 degree appraisal where employees rate

themselves on their performances. The self appraisal also includes the information regarding

what the employees feel they did best and what areas can be improved upon, as well as the

environment that they worked in. The employees are asked to rate their performance and

provide instances of critical and non critical situations that they handled so that the

information of performance provided can be verifiable.

The problem that arises in self appraisal is that employees normally rate themselves

higher than the ratings of supervisors and peers due to self centered biases. (Ghimire) In

order to prevent this, the self ratings should be accompanied by explanations and instances of

actual behavior and performance.

- Peer Evaluation:

Ratings by the colleagues of the employees are another component of 360 degree

appraisal. The peer evaluation is increasingly becoming important as the organizations are

now focusing on team work without any supervisor directly observing the tasks. Also, with

increasingly flatter organization structure, there are more employees at the same level who

can assess each others’ performance better than supervisors.

There are both significant contributions and serious drawbacks that must be carefully

considered before including this type of feedback in a multifaceted appraisal program. Peer

ratings are remarkably valid and reliable in rating behaviors and “manner of performance,”

but may be limited in rating outcomes that often require the perspective of the supervisor.

(360 Degree Assessment: An Overview, 1997)

- Appraisal by Subordinates:

Though not generally used, appraisal by subordinates can also be a component of 360

degree performance appraisal. This is done in cases where the employees’ performance is

directly related to guiding, supervising and motivating the subordinates.

Though this method is effective in assessing the managerial performance of

employees, there might be fear or reluctance in part of subordinates to rate their supervisors.

In contrast, if the supervisor does not have good relationship with subordinates, there might

be biases in the ratings.

Another issue with appraisal by subordinates is that supervisors may not accept it as

they feel it as a threat to their ego. Although supervisors may feel threatened and recognize

that their authority has been undermined when they must take into consideration that their

subordinates will be formally evaluating them, research suggests that supervisors who are

more responsive to their subordinates, based on the feedback they receive, are more effective

managers. (360 Degree Assessment: An Overview, 1997) Anonymous and objective ratings

and rater trainings can remove the drawback of this kind of feedback.

- Feedback from Customers:

Another component of 360 degree feedback is the feedback from external

stakeholders, generally customers. As businesses exist to serve the customers, the feedback

from customers gives a realistic view of how successfully the employees are performing

from customer’s perspective.

The problem of implementing this feedback mechanism is that, the customers are the

recipient of holistic package of goods and services offered by an organization. In such case,

the feedback of the customers is more useful in assessing the performance of a team or the

organization itself rather than the individual employee. But, in certain cases, like hospitality,

customer feedback can also be used to assess individual employees.

Hence, the components of 360 degree appraisal include feedback from internal and

external sources and can be used to form a well rounded perspective of an employee’s

performance. In order to do so effectively, the drawback of each feedback sources should be

well addressed.

Advantages and Disadvantages of 360 Degree Appraisal:

360 degree appraisal, when used properly has a number of advantages. The major

advantage of 360 degree appraisal is that it provides a holistic perspective of an employee’s

performance. By the inclusion of a number of sources who are either the observant or recipient

of the performance of the employees, this method ensures a reliable and valid assessment of an

employee’s efforts, behaviors, accomplishments as well as strengths and weaknesses. This helps

to remove the biasness caused by linear ratings and allows the assessment of developmental

needs of the employees which will ensure that appropriate trainings and developmental activities

are carried out to enhance employee’s performance in the future.

The major disadvantage or drawback of 360 degree appraisal is that it requires a lot of

time and effort. Also, problems might arise in determining the realistic performance of the

employee in cases when the ratings in similar performance areas by different raters vary

significantly. In some cases, while considering the ratings from various sources, the raters might

not be capable to understand the rating criteria and assess employee. This kind of situation can

arise especially when customers are asked to rate employees. Another disadvantage of 360

degree appraisal is that, if it is used for rewards, punishments and promotional purposes, it might

lead to decline in trust among employees and foster office politics. So, these factors should be

considered properly before applying 360 degree appraisal in the organizations.

Literature Review:

In general, 360 degree performance appraisal system is considered effective as it

incorporates different perspectives on performance of an employee. But, there are some

conflicting views regarding the method as well. A number of research papers and articles have

been published regarding the validity and reliability of 360 degree appraisal, its perception by

people at different levels of organizations and so on.

A paper published in Harvard Business Review titled ‘Getting 360° Feedback Right’ by

Maury A. Peiperl identifies the paradoxes related to peer appraisals that managers need to

understand in order to make 360° appraisal effective. The paradoxes identified are: paradox of

roles, paradox of group performance, paradox of measurement and paradox of rewards. Paradox

of roles means that a person cannot be both a peer and a judge because employees do not want to

strain their relationship with colleagues and thus give high ratings. Paradox of group

performance means that as 360 degree appraisal measures individual performance, it brings

mistrust among closely knit groups and negatively affects group performance. Paradox of

measurement means that the most useful and applicable ratings of performance are difficult to

implement and vice versa. Paradox of rewards means that when rewards are involved in peer

appraisal, the ratings start getting distorted. The writer presents these paradoxes so as to enable

the managers to understand the dynamics of peer appraisal and also suggests ways to improve

peer appraisal: publicly value peer appraisal so that employees see value in it, become a

counselor and attempt to make employees understand the assessments they received through

discussion, provide training on giving and receiving feedback, paying attention to and

publicizing results brought about through feedback system and letting employees know when

they are not doing peer feedback well. (Peiperl, 2001) This article has analyzed the peer

appraisal and its issues well and has suggested ways to address it which might be useful for

managers. But, peer appraisal is just a part of 360° appraisals and though the title suggests

developing effective 360° appraisals, the article fails to address other components. Research

study has found that one of the other ways to make 360 degree appraisal more effective is to use

it in combination with systematic coaching and regular feedback. (Luthans & Peterson, 2004)

There have also been articles regarding the usage of 360 degree performance appraisal in

increasing the competitive advantage of an organization. ‘360-degree Feedback as a Competitive

Advantage’ by Manuel London and Richard W. Beatty highlights how organizations can use 360

degree feedback to increase their competitive advantage. The article advocates the

developmental usage of appraisal as a means to enhance organizational competency. Also, it

highlights that 360 degree feedback brings in customer perspective and improves communication

which allows the companies to have better understanding of customers and hence formulate

strategies accordingly. (London & Beatty, 1993) Upon analyzing this, we can infer that 360

degree appraisal does not, in itself, enhance competitiveness but provides the information to do

so.

The importance and advantages of 360 degree appraisal have been highlighted by many

articles. But, an article published in Forbes magazine opposes the notion and states 360 degree as

idiotic. The article, written by Liz Ryan, based on her personal experience states that the

secretive and confidential nature of 360 degree appraisal creates more mistrust among employees

at workplace. She instead suggests creating an environment of trust in the organization so that

when something goes wrong the managers are notified immediately instead of waiting for yearly

appraisal. (Ryan, 2015) This article, though represents an opposing view on 360 degree

appraisal, completely ignores its benefits. Though the case of increasing mistrust due to 360

degree appraisal can arise in organizations, the severity of it might not be so high especially

when used for developmental purposes only.

Application of 360° Appraisal in Organizations:

Many organizations in Nepal, when asked about their performance appraisal system,

claim to implement 360 degree appraisal system. But, upon closer analysis, it is revealed that the

performance appraisal in most organizations, though done by more than one people is a mere

formality. One such example is that of Nepal Telecom.

Nepal Telecom only partially employs 360 degree appraisal system. The performance

appraisal is done annually for permanent staff and quarterly for contract staff. The appraisal

process first begins with the self appraisal. The employees are given a form to fill up information

regarding how well they think they have done, what are their problems and so on. Then the

immediate supervisor or manager is asked to rate the employee. After that, the self ratings and

supervisor’s ratings are sent to the regional head who again rates the employee. The ratings from

these sources are then combined and final rating is given to the employees.

Upon interview with a NTC staff, it was found that there is very high degree of

dissatisfaction among employees regarding the performance appraisal system. The first reason is

that though the ratings determine the promotional chances, the process is not at all scientific and

not backed by performance. Ratings are given based on the location where the employee works

where employees working in rural areas receive higher ratings that those working in

comparatively urban areas. The employees also feel that ratings depend upon closeness with

managers and supervisors rather than actual performance.

Another major problem in the performance appraisal of NTC is that the appraisal is not

tied with rewards and development activities. The ratings of the employees are all kept secret and

they do not know what happens to the appraisal form once they fill up their form and send it.

There are no incentives to people who work well due to which they slowly slack off which is

resulting in the decline in performance level of the employees.

Analyzing the performance appraisal of NTC in terms of 360 degree appraisal, it can be

observed that the company does not have a well rounded feedback mechanism. The only sources

of information regarding employee performance are employees themselves, supervisors and

regional head. The regional head is geographically away from the actual workplace of the

employee and does not have first hand information regarding employee performance. So, they

base their rating of supervisors rating and randomly rate employees without much thought.

Because of this, the performance appraisal does not accurately measure performance of the

employees and there are a lot of improvements that can be done in this process by NTC.

In international scenario, there are a lot of companies that have successfully implemented

360 degrees appraisal system. One such example is that of Starbucks. The performance appraisal

of Starbucks consists of two stages: measurement of job performance and sharing of feedback to

the employees. The performance is measured through customer comment card where customers

give their feedback on both employees and services. This form is very objective and induces

honest performance assessment as customers do not have the incentive to give good ratings just

to please the employees. Bonuses are given to employees on the basis of these ratings. The

appraisal at Starbucks also includes managers and employees rating each other based on which

company provides feedback, training and reward to the workers. The rating is given by both

supervisor and subordinates to one another. This system works at Starbucks because each booth

is a small unit with only nine members who have more like a family relationship and do not mind

giving and receiving feedback. (Starbucks performance Appraisal, 2016)

Upon comparing the appraisal of these two companies, the 360 degree appraisal at

Starbucks is successful because it is using it for the development and reward of the employees

and is based on performance, unlike that of NTC. Also, Starbucks has been able to create a good

relationship between employees due to which they are not hesitant to give and receive feedback.

In conclusion, the performance based culture, small work unit and good relationship between

workers, performance based rewards and development and objective feedback forms has led to

successful 360 degrees appraisal in Starbucks as compared to NTC.

Recommendations:

In order to make performance appraisal more effective, Nepal Telecom can employ 360

degree appraisal by using information from as many sources as possible. To do that, there should

be an objective appraisal system in place so that biases in ratings are reduced. The rewards,

promotions and training and development of the employees should be based on appraisal so that

the employees see value in the process and participate more seriously in it. Further

recommendations to establish an effective 360 degree appraisal as given by (Ghimire) are listed

below:

- Supervisors need training on how to conduct performance appraisals. They should

be capable of coaching and developing employees as well as planning and evaluating their

performance. Self-ratings should focus on the appraisal of performance elements.

- Peer evaluations are almost always appropriate for developmental purposes, but

attempting to emphasize them for pay, promotion, or job retention purposes (i.e., the rating of

record) may not be prudent. Peer input can be effectively used for recognition and awards.

- There is a difference of opinion about the need for anonymity of the peer

evaluators. Generally, it is advised that the identities of the raters be kept confidential to assure

honest feedback.

- It is essential that the peer evaluators be very familiar with the team member’s

tasks and responsibilities.

- Employees and their representatives need to be involved in every aspect of the

design of appraisal systems that involve peer ratings.

- The need for anonymity is essential when using subordinate ratings as a source of

performance feedback data. Subordinates simply will not participate, or they will give gratuitous,

dishonest feedback, if they fear reprisal from their supervisors. If there are fewer than four

subordinates in the rating pool for a particular manager, the ratings (even though they are

averaged) should not be given to the supervisor.

- Only subordinates with a sufficient length of assignment under the manager (at

least 1 year is the most common standard) should be included in the pool of assessors.

Subordinates currently involved in a disciplinary action or a formal performance improvement

period should be excluded from the rating group.

- Organizations currently undergoing downsizing and/or reorganization should

carefully balance the benefits of subordinate appraisals against the likelihood of fueling an

already tense situation with distrust and paranoia.

- With few exceptions, customers should not be asked to assess an individual

employee’s performance. The value of customer service feedback is most appropriate for

evaluating team or organizational output and outcomes. This feedback can then be used as part of

the appraisal for each member of the team. The possible exceptions are evaluations of senior

officials directly accountable for customer satisfaction and evaluations of individual employees

in key “front line” jobs personally serving internal or external customers.

Hence, organizations can implement an effective 360 degree performance appraisal

system by implementing the above mentioned ways.

References(1997). 360 Degree Assessment: An Overview. In Performance Management

Practitioner Series. United States Office of Personnel Management.

Antonioni, D. (1996). Designing an Effective 360-Degree Appraisal Feedback Process. Organizational Dynamics , 24-38.

Ghimire, R. B. (n.d.). 360-Degree Performance Appraisal: An Overview.

London, M., & Beatty, R. W. (1993). 360-Degree Feedback as a Competitive Advantage. Human Resource Management, Vol. 32 .

Luthans, F., & Peterson, S. J. (2004). 360-degree Feedback With Systematic Coaching: Empirical Study Suggests Winning Combination. Wiley Periodicals .

Mashihi, S. (2015, March 30). 7 Reasons to Use 360-Degree Feedback. Retrieved June 6, 2016, from Envisia Learning: http://blog.envisialearning.com/7-reasons-to-use-360-degree-feedback/

Peiperl, M. A. (2001). Getting 360 Degree Feedback Right. Harvard Business Review .

Ryan, L. (2015, April 17). 360 Degree Feedback is Idiotic. Retrieved June 5, 2016, from Forbes: http://www.forbes.com/sites/lizryan/2015/04/17/360-degree-feedback-is-idiotic/2/#793b8f87642e

Starbucks performance Appraisal. (2016). Retrieved from Everything you need to know about Starbucks coffee HRM: https://makegoodcoffee.wordpress.com/starbucks-performance-appraisal/

http://blog.envisialearning.com/7-reasons-to-use-360-degree-feedback/

http://www.openlearningworld.com/books/360%20Degree%20WBT/The%20Concept%20of%20360%20Degree%20Feedback/Objectives%20of%20360%20Degree%20Feedback.html