The power of peer feedback

THE HUMAN FACTOR

Some chief executives swear by this "dream" performance evaluation method and think it's the ultimate showpiece of corporate democracy. The 360 degree appraisal, made popular by General Motors in the 1990s, has indeed found many takers in corporations around the world.

According to a Hewitt survey, 82 per cent of the top notch performers use this, versus just 50 per cent of the poor performing ones.

But if the enthusiasm is showing signs of abating by quite a few degrees of late, there are valid reasons for it. "It's a good theory. Sadly, it suffers from bad execution," says a management consultant.

Let's look at the plusses first. Rather than having the immediate boss play god at the time of annual performance evaluation, the 360 degree system acts more like a jury by pooling feedback from both internal as well as external sources to receive a broader perspective on employees.

The internal sources include the immediate boss, the top management, subordinates, peers, and even people from other departments who interact with the candidate on a regular basis. The external sources could consist of clients, suppliers, consultants "" in short, anyone who can give useful information on how the employee does his job.

A compelling argument in favour of the 360 degree appraisal is that an employee who might have previously concentrated only on impressing his immediate boss now has a powerful motivation to focus on working well with all individuals inside and outside his department.

An accountant in HSBC India, for example, was rated a top performer by his managers year after year and got hefty increments. At an informal get-together, the chief executive officer (CEO) happened to have a casual conversation with his juniors.

What the CEO heard left him stumped: the accountant's juniors felt their boss only looks in the mirror when a good job gets done and passes the buck whenever there is a crisis. HSBC soon realised it was dangerous to have such a "brilliant isolationist" as the head of a department. "The 360 degree method is only a formal way of knowing what the CEO found out in casual conversation," says a consultant.

HR managers say the 360 degree method also enables an employee to experience the power of peer feedback and compare his own perception about his performance with the perception of others.

The minuses of the system, however, are many. For example, the problem with the power of peer feedback is that it can often be intimidating "" a view being increasingly shared by many HR chiefs. Here's why.

First, consider the logistics. To make it meaningful, about 10 to 15 people have to be identified to evaluate a single manager. Evaluators include at least two bosses, two peers, two subordinates and two customers, and are selected either by the HR department or the immediate boss in consultation with the candidate being rated. The HR department then averages and summarises the ratings.

The process does not end here; in fact, it's just the beginning. The summary is then shared with the manager concerned, without disclosing the identity of the raters. The manager in turn submits a self-appraisal after which a detailed discussion takes place between him and his immediate boss. Finally, the HR department issues the final rating.

The sheer paperwork or the huge number of e-mails involved can be daunting and simply unworkable. Sometimes people dread being selected as evaluators because it means being bombarded with appraisal forms. "At any given point of time, there may be a dozen forms waiting to be completed in an evaluator's inbox, and each one takes about 45 minutes," says a consultant.

The result: a routinised, brain-dead way of filling out forms. There is more. Though confidentiality is maintained about the raters, people soon devise ways to find out who said what about him.

This gives rise to unintended consequences: employees are either spending time getting even or playing safe by giving positive feedback in all the appraisal forms they have to sign. As a result, the 360 degree system often degenerates into popularity contests.

No wonder, a Watson Wyatt human capital index study of 405 companies found that the 360 degree feedback programme does not add to a company's economic value and, in fact, is associated with a decrease in market value.

"The finding may be somewhat counter-intuitive, and while there is nothing inherently wrong with employee feedback programmes, the problem lies in the implementation of what may be a very good idea on paper," the study notes.

The lesson: if you have an atmosphere of absolute trust in your company and the monetary muscle to recruit the required number of qualified people who can pay special attention to appropriate execution, go ahead.

If you have any doubts on this score, it's better to stick to the conventional way of employee appraisal. They may be what some say "one-way streets", but they would save you the bother of grappling with one of the biggest fears people have: a group of anonymous people determining their increments and promotions.