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The 360-degree review: A good idea?

May 18, 2009

Fancy having your performance judged by your boss, your colleagues and your subordinates? Or do you believe no one has the right to appraise you except your immediate boss?

That’s what the 360-degree review is about. How much you earn and how high you can be promoted to depends not just on what your boss thinks of you. It also depends on what your peers and your subordinates (if you have any) think of you. If you routinely deal with customers and suppliers, then their opinions would count too.

Similarly your boss’s standing will depend on what you say about him as well as what his peers and other subordinates think of him.

Sounds like a dream doesn’t it. Appraisals becoming a two-way street. Some justice at last. After all, your boss is just one person. What about those other people in the company that you take work from and pass work to. If they screw up, you screw up so its only fair that you get to say something about them too.

So would it surprise you to hear something like this?

“Watson Wyatt’s 2001 HCI report revealed that companies using 360-degree feedback have lower market value. According to the study, companies that use peer review have a market value that is 4.9 percent lower than similarly situated companies that don’t use peer review. Likewise, companies that allow employees to evaluate their managers are valued 5.7 percent lower than similar firms that don’t.

Taken together, these practices are associated with a 10.6 percent decline in shareholder value.

Source

Shocking?

You betcha, and here’s how companies get screwed doing the 360-degree review.

What used to be a simple appraisal process suddenly turns into a monster, involving more people, more man days to crunch the numbers, all of which translates to high cost. In a fast moving company, its like having a plane deploy a parachute in mid flight. Things slow down suddenly, cost goes up and productivity drops by as much as 10%.

Secondly, not everyone is on the same page when it comes to knowing how to rate someone or interpreting the results. My standard of good may be your definition of bad. Worse still, perspectives can be based on fads and practices impossible to apply rather than sound financial practices. Statistically the margin of error in peer review feedback can be so big it renders the results meaningless.

Thirdly, after all the effort, companies don’t see any payback. Nothing ever changes no matter what the results say, and the broken expectations set aloft by the 360-degree review can actually do more harm than good to productivity. Employees can turn cynical.

I should tell you that in the West, the 360-degree review is often a year-long process done for developmental reasons whereas in Asia, I’ve seen companies use it as a once-a-year performance appraisal tool. So the drag experienced by companies in the West is far greater.

Anyway, know what I think?

Personally, whether as a year-long or once-a-year ritual, I think the 360-degree thing is doable for small companies. That means 30 people or less. If the company is large, the data becomes suspect for social reasons. People clique up into factions. Some will get personal. You’ll find that it takes more time & effort to convince everyone to use the same yardstick than you expected. Eventually the question will pop up – is the effort worth the return?

In smaller companies, it is faster to take measurements. Its far less costly. And making followup changes is easier because the impact tends to be more immediately felt.

Another reason to cheer for smaller companies. 🙂

(Provided the management there believes in professional people management of course.)

So back to the question. How do you feel about having your salary and future in the company decided by your boss plus 10 others. People who don’t know you very well?

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4 Comments leave one →
  1. May 18, 2009 11:06 am

    well , if i am in a company that practices 360 ..
    that means i have to kiss ass to 20 other people

    if it is by my immediate boss , hmm..that is only one ..sounds good to me

    I think 360 is unfair , a “happening” or maybe an extrovert , or maybe a hot chick will more likely be loved by more people ..since everyone judge people by the outside these days

    A popular dude like yourself wouldn’t have much of a problem getting support from everyone now, would you? There’s probably more people wanting to kiss yr ass than the opposite, hehe. 😀

  2. May 18, 2009 12:38 pm

    360 degree ass-kissing… hahahaha. gapnap, you’re right. We’ll all be having bruised lips by the end of the 1st month and very thick lips by Christmas.

    Oooh, yucks. 🙂

  3. May 18, 2009 4:38 pm

    I’m a great believer for 360. I proposed this for my small team of 10 people. We were planning to champion this and maybe introduce it to the rest of the APAC office. My team manager was very glad and he agreed with me. Talked to HR about it, she was skeptical but told us to try.

    But it didn’t work. My manager left before I got time to lay out the plan…and soon after he left, I was sent to UK. LOL.

    Well, all I can say is, based on my research, 360 is only applicable for small companies where people trust each other and colleagues are like ur good friends/family members. If you have bad feelings against one another, 360 will fail. And if you have people who love to backstab and play office politics…then it’s never gonna work. Imagine if the company has 10 people, 2 newcomers, 1 boss, 1 manager and 6 seniors who dislike newcomers. 😛

    There was a case in San Francisco some years back when a CEO received an anonymous staff review that said, “You are a son of a bitch.” He stopped the 360 review immediately. So yeah, “backchannels” can blow a hole in peer reviews that aim to be objective. Still, with enough work put in to ensure impartiality and focus, it could still work. The question is less of whether it is good and more to whether the cost outweighs the benefits.

  4. May 19, 2009 8:49 am

    Engineer’s point of view: “I don’t care how great it looks. If it doesn’t work toss it out”.

    Sometimes effective people who are great assets to the company get 360deg shitted because they make everybody else look bad. That’s the biggest drawback I can think of.

    Yeah, Alvin calls that “spoiling the market.” 😀

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