‘360 degree feedback’ not effective method

Bizning Vakil By Bizning Vakil, 24th Jun 2012 | Follow this author | RSS Feed | Short URL http://nut.bz/d9c_jzl-/
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The statement: “‘360 degree feedback’ method of performance appraisal is not effective in identifying the pay level for employees” is discussed. To give wider ground for this discussion, this essay has been structured to first give an interpretation of the statement followed by the current knowledge in the area. Then comes literature review followed by conclusions and recommendations.


This report forms itself around the argumentative discussions of reward strategy of the organizations. In particular, the report takes a specific statement per instructions of the task and argues, from several perspectives, in its explorative study. The statement goes as “‘360 degree feedback’ method of performance appraisal is not effective in identifying the pay level for employees.” To give wider ground for this discussion, this paper has been structured to first give an interpretation of the statement followed by the current knowledge in the area. Then comes literature review followed by conclusions and recommendations.

Statement Interpretation

Even from medieval times, motivation and rewarding has always been the key concept in developing efficiency in implementing the task at hand (Oberhauser et al. 2000). In today’s extremely competitive and employee-oriented business environment, motivation and rewarding is pronounced with even more emphasis. Hence, organizations strive to work out the ways to motivate and reward employees and, consequently, have given a rise to several methods of performance appraisal. One such method is ‘360 degree feedback.’ The statement around which this paper is going to build its argumentations claims that this method of performance appraisal is not effective in identifying the pay level for employees. The closeness of this statement to the reality of HR practices shall be discussed throughout this paper. To this end, first descriptive explanations of the issues dominating in this field will be presented.

Performance Appraisal

In essence, the performance appraisal is the process of obtaining, analyzing, and recording information about the relative worth of an employee (BusinessDictionary, 2011). In simplest form, it is a performance review. This review lets managers and employees communicate among themselves – sharing ideas, opinions, and information.

Traditionally, however, performance appraisals (reviews) placed managers into the position of uncomfortable judges “ostensibly telling employees how their work either fit the bill – or didn’t” (Toolpack Consulting, 2010). Since the overall objective of such reviews is targeted at growth and development, several new types of performance appraisals have evolved to better meet that objective. Common examples are Peer Reviews, Self-Reviews, Upward Assessments, and 360 Degree Feedback.

Briefly, a peer review is a designed criteria-based performance evaluation system, often designed by a task force of three to six workers (Training and Development, June 1992). Self Review is a process where the employees rate themselves on a number of criteria, usually with a formal survey form. According to Meyer (1991), self-review changes the role of the manager to counselor, rather than judge – a role from which the manager can do more to support people. Involving the employee as an equal in the review process is, as Meyer (1991) claims, more likely to increase commitment to action plans. Upward assessment, on the other hand, is the reverse appearance of traditional performance appraisal, broadly speaking. Upward assessments are used in a large number of organizations, running from Honda and Chrysler to Motorola and NASA (Toolpack Consulting, 2010). Finally, 360 Degree Feedback, which calls for separate attention, since it is this performance appraisal that the paper bases its foundations.

‘360 degree feedback’

As mentioned, the traditional performance appraisal involves the bosses assessing their staff. Yet the people who actually work with the employee – peers, subordinates, suppliers and customers – can often provide far more accurate and useful insights into that employee’s strengths, weaknesses and the scope for development. The data and their analyses from these stakeholders are vital for the organizations. Therefore, the organizations tap into tap into these vital sources of information through the application of 360 degree feedback (Parag, 2002).

360 Degree Feedback method of performance appraisal was originally developed by NASA to evaluate their space programmes. In his pioneering book, consultant Peter Ward who introduced this technique into Tesco, argued that this method so far is one of the best tools that brings forward the desired results (cited in Parag, 2002).

In essence, 360 degree feedback is “The systematic collection and feedback of performance data on an individual or group, derived from a number of the stakeholders in their performance” (ibid, p. 11). Hence, the data collection is systematic, which implies that it is done in some systematic way via questionnaires or interviews. Unlike traditional methods, this method thus formalizes the people’s (the working staff) judgments coming from the natural interactions they have with each other.

Specifically, there are two processes within the 360 degree feedback method, namely, a collection process and a feedback process (ibid). Indeed, both processes are vitally important. Otherwise, merely reviewing, assessing, or appraising alone does not bring any benefit nor promise any results. In fact, to quote Robert Bacal (1991), “If all you do is appraisal – if you don’t do planning and have ongoing communication, collect data, and diagnose problems, you are wasting your time” (A briefcase Book, p.34).

Thus, first, data, which are the responses of the stakeholders, are gathered. Afterwards, the data are analyzed and fed back to the individual participant in a clear way, which is designed to promote the individual participant towards the development. Specifically, that development covers the process of understanding, acceptance, and, ultimately, changed behavior.

The data come from stakeholders, as mentioned. By stakeholder, it is referred to the individual who is both affected by the participant’s (the person being rated) performance and deal with the participant closely enough to be able to answer specific questions about the way the participant interact with them.

Specifically, the stakeholders are:
• Bosses
• Team members
• Customers
• Staff
• Self
• Peers

Indeed, this method of performance appraisal is extremely useful and, lately, has gained dramatically high level of popularity. According to Carruthers (2003), 90 percent of the Fortune 500 companies in 2002 used 360 degree feedback.

The major benefits of this method, generally speaking, involve the two categories of the organization staff (Linman Terri, (2011). These are:
• Employee: The employee (who is being rated) gets a wide-ranging point of view about how he/she is perceived by those around him/her. Thus, 360 degree feedback proves strengths and identifies weaknesses in the employee’s performance and allows the employee to highlight areas of development.
• Co-workers and managers: The environment is favorable for better team work and there is openness for improved communication between members within the organization. The team members are receptive to company goals when they are involved in the development process.

While 360 degree feedback may be favorable, being used by a rising number of organizations throughout the world, it does fail to bring forward the promises when this method is used in identifying the pay level of the employees. Indeed, this is the central argument to the formation of this paper.


While 360 degree feedback method of performance appraisal is an effective tool, it does carry along with itself certain disadvantages when it is used to determine the pay level of employees. When such is the case, namely, the 360 degree feedback is merged with the compensation decisions, the employees will begin to doubt the advantages of this method. Generally, when employees perceive that the people around them are deciding their financial rewards and promotional opportunities, mistrust may set in (Linman 2011).

Indeed, in their extensive research work evolved around literature review, Clark and Whittall (2003) determine the factors that lead either to success or failure in the organizations that apply 360 degree feedback methods and those factors leading to failure, exclusively, include the “Feedback tied to merit pay or promotions.” This clearly declares the support for the statement that 360 degree feedback is not an effective tool in identifying the pay level for employees.

Further support can be generated from the personal experience of the author of this paper. Indeed, if the 360 degree feedback is linked to some monetary reward or reward of other nature, employees may act opportunistically. Two years previously, at Wisconsin Dells Resort, at the end of employment in summer among the Work and Travel program participants, 45 employees were asked to evaluate each other to determine the Best Lifeguard, Best Supervisor, Best Hard-worker, and few other ‘best’ positions. Because the outcome would result in reward of some souvenirs, Uzbek students who were 28 out of those 45 conducted their evaluation on the mutual agreement among themselves and prematurely determined who would get what position. Consequently, of the ten ‘best’ positions, nine were awarded to Uzbek students. While the nature of this incident owes itself more to entertainment, it does give an argumentative explanation to show the drawbacks of 360 degree feedback when it is linked to reward system.

The other case, which is specifically relevant to this discussion gives a better illustration. Accordingly, in the Nelson Inc. versus Stephen Dyn (1997) (, the employee suffered several layers of financial, psychological, and other problems due to the rating system of his performance being unfairly judged by his co-workers on a discrimination basis. He finally brought a lawsuit claiming compensation. The fundamental explanation behind his lawsuit was that the organization had employed ‘All round feedback’ (which is the equivalent version of 360 degree feedback) and, based on that, either promoted or de-promoted the employees.

Conclusions and recommendations

In recognition of the highly effective benefits of 360 degree feedback method of performance appraisal and, simultaneously, in recognition of its major and dangerous drawbacks when it is tied to merit pay or promotions, the following conclusions have been drawn.

• Organizations need better tools to investigate, explore, analyze, and make recommendations within the context of their employees and therefore, must use effective performance appraisal tools to better analyze the weaknesses and better promote and reward the strengths.
• 360 degree feedback is one of the highly effective tools when it is properly applied in the organization environment where organizational climate fosters individual growth and criticisms are seen as opportunities for improvement (Randel, 2004).
• The organization may suffer greatly if the 360 degree feedback method is linked to the reward system in promoting the employee performance.

Hence, based on these conclusions and the discussions that have brought them out, the following recommendations are proposed. The organizations should use 360 degree feedback to:
• To identify the skills, competencies, behaviors, and practices needed to successfully achieve the goals, outcomes, and the results
• To measure the proficiencies in skills, competencies, behaviors, and practices
• To assess where improvement is needed to achieve desired results
• To create targeted development plans that increase capabilities and performance
• To assess what environment will bring out the best results from individual and teams

So long as the 360 degree feedback method of performance appraisal is not tied to merit pay and promotion, this method proves itself as highly effective tool for the organizations. As the final concluding statement, the statement that brought the formation of this paper is repeated with emphasis. Hence, “‘360 degree feedback’ method of performance appraisal is not effective in identifying the pay level for employees.”


• BusinessDictionary, (2011), Definition of Performance Appraisal, Available from: http://www.businessdictionary.com/definition/performance-appraisal.html
• Carruthers, F. (2003, November 14). Nothing but the truth. Australian Financial Review, p. 78
• Clark, S. and Whittall, A, (2003), Performance management develops productivity. Winnipeg Sun, 2003 August 17, Available from: http://web.lexis-nexis.com/universe/document
• Linman Terri, (2011), 360-degree Feedback: Weighing the Pros and Cons, Available from: http://edweb.sdsu.edu/people/ARossett/pie/Interventions/360_1.htm
• Meyer Herbert, (1991), A solution to the performance appraisal Feedback Enigma, Academy of Management Executive, Vol. 5, N1.
• Oberhauser Christina, Miguel Egea, Steve Gilbert, and Armando Lopez, (2000), Motivation Theory, ENG. 801, Project #1 Available from: http://userwww.sfsu.edu/~gtarakji/engr801/wordoc/motivation.html
• Parag M, (2002), 360 Degree Feedback, A Management Tool, HR Folks
• Training and Development, (2010), Available from: http://traininganddevelopment.naukrihub.com/
• Toolpack Consulting, (2010), Performance, Available from: http://www.toolpack.com/performance.html


360 Degree Feedback, Performance Appraisal

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author avatar Bizning Vakil
An economist by definition, a teacher by practice, a journalist by nature, I find it hard to find any one permanent place to settle down...

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