Should 360° feedback be used for personnel and pay decisions as well as for development? (Part 1 of 10)

Here at Talent Innovations our Client Manager, Suraiya, has written a paper challenging the 10 most common best practice topics in 360° feedback. Over the next coming months we will be discussing each topic and would love to hear your thoughts!! For the full paper, download it for free here.

Should 360 feedback be used for personnel and pay decisions as well as for development?

The key debate is two-fold: firstly is 360° feedback suitable for both development and personnel and pay decisions; and secondly if the feedback has been obtained for one purpose can it then be used for the other – the distinction is in the original intended use of the data.

a. Is the 360 approach suitable for development as well as for informing personnel and pay decisions?

Advice by one 360 provider suggests that in order for 360° feedback to be used as part of performance management, there first needs to exist an effective performance management system and culture. This will ensure that input from the 360 process is better understood and best utilised; but how accurate are current performance management processes? A meta-analysis of 50 studies involving a total of 8,341 individuals has shown a merely moderate relationship between objective ratings of performance and individual indicators of performance24. This suggests current processes tend not to be as effective as they could be. There may be many reasons for this, such as rater candour. For example, studies have shown that ratings made for performance appraisal purposes, may be increased if the rater wants a positive influence over reward decisions for the appraisee, or may be decreased if the opposite is desired. Ratings may also be inflated due to a reluctance to highlight development needs, either in the self or others.

“…where this a clear or indeed indirect connection to pay and reward this can have a huge impact on the content, accuracy and emphasis of the feedback and consequently the usefulness of it for the individual.”

Whatever the cause of discrepancy, performance assessment and reward decisions should be based on accurate data gathered using the most appropriate tool/ method. In this light it could be argued that the 360° feedback process was designed for development and, development and assessment are two very different concepts. The distinction between development and assessment lies in what is being measured, competence or results? It could be argued that 360° feedback is better at gathering data related to competence, where it should be results and potential that are rewarded. Furthermore it could be argued that feedback received from 360° ratings make it difficult to make the distinction between individual contribution versus team effort as in the 360 process there is an emphasis on the individual.

An alternative view, which supports the use of 360 for performance development, states that rewarding results without consideration for the methods used to get those results is not sufficient. Managers recognise that results are obtained through working with people and 360 offers a way to ensure results are not gained by compromising on this.

“We know they [managers] can’t achieve them [results] without working through people, so we don’t want them to improve the bottom line and collect bonuses for doing so while discouraging, misusing or burning out the talented people who produced those results. We don’t want them to kill the goose that lays the golden eggs.”

One very different view was presented by a law firm during a round table discussion hosted by one 360 provider. They were clear that they did not want to use 360° feedback to influence pay decisions:

“The business imperative is to win business, and it‟s understood that some of the most successful partners are not very nice in the process. Under no circumstances would we penalise them because they are not very nice and don‟t get on with their teams. We‟ll allow that behaviour because they bring in millions.”

It therefore seems that it may not always be appropriate for certain organisations to base pay decisions on the aspects measured in a 360.

Despite the above, research has shown that 22% of private sector organisations surveyed use 360 to support appraisals. Some feel that 360° feedback is a more accurate way to assess performance. Gaining a broader perspective from multiple raters leads to reduced bias; this may increase trust and engagement in the appraisal process as it is seen as fairer. The open comments element of many 360 tools may also help provide concrete examples of behaviour and impact and thus provide more reliable input into reward decisions. Some simply feel that having already invested in the process, using it for assessment as well as development will increase cost effectiveness.
At Talent Innovations we regularly use the 360° approach for performance management purposes. We strongly believe that the 360° approach provides the rounded approach required to make effective personnel and pay related decisions.

b. Can feedback gained for one purpose, then be used for the other?

Although research recognises the differing focus of 360° feedback for development and 360° feedback for personnel and pay decisions, there is limited advice on using data gathered for one purpose and then using it for the other.
What is published focuses on the ethical issues of participants not being fully aware of how their data will be used. Our thoughts at Talent Innovations however, focus on the fundamentally differing decisions that are required for each type of 360 process. For example if used for development we advise that the focus has complete choice over raters, whereas if being used for personnel decision we suggest at least some management input into rater choice.
If however it is decided that the same feedback data will be used for both there are certain criteria that should be met:

• The intended use of the feedback should be made clear from the onset.
• Feedback from the 360 report should not be used in its raw form. It may be more suitable to use the development plan that results from the 360 process. This will help put all feedback into context.
• The 360° feedback should form part of the performance appraisal and should not be the sole source of feedback.
• The manager feedback must be identifiable.
• The appraiser must be clear in how they should use the 360 data and not depend on anonymous feedback to provide the final performance rating.

Keep an eye out for the next part discussing whether individuals should choose their own raters…….

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