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Measuring Performance: Appraisals and the 360-Degree Feedback Approach
Principles of Management · Chapter 13: Human Resource ManagementSection 13.10 · lesson 92 of 11713 min · free with a free account
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In this lesson
Appraisals and the 360-degree feedback approach.
- State appraisal's 4 purposes and the conflict between them
- Describe the principal appraisal methods and criteria
- Explain when 360-degree feedback works, and when it fails
- Identify the rater errors and a countermeasure for each
Transcript
Everything said in the video, section by section (1,676 words). Read along, or search it.
Human Resource Management
Measuring Performance
A performance appraisal looks simple. A manager rates a person, and they talk about it. In practice, it's one of the harder measurement problems in management. This section covers how appraisals work, and where they go wrong. We'll start with the four purposes appraisal serves, and the conflict built into them. We'll compare three kinds of criteria, and two ways a criterion can mislead. We'll survey the principal appraisal methods, including three-sixty degree feedback. We'll name the recurring rater errors, and a countermeasure for each. And we'll see a promotion process where honest feedback quietly disappeared.
The Purposes of Appraisal
4 Jobs for One Process
Performance appraisal serves four distinct purposes. The first is administrative. Decisions on pay and promotion rest, at least in part, on appraisal outcomes. The second is developmental. Feedback that helps a person actually improve. The third is documentation. An appraisal creates the record that later decisions may depend on. That includes the termination sequence from Subchapter thirteen point nine. The fourth is communicating expectations. It tells a person clearly what she is actually being measured against. A person who doesn't know the standard can hardly be expected to meet it. Four purposes sounds tidy. The trouble is that two of them pull against each other.
The Central Design Conflict
Pay and Development Rarely Share a Conversation
Here's the central design conflict. The same conversation can't easily serve the administrative and the developmental purpose at once. Look at it from the employee's side. Her rating directly determines her pay. Would she volunteer a genuine development need, in that same conversation? Doing so risks damaging the very rating her pay depends on. So she won't readily disclose it. That's a rational response, not a character flaw. Notice that the reason is structural. It isn't a matter of skillful delivery. A more tactful manager doesn't remove the incentive. So the standard responses separate the two purposes, rather than reconciling them in one exchange. One option separates them in time. A distinct developmental discussion is held apart from the pay-determining review. The other separates them in process, using genuinely different mechanisms for each purpose.
The Criterion Choice
Traits, Behaviors, or Results
Next, what exactly should an appraisal measure? There are three kinds of criteria. Traits describe what a person is. Dependable, say, or proactive. Behaviors describe what a person does. Specific, observable actions. Results describe what a person produces, the measurable outcome of her work. Traits are the weakest ground in any dispute, and the reason is direct. A trait describes the person, rather than the work. That makes it harder to observe consistently, and easier to challenge as subjective, or biased. Results have a different problem. They're contaminated by factors outside the individual's control. This connects to the attribution error from Subchapter ten point seven. A result can look poor for reasons that had nothing to do with the person being evaluated. So neither criterion is automatically safe. That's why the next distinction matters.
Figure 13.10.1
Contamination and Deficiency
Two precise terms describe how a criterion goes wrong. A criterion is contaminated when it captures things outside the person's actual performance. Think of a results measure inflated or depressed by market conditions, resources, or a colleague's contribution. The individual being measured controlled none of those. A criterion is deficient when it misses parts of performance that genuinely matter. Real, valuable contribution simply never gets captured. That's the measurement problem Subchapter eleven point eight raised for reward design generally. Figure thirteen point ten point one pictures both, for an illustrative regional sales manager. Where her measure and her real job overlap sits genuine performance: quota attainment, deal quality, and forecast accuracy. On the contaminated side sit a territory assigned by luck of the draw, and a regional economic downturn. Add the quality of support staff, which is outside her control. On the deficient side sit coaching junior reps, long-term account health, and cross-team collaboration. A pure quota measure captures some genuine performance, pulls in real contamination, and misses areas that matter just as much.
Appraisal Methods
Rating Scales, Records, and Prose
Several appraisal methods are in common use. Let's take four of them first. Graphic rating scales score an employee along a numeric or descriptive scale, for each of several dimensions. Their weakness is the scale points themselves, which are often vaguely defined. What exactly separates a three from a four? Two raters can answer quite differently. Behaviorally anchored rating scales replace those vague points with concrete behavioral examples at each level. What anchoring achieves is direct. Raters share a common, observable reference point, rather than an abstract number. That substantially reduces the inconsistency graphic rating scales invite. The critical incident method keeps an ongoing record of specific, notable instances throughout the period. That record is what defeats the recency problem, which we'll meet shortly. It captures events from the entire period, not just what a rater remembers at review time. Narrative essays describe performance in open prose. They offer rich detail, at the cost of consistency across raters.
Appraisal Methods, Continued
Comparing People, and Agreeing Goals
The remaining methods compare people with each other, or measure them against goals. Ranking orders employees against each other directly. Forced distribution goes further. Ratings must follow a predetermined distribution shape. That holds regardless of the actual spread of performance underneath. Here's the problem it creates. Picture a team where everyone genuinely performed well. The manager must still rate someone poorly. Now picture a team where everyone genuinely struggled. Someone must be rated generously. Either way, the rating satisfies the distribution's shape, not the person's actual performance. Management by objectives takes a different route. It ties appraisal to specific, pre-agreed goals, rather than to a general rating scale. The question shifts from how good someone is, to whether she achieved what was agreed.
360-Degree Feedback
Many Observers, One Crucial Condition
Three-sixty degree feedback gathers input from multiple sources. A manager, peers, direct reports, and sometimes external contacts, such as clients. The logic is that each source can observe something the others cannot. A manager sees strategic judgment, and upward communication. Peers see collaboration, and lateral coordination. Direct reports see how authority is actually exercised, day to day. One crucial condition governs this method. It works for development, and fails as an administrative tool. The reason is that ratings inflate the moment they affect pay. Suppose a peer knows her feedback could influence someone's pay or promotion. The incentive to soften an honest but critical assessment becomes considerable. And the resulting inflation undermines the very honesty the method depends on.
Table 13.10.1
Rater Errors and Their Countermeasures
Several errors recur across raters and appraisal methods alike. Each has an available countermeasure. Table thirteen point ten point one sets out eight of them. Here are the first four. Leniency rates everyone more favorably than performance actually warrants. Nearly every rating clusters at the top of the scale. Severity is its mirror. Everyone is rated more harshly than warranted, and ratings cluster at the bottom. Both are countered by calibration sessions, which compare ratings across raters. Central tendency clusters every rating near the middle, regardless of actual variation. It avoids the very differentiation the scale was meant to capture. The countermeasure is frame-of-reference training, emphasizing genuine differentiation. Halo lets one strongly positive trait color the rating of unrelated dimensions. One strong dimension appears to lift every other score. The fix is to rate one dimension at a time across all employees, not one employee across all dimensions.
Table 13.10.1, Continued
Rater Errors and Their Countermeasures
Here are the remaining four. Horns is the mirror of halo. One strongly negative trait colors everything else. A single weak dimension appears to drag down every unrelated score. The countermeasure is the same. Rate one dimension at a time, across all employees. Recency overweights recent events, relative to the full period under review. Comments and scores emphasize only the last few weeks. The fix is a running critical-incident record. Similar-to-me rates people who resemble the rater more favorably. It's countered by frame-of-reference training, and structured criteria. Contrast rates a person against whoever was evaluated just before her, instead of a fixed standard. So her rating shifts sharply depending on who came first. The fix is independent scoring against a fixed standard, not against other employees. One more error recurs as well: attribution error, from Subchapter ten point seven. It over-attributes a shortfall to the person's own character, rather than to her surrounding situation.
Countermeasures
Training, Calibration, and a Year-Round Record
Two countermeasures came up repeatedly. Here's how they work. Frame-of-reference training teaches raters to apply a shared, common standard consistently. Typically, raters practice on sample cases, then compare their results against an expert-agreed benchmark. Calibration brings raters together to compare and reconcile their ratings before they're finalized. It surfaces exactly the leniency, severity, and inconsistency patterns we've just named. So how well do they work? Measurably, but not completely. They reduce several of these errors, particularly leniency, severity, and halo. But they don't eliminate rater error entirely. Their effect depends considerably on rigorous implementation. A brief, token exercise won't deliver it. The last fix concerns timing. Document across the year, not only at review time. That addresses the undocumented year from Subchapter thirteen point nine. An appraisal built from memory at a single point is vulnerable to recency error. It also offers little support if a later decision, including a termination, is ever challenged. An ongoing record, kept as the year unfolds, is both a better appraisal, and a more defensible one.
Case Vignette
Harborline's 360-Degree Feedback Turns Uniformly Positive
Here's a composite case, constructed for instruction. Harborline Manufacturing introduced three-sixty degree feedback as part of its formal promotion process. It gathered input from peers and direct reports, alongside the usual manager assessment. The purpose was specific: to inform which candidates would advance. Within two review cycles, the feedback had become almost uniformly positive, across nearly every candidate. Yet colleagues openly discussed real differences in performance and working relationships, in informal settings. Those differences never appeared in their formal submissions. That's exactly what the crucial condition predicts. Once peers and direct reports understood their feedback could influence a promotion, caution replaced honest assessment. No one wanted her own critical feedback to be the reason a colleague didn't advance. That colleague might become a future peer, or even a future manager. The tool had crossed the administrative-developmental boundary. Its usefulness inflated away almost at once. Next, Subchapter thirteen point eleven turns to compensation, and how organizations structure and administer pay.
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