Using 360° Feedback to Predict Performance

Training & Development, Sep 2007 by Maylett, Tracy, Riboldi, Juan

What past performance can tell us about the future.

Organizations place increasing emphasis on measuring results-from financial success to management effectiveness and return-on-investment-in training and development. While most companies have become adept at defining financial and operational success, many find that the "softer" side of performance is often the hardest to quantify, yet it remains critical to success.

Where past measurement typically focused on what was accomplished, an increasing number of organizations today incorporate elements of how things are accomplished into their individual and company performance assessments. Feedback tools, such as 360-degree feedback and employee engagement assessments, have gained popularity in evaluating individual behaviors and overall levels of engagement-the "soft" side of performance that is not typically included in a company's profit and loss statement. While most organizations use feedback mechanisms, few take the time to connect these measurements to organizational performance.

Conflicting information

Many organizations struggle to link nonfinancial metrics with results. We conducted a three-year study with several hundred employees in various industries that analyzed the results of performance evaluations, production performance, and 360-degree feedback. Surprisingly, this study showed no correlation between 360-degree feedback scores and performance evaluations. Employees scoring high on their performance evaluations were not necessarily those who scored high on their feedback.

Some of these employees with poor feedback scores were hitting their production and financial targets. This resulted in managers receiving good performance evaluation ratings, along with accompanying raises and promotions. However, these managers' departments also experienced high levels of employee turnover and had difficulty attracting and retaining talent. It soon became clear that these managers were meeting short-term targets at the expense of long-term profitability. They were pulling out all the stops to achieve these short-term revenue targets.

Although these managers were rated as excellent performers, they and their departments were often found to be the origination points for a number of employee-related grievances the organizations were experiencing. Soon it was realized that these top-down appraisals only took into account the ratings of the supervisor. These ratings depended on the manager hitting or missing monthly revenue or production targets.

However, the managers' true overall performance went largely unmeasured. Through this process, it was discovered that many of these so-called "stellar performers" were not so stellar after all.

360-degree feedback

Feedback has been used for decades as a measurement of past performance and behaviors. However, it wasn't until the mid-1980s that extensive use of 360-degree feedback became common for identifying strengths and development needs that might not be exposed in traditional performance evaluations.

Similar to the 360 degrees of a circle, with the participant figuratively at the center of that circle, feedback is gathered from those most familiar with that participant's performance: supervisors, peers, and direct reports. Proponents of 360-degree feedback are quick to point out that gathering feedback from multiple stakeholders provides a clearer perspective of the impact an individual's behavior has on others. Conversely, opponents claim that peer ratings may not be objective or accurate. Despite the debate, it is estimated that as many as 90 percent of Fortune 500 companies use some form of 360-degree feedback for either employee evaluation or development.

Similarly, it was discovered that understanding levels of employee engagement would help an organization better understand its culture, satisfaction, well-being, and effectiveness. Many organizations today use employee surveys as a way to gauge and identify elements of organizational culture. These engagement surveys typically measure employee satisfaction, motivation, and effectiveness. However, as with 360-degree feedback, most organizations make littie attempt at relating these results to their bottom lines.

Predictor of success

CHG Healthcare Services is one of the oldest and largest healthcare staffing firms in the United States. Founded in 1979, CHG provides both temporary and permanent placement of physicians, nurses, and allied health professionals. Located in Salt Lake City, CHG has consistently been named one of Utah's most-admired companies.

"We have been gathering information on our financial and service performance since day one," says Michael Weinholtz, CHG president and CEO. "But we knew that overall business success is an outcome of more than just operational performance. We are a business that is based on people. Our ability to attract, motivate, manage, and retain talented employees is key to the company's bottom line, and we knew that we needed a way to measure those factors."