360 Degree Feedback = Lower Shareholder Return?


Evaluating employees, known in human resource circles as performance management, "is a faith hoping to achieve the status of science." That's one conclusion from an analysis of performance management trends and surveys released this summer by the Human Resource Institute at the University of Tampa.

The analysis also found that:

A flawed performance management system can be worse than none at all. A number of major corporations using forced ranking systems — in which supervisors are required to rank a certain percentage of employees as high, medium and low performers — have been sued by employees who claimed such systems discriminated on the basis of race, age or other protected rights. And a recent study shows that companies using 360-degree feedback are returning less value to stockholders than those that don't.Experts advocate conducting reviews more often than once a year. Conducting only annual reviews allows performance problems to fester too long and fails to encourage the "ongoing performance dialogue and competency improvement experts say is imperative to success."

Those who evaluate others need more training and oversight on how to evaluate properly. Studies show that evaluations, no matter how carefully the forms are designed, are skewed by a host of prejudices and errors. The most common tendency is for managers to rate employees too highly in order to avoid confrontation. Inaccurate evaluations undermine employee trust. "Performance management will always come down to individual evaluations, and raters need reliable evaluation skills for the system as a whole to satisfy the employees and the company."

I think whoever did this research has never had to give a negative evaluation to someone with a bad temper. It takes a special skill.