“360 degree feedback’ method of performance appraisal is not effective in identifying the pay level for employees”.

1. Introduction
Evidently, the increasing competition in the business sphere reflects in the necessity if
implementation of the measures for increasing the effectiveness and efficiency of the
operation of any company, despite of the industry or a country chosen for exploration. While
there are lots of new innovations and increasing usage of already existed techniques for
increasing productivity concerning non-human operations, the human related performance is
also a subject of great attention from both owners and managers of the business. Increasing
productivity of the personnel is closely tied with the performance appraisal management
practiced in an organization. Managers and academic researches in the field of human
resource management tests and share their experience about the variety of the techniques and
methods they use, also trying to combine the existing elements of this “puzzle” to create the
more efficient HR system that would motivate personnel to increase their productivity and
quality of their work to a maximum extent. But they also try to eliminate and reject the
approaches that would not be reflected in the increased output, thus, the approval or rejection
of the statement that 360 degree feedback is not effective in the determination of the level of
payment, which is the purpose of this assignment, will deal to a certain extend with the range
of the issues related to the human resource management, from performance evaluating and
compensation to rewarding strategy. Therefore, this assignment will be prolific for application
of the theories and knowledge gained during the study of HRM module, and gaining the
further experience in searching academic sources for proving the one or another statement
related to HR management. However, it should be mentioned that this paper is limited to
mainly two areas: one is the analysis of the 360 degree feedback from different sides; the
other is the examination of the factors that contribute to the level of pay, separate from the
suggested 360 degree appraisal.
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2. Methods and process of research
Firstly, all the lectures and tutorials, as well as the books of Armstrong & Murlis (2000) and
Storey (2000) were once reexamined in order to restore the consistent memory about the main
concepts in the fields that coursework would deal with. Then, one of the statements, namely
“360 degree feedback method of performance appraisal is not effective in identifying the pay
level for employees”, was selected for further critical evaluation. The evaluations were mainly
based on the critical assessment of the arguments both for and against this statement that were
found in the academic papers using both JSTOR and Emerald databases, however the
evidences found on the internet were also used for building this paper. After the critical
examination of the variety of sources it was found that the statement is true, however, there
are some reservations and stipulations. However, it should be mentioned that many of the
publication were rejected since they were not related to the topic or could not be utilized for
approving or rejecting the proposed statement. Then, the other elements and causes that
contribute to the final level of pay were analyzed and presented in the paper.
The analysis of 360 degree feedback as the factor for the level of pay
The description of 360 degree feedback
Linman (2005) describes the 360 Degree feedback as a method, or feedback system that takes
the feedback from the range of the sources, supervisors, associates, colleagues and
subordinates in addition to a self-assessment and frequently the review by both internal and
external customers. Lewis also adds (2011) that the implementation of the 360 degree
feedback is based on the premise that the usual methods of personnel evaluation by the single
evaluator, who is also usually the immediate supervisor of the employee, do not provide with
the full and comprehensive information, that can often be retrieved from co-workers,
subordinates or customers. Marchese and McGowan (1995) describe reinforcing the trust in a
customer-driven approach to success, empowering the employees by making their opinion
valuable, increasing the career and development orientation, and providing more
comprehensive view of their performance as main particular advantages of 360 degree
feedback.
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3. Necessary factors for successful implementation
Vinson (1996) states that 360 degree assessment can be offered as a remedy for the majority
of the organization, since the majority of employees are dissatisfied with the performance
appraisal system of their organization. However, some of the features the environment in an
organization should posses to make the introduction of this approach successful. Morgan et al.
(2005) discusses the necessary conditions for the success of implementing 360 degree
feedback methods, and note that the environment itself is one of the most crucial moments.
Obviously, the climate in the company should promote the individual growth and career
development, therefore Vinson (1996) suggests that criticisms should be regarded in uch a
company or organization as a chance for improvement by the employees. So, McCalulet and
Moxley (2004) assert that 360 degree feedback is very effective in such area as providing
managers with the comparison their “self-views with the views of others, thus encouraging
them to adjust their self-views with others views”, therefore motivating a manager to “re-
esteem” his or her behavior and its impact on others, while Nilsen and Campbell (1999) notes
self-observer rating discrepancies suggest they can provide a very useful information. Morgan
(2005) also emphasizes that the feedback should be management and be provided in a proper,
confidential manner, and of course has to be discussed with and commented by the
employees. In addition, all the employees participating in the feedback process should be
trained, or at least be aware of the purposes and the frame of implementing 360 degree
feedback, as Bracken et. al. (2001) asserts. Rosti Jr and Shipper (1998) emphasize the
necessity of support activities after the feedback provided; asserting that training and
coaching activities as result of the 360 degree evaluation are is probably the most crucial and
momentous factor for its implementing. Thought, O'Reilly (1994) asserts that sometimes it is
hard for a manager to accept the results of the 360-feedback assessment. However, he notes
that if the participant desires for his or her further development, the recipients of feedback
should discuss the results with the feedback-providers, and concrete remedies for the
shortcomings revealed should be chosen, together with Vinson’s suggestions that 360 degree
feedback can be effective only when it is accompanies and followed by the future efforts for
the development of the performance. To add, Ward (1995) suggest that 360 degree should not
mainly focus only on the employees' weaknesses or needs, feedback should be collected with
an emphasis on proper implementation and on follow-up action, confidentiality is necessary
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4. for honest ratings, the purpose of feedback should be communicated to all the employees
involved, and only then the evaluation of the organization’s training and development needs
should be done.
360 degree feedback as a determiner of the pay level
The research and examination of the large variety of the academic researches and sources has
obviously demonstrated that 360 degree feedback is considered to be very ineffective when it
is used as a determinate and reason for the change in the level of pay, promotion or
terminations.
For example, Smither (2005), making the comprehensive reflection on the findings of the
main researches in the area of performance appraisal and 360 degree feedback, asserts that the
utilization of 360 degree feedback for remuneration purposes is particularly harmful for an
organization. To add, Vinson (1996) also notices that performance improvement can be less
obvious while comparing with any other type of feedback and performance appraisal. The
same is proved by Edwans and Ewen (1996), who was appraising 360 degree feedback for its
usefulness for developmental purposes, and stated as the result that using this method for pay
and performance decision making could produce “invalid results”. Bernardin et al. (1993)
note that despite of its usefulness for increasing the completeness of performance appraisal
system, in addition to the necessity for the future outlining the development and training
programs, there are the considerable problems with the linkage of the 360 degree feedback to
the compensatory system, 360 degree feedback is a good opportunity to make performance
appraisal system more comprehensive. The same conclusion is suggested by Coates (2000),
however he notes that 360 degree feedback can be effectively utilized only if there are
anonymity of the raters, even when implemented for developmental purposes, as it was also
suggested by many researches, and the preparedness of organization for 360 degree process in
terms of culture of feedback giving/receiving and the disconnection of developmental
feedback from personnel and compensation decisions.
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5. The limitations of 360 degree appraisal
Besides inability of the proper utilization of 360 degree feedback as the starting point for
merit pay or promotions, there are also some limitations that this method of performance
appraisal possesses, as the range of the research papers revealed. For example Pfau and Kay
(2002) make a thorough research on the topic of the drawbacks of 360 degree performance
appraisal method and conclude that the implementation of 360 degree feedback is certainly
associated with the decrease of the shareholder value, which was approved by the data
provided. They also state the following: “there is no data showing that 360 degree feedback
actually improves productivity, increases retention, decreases grievances, or is superior to
forced ranking and standard performance appraisal systems, it sounds good, but there is no
proof it works”. Bracken et al (2001) make the same suggestions; additionally showing that
this methods and the process of providing/receiving the feedback is actually worsening the
climate in the organization, especially when 360 degree approach affects the evaluation of the
level of pay and promotional decisions, or focusing only on the negative aspects of employees
performance to be estimated, as Baron and Morin (2010) adds. Bracken et al (2001) also adds
that the process of design and development of the 360 feedback process can be confusing for
the HR staff, with all the data entry and manipulating process difficulties, while outsourcing
can be costly and the risk of the exposure of internal problems to the competitors. It is also
worth mentioning that sometimes it is hard to link the result of the feedback process with the
strategic aims of the company, in addition to the reward strategy and pay structure and
incentive plan (Maylett and Riboldi, 2007; Bracken and Timmreck, 2001). The bottom line
was done by Marchese and McGowan (1995), who lists the wide range of the limitation of
360 degree, concluding that 360 degree systems require more accurate design and
implementation than other approaches to the performance appraisal; it is usually more time
and cost consuming and often leads to bias (namely recency, halo effect, fraudulent
misrepresentation; by McGarvey and Smith, 1999) in their responses when using it as an
assessment for pay and promotion decisions, in addition to the fact that sometimes the results
are hard to interpret and make the suggestion even in the field of trainings and development.
Therefore, it can be concluded that 360 degree feedback cannot replace the performance
management system, since it can be used only as the aspect of the receiving and providing the
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6. feedback, so the frame of the usage of this method sometimes should be limited only to the
facilitation of the development and trainings needs.
Other factors influencing the pay level
Thus, since it was decisively established that 360 degree feedback method of performance
appraisal is a very inappropriate and ineffective for setting the right pay level for different
employees, other factors that mainly contribute to this level will be further discussed, which
are, to be more specific, rewards strategy, performance appraisal system, job evaluation
process and pay structure, as Armstrong and Murlis (2000) suggest.
Druker and White (1997) and Chapman and Kelliher (2011), explain the total rewards
strategy as the number of guidelines and requirements to the compensation and reward
programs of an organization, so they enable the company to effectively manage the people
resources, in order to attract, retain and motivate employees. Reward strategy is closely set
with performance appraisal, as Azzone and Palermo (2011) says, therefore, with the results of
the measure of performance and evaluation thought the performance appraisal. One of the
main and widely used approaches for rewarding is objective measure of performance, which
is usually can be easily quantified (such as, for instance, the level of profit, or sales), as Storey
(2000) suggests, but management by objectives and subjective measure can also determinate
the level of rewards, he adds. Armstrong and Murlis (2000) says that the main approach that
is used for determining the pay rates through using the surveys, benchmarking broad-banding,
skill/competence based payment, labor market research, and other methods is a job
evaluation, so this is the main determinant for the level of pay, in addition to the pay structure
system and incentives plans proposed by the company.
Conclusion and recommendations
The process of research helped in understanding the concepts of performance appraisal, the
current knowledge that academic world has accumulated in this field, and in the broader area
of human resource management.
To sum up, the statement that 360 degree feedback is not effective in determining the level of
was successfully proved using the number of different sources.
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7. It was also found that this methods posses large amount of the drawbacks, such as high
complexity and difficulties with evaluation, implementation and interpretation, as well as the
high costs. Therefore it is recommended to use the tradition methods for evaluating and
proposing the level of pay for the employees. However, 360 degree method can be used as a
tool for identifying the need of the employees in training programs, and also for the increase
of the source of performance appraisal. However, the recommendations, which were proposed
previously, should be taken into account in the process of utilizing this method.
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8. Bibliography
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Harvey, E., 1994. Turning performance appraisals upside down. Human Resource
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http://edweb.sdsu.edu/people/ARossett/pie/Interventions/360_1.htm [Accessed 9 April 2011].
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9. Romano C., 2003. Fear of feedback. Management Review, December 2003, pp.38-41
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10. Romano C., 2003. Fear of feedback. Management Review, December 2003, pp.38-41
Rosti Jr R., and Shipper F., 1998. A study of the impact of training in a management
development program based on 360 feedback, Journal of Managerial Psychology, Vol. 13 Iss:
1/2, pp.77 - 89
Storey J., 2000.Human Resource Management. Thomson Learning
Vinson M., 1996. The pros and cons of 360-degree feedback: Making it work. Training and
development, April 1996, pp.11-12
Ward P., 1995. A 360-degree turn for the better. People Management 1:3, February, 1995, pp.
20-22
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