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

1. The statement that was chosen for the critical evaluation is the following:
“360 degree feedback’ method of performance appraisal is not effective in identifying the
pay level for employees”.
This analysis will be revolved around this statement and concern an array of the
theoretical and practical concepts in the different fields. This question is evidently divided onto
two main components: the first is the evaluation and study of 360 degree feedback method as
performance appraisal approach, its main features, benefits, scopes and limitations of its
application in addition to the comparison with other performance appraisal approaches , as well
as its applicability as the effective measure to determine the pay level for employees, the
second part is concerned with the evaluation and setting a certain level of payment, apart from
360 degree feedback. Hence, the first part should evidently comprise the close examination of
the 360 degree feedback method itself with its comparison against other methods of
performance appraisal and matching it with the complete area of performance appraisal
management. In the second part the factors that identify the pay level for employees, including
reward management, incentive compensations and pay structure will be explored in order to
further exploration of how they can be linked with 360 degree feedback. Finally, the way of
how the results of performance appraisal under 360 degree feedbacks can affect the level of pay
will be discussed and recommendations for the proper usage and utilization of 360 degree
feedback method will be suggested to achieve the better performance of employees in an
organization.
WebFinance (2011) defines 360 degree feedback as the performance evaluation method, using
the data from 'all around', including the “subordinates, supervisors, and sometimes, from
internal and external customers”. Harris (2000) further describes it as the method which is
mainly focused on determining the necessity in trainings and development programs, hence
mainly not for evaluating the level of reward or pay, which is the first sign for the approve of
the suggested statement.
Although, in order to understand the advantages that 360 degree feedback methods gives
as a performance appraisal method in determinations the pay level of employees, it should
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2. compared with other approaches to employees’ appraisal. Smith and Goddard (2002) says that
there are basically 3 types of the performance measuring; the results oriented, when the
performance of workers is done on the ground of their measurable results, behaviour oriented,
when workers' attitudes and behaviour are evaluated, such as, for example, good attendance,
and trait based, when the personal characteristics of a worker are measured. Although, Ilgen
and Favero (1985) assert that trait based performance measure cannot be regarded as reliable
because of the large exposure to bias. As DeNisi and Kluger (2000) say, 360 degree feedback is
regarded as one of the behaviour based methods; however, it is partially influenced by the
results. Ilgen and Favero (1985) also suggest that the main emphasis should be done on the
result and behaviour based approaches to the performance appraisal. Ittner, Larcker and Rajan
(1997) say that the most widely used methods of results and behaviours evaluation are
objective and subjective measures of performance and management by objectives. However,
Beehr et al. (2001) suggest that 360 degree feedback is also an increasingly popular method for
performance appraisal.
So, 360 degree feedback can be used for the range of the purposes, and regarded as one
of the main methods of performance appraisal. Consequently, as this fact is proved, the analysis
of pros and cons of designing, implementing and utilizing 360 degree feedback as a
performance appraisal method in a company for different purposes should be discussed, in
order to get to the focal question of this paper. The range of long-term trends in business
organizations, such as focus on both appraising management skills to leadership skills, going
from dependency to self-responsible approach in career planning, and the gradual moving from
traditional hierarchy and structure and increase of promoting feedback-seeking environment
make the multi-rater feedback system more and more necessary, Jones and Bearley (1997)
suggest, and proposing 360 degree as a necessary tool for these purposes, they add. Also,
Buman and Rice (1999) suggest that 360 degree feedback provides an array of the advantages,
while comparing with other types of performance appraisal, such as diversification of the
sources of rating and thus more comprehensive analysis of employees’ performance. Nowack
(1992) also says that implementation of 360-degreee feedback and increase the career
orientation of the personnel in a company, influencing their awareness about their deficiencies
and areas for improvements. To add, Ludeman (2001) argues the special necessity of 360
degree feedback for senior-level executives, because they do not obtain the adequate level of
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3. feedback from both peers and subordinates. Calling this problem as a “feedback void”, he
asserts that this results in less effective senior management because of their “blindness”,
therefore, influencing the performance of both high and middle-level executives. Besides, an
array of the academic researches, including Bracken (1994), London and Beatty (1993), assert
that 360-degreee feedback approach is a very effective tool for evaluating training and
development needs of the workers. London and Beatty (1993) suggest that, apart from well-
known benefits of implementing 360 degree assessment, it is also regarded to be a good
additional step for gaining competitive advantage, since there are the obvious suggestions that
it will “provide a product or service perceived by its customers as adding value and doing so in
a way that is unique and difficult for a competitor to readily duplicate”. However, it should be
noted that customer satisfaction survey is emphasized in their research. They also note that
competitive advantage is mainly gained from personnel improvement, since 360 degree
assessment involves the amelioration of two-way communication, as well as increased both
formal and informal communication, building effective work relationship and increasing
employees’ involvement, in addition to proving the respect for employee opinions of others by
the employers and managers.
But, Gebelein (2005) asserts that 360 degree measurement implementation will support
the goals of an organization, only if these goals and strategies are clarified to the employees,
the scope, the frame of work and planning, as well as instruments for the process of evaluation
are preliminarily designed and communicated to the raters. To add, Nowack (1992) shows that
managers often tend ot have self-rating significantly higher than the rating of others, and this
inflated self-view may impede the development as managers because they may not recognize
the need for improvement, he also notes with the examples that the managers, who prefer “old-
fashioned” style of leading the company, can sabotage the implementation of the programs.
Hollenbeck and Sorcher (1993) also discuss the drawbacks of 360 degree feedback, which are
reliance on generalized traits, restricted frame of reference for ratings, memory basing and
therefore “recency” subjected , often incomplete description of past performance, the inability
of observers to interpret behaviours and reliance on the instrument’s designed for interpretation
of data, and concludes that this methods exposed to almost all the types of bias errors, including
leniency/severity errors, central tendency errors and halo errors in the considerable part of the
cases. Besides, Bracket (1994) discuses all the step of implementations of this method, such as
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4. design, alignment of the culture to the feedback oriented, collection of the data and its
interpretation and concludes that there is an array of crucial disadvantages of this method such
as complexity of implementation, necessity for altering climate and culture in organizations, in
addition to the cost and time consumption.
So, it was revealed that, despite of the limitations and drawbacks in some of the cases,
360 degree feedback and appraisal proposes an array of the particular advantages while
comparing it with other types of evaluation, however, the main question of this work is
evaluating the effectiveness of this method as a main determiner and determinant for the level
of pay. Hence, the widest array of the sources, both academic and the reflections of the
practical experiences were studied to answer this question. Consequently, some of the sources
and academic papers were chosen to present arguments for both and against effectiveness of
using 360 degree appraisal for the identified level of remuneration.
Bracken, for example, (1994) asserts that properly implemented 360 degree feedback
can be successfully utilized for making the decision regarding the pay promotions, since it
provides with valid information about the entire employees' performance. However, he notes
that this should be done under control of experienced raters and evaluators, and should include
anonymity, together with feedback positive-oriented and self-development oriented culture in a
company. In addition, Buman and Rice (1999) state that that 360 degree feedback can be
successfully used for the purposes of setting remuneration only in the companies with a suitable
culture, namely flat and not hierarchical.
But, Antonioni (2006) asserts that the effective implementation of 360 degree feedback
should not include using it for setting the level of payments purposes in any case, since it can
produce the negative reactions from the participants and drastically reduce the performance and
teamwork. Carey, after analyzing the usage of 360 degree feedback in an array of the
companies, including At&T and Xerox, also suggest (1995) that it should be confidential and
should not be the “primary determinant of salary promotions… or termination”. Jones and
Bearle (1997) differ the traditional methods for performance appraisal and 360 degree
feedback, the first ones are used “in retrospect” in order to assess what employees have done,
whilst the second one is used for “development evaluates how the employees do their jobs”,
and concludes that the main purpose of 360 degree and other multi-rated feedbacks is “to
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5. inform and motivate feedback recipients to engage in self-directed action-planning for
improvement... It is the feedback process, not the measurement process, which generates the
real payoffs”.
Of course, the level of pay is determined according to the range of the factors, and if it is
proved that 360 degree appraisal is not an effective approach to determine the level of
compensation for the employee, other factors should be considered to make the suggestions in
this field. Armstrong and Murlis (2000) suggest that the level of compensation is determined by
an array of the factors, such as job description, job analysis and job evaluation. Heathfield
(2010a) determines the job description as the "duties, responsibilities... contributions and
outcomes needed from a position..." that are written in the special statement. Heathfield
(2010b) notes that the job description is determined by the job analysis, which obtains and
analyse the information about "duties, responsibilities, necessary skills, outcomes, and work
environment of a particular job". As Armstrong and Murlis says, only after the analysis and
close examination of a job description, analysis and evaluation is done, in addition to collecting
of salary and market data and other salary surveys, the final decision about the level of pay
should be made. But, the great portion of the final payments are determined by the reward
strategy of a company, which is comprehensively defined by Gomez-Mejia and Balkin (1992)
as “deliberate utilisation of the pay system as an essential integrating mechanism through
which the efforts of various subunits and individuals are directed toward the achievement of an
organisations strategic objectives, subject to internal and external constraints”. So, the reward
strategy is an important determinate for the level of pay, and Smith and Goddard (2002) also
assert the close link between the appraisal system and the reward strategy. But, as it was
previously proved, other types and approaches to performance appraisal should be used for
determining the level of pay, including mainly objective measures of performance and
management by objectives.
In conclusion, after the analysis of the wide array of the academic sources, in addition to the
analysis of the evidences proposed by the practitioners, it was found that 360 degree cannot be
used as the main determinant for the level of pay in an organization, as it is effective tool. It
was also found that implementation of 360 degree assessment for determining the level of
remuneration, or the decision over the promotion and dismissal, can largely increase the bias in
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6. the result, and adversely affect the environment in the organization where this measure is used.
It also has some other limitations, such as high costs and complexity, in addition to the
drawbacks that were discussed previously. However, 360 degree appraisal methods was proved
to be very effective in determining the needs and areas of improvement in the field of
development and training, it is also a good opportunity for employees to maintain their career
orientation, and for employers to create an effective, feedback – seeking climate, with the
employees eager to develop further.
Therefore, it is highly recommended not to use 360 degree feedback as the determiner for the
level of pay because of the range of the reason, arguments about the negative effects of this
implementation. But, it is worth mentioning that the implementation of this method for not
related to the level of pay purposes can be used in the conjunction with other methods to create
the highly effective performance appraisal system in an organization. It is also highly
recommended to implement 360 degree appraisal in the organizations lacking the effectiveness
of developmental and training programs, since they are the main areas for implementation of
this methods.
To sum up, the assignment and the followed research was very helpful for further
understanding the main features of 360 degree feedback, as well as for comprehending the
concepts related to the performance appraisal, reward strategy and management, and other
human resource management related areas.
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7. BIBLIOGRAPHY
Armstrong, M., and Murlis, H., 2000. Human Resource Management., 6th
Revised ed, Kogan
Page Ltd.
Beehr, T.A., Ivanitskaya, L., Hansen, C.P., Erofeev., D., Evaluation of 360 Degree Feedback
Ratings: Relationships with Each Other and with Performance and Selection Predictors,
Journal of Organizational Behavior Vol. 22, No. 7 (Nov., 2001), pp. 775-788
Antonioni, D., 1996. Designing an effective appraisal feedback process. Organizational
Dynamics, April, pp 24-38
Bracken, D.W., 1994. Straight talk about multi-rater feedback. Training and Development,
September. pp 44-51
Buman, M., and Rice, B., 1999. The rating game. Across the Bords 31:2, Feb, pp.35-38
Carey, R., Coming around to 360-degree feedback. Performance, March 1995, pp. 56-60
DeNisi, A.S., and Kluger, A.N., 2005. Feedback Effectiveness: Can 360-Degree Appraisals Be
Improved? The Academy of Management Executive (1993-2005). Vol. 14, No. 1, Themes:
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Gebelein, S.,2005. Employee development: Multi-rater feedback goes strategic. HRFocus,
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Gomez-Mejia, L. and Balkin, D. 1992. The Determinants of Faculty Pay: An Agency Theory
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Harris, M., 2000. "360-degree Feedback", Leadership & Organization Development Journal,
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8. London, M., and Beatty, R.W., 1993. 260 degree feedback as a competitive advantage. Human
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