Top Down Performance Reviews Vs. 360 Degree Feedback

Most organizations use top down performance reviews for administrative purposes such as promotions, job terminations, salary increases, and as an employee development tool.

While the input that goes into top down performance reviews comes entirely from the employee's supervisor, 360 degree feedback gathers performance input from multiple sources including peers, subordinates, customers, and self, as well as from supervisors. 360 degree feedback is commonly called multisource feedback and multi-rater feedback because the reviews, or ratings, are derived from more than one source.

Today, many organizations are demanding a better return on their training investments and giving more attention to identifying the best available tools to assist in manager training and development. This paper will examine top down performance reviews and 360 degree feedback reviews to determine which method is a better manager development tool.

The use of top down performance reviews, also called performance appraisals and performance evaluations, in modern organizations became popular in the early 1900s. According to BusinessDictionary.com, a performance appraisal is the process by which a manager examines and evaluates an employee's work behavior by comparing it with preset standards, documents the results of the comparison, and uses the results to provide feedback to the employee to show where improvements are needed and why. Many scholars attribute the work of Frederick Winslow Taylor and his two books, The Principles of Scientific Management and Shop Management as instrumental in the widespread adoption of systematic evaluations of employees as a way to improve organizational efficiency (Blake 346).

The first organizational use of 360 feedback is attributed to the German military during WW II. Soldiers were evaluated by their superior officers, their subordinates, as well as those of equal rank. The evaluations were used for promotions and to improve efficiency. The first commercial use of 360 feedback is usually attributed to Esso Research and Engineering Company in the 1950s. The information gained was used to improve manager skills as well as business operations. 360 feedback is credited with Esso's business success. Over the years, the use of multisource feedback has steadily grown. Today, an estimated 90% of Fortune 500 companies use some form of multisource feedback in their evaluation programs (McCarthy, Garavan 7).

The idea behind using performance feedback as a manager development tool is that the focal manager would use the feedback to identify strengths and weaknesses, set goals accordingly, and actively work toward personal development. There are limitations and inaccuracies with both top down reviews and 360 feedback reviews as they relate to manager development. However, there appears to be more of these problems on the top down side. For instance, studies have shown top down reviews can be misleading and inaccurate since this type of appraisal tends to focus only on financial performance. A study by Maylett and Ribaldi (48) showed that managers who met their financial goals received good top down performance appraisals, even when their 360 feedback scores were low. In fact, this three year study of hundreds of managers in various industries showed no correlation between top down performance appraisal scores and 360 feedback scores.

This study observed the departments of some of these managers had low employee satisfaction, high turnover, and experienced difficulty attracting good talent. The managers, and their departments, were often the subject of employee grievances. The study also found that many of these managers eventually experienced a drop in their department's financial performance. According to Maylett and Ribaldi, it was clear these managers were meeting short-term targets at the expense of long-term profitability. Managers who received low individual 360-degree feedback scores could still hit their financial targets in the short term, but eventually experienced declining employee morale and engagement. This, in turn, affected operational performance. The top down appraisals rendered misleading information since they only took into account the ratings from the supervisor, who based their ratings solely on the manager hitting or missing monthly revenue or production targets. In these cases, the manager's true performance was going unnoticed. By using 360 feedback, organizations can obtain more accurate performance information, and get a clearer picture of a manager's true performance.

Another conclusion of the Maylett and Ribaldi study is that 360 feedback reviews can be used to predict future performance. They noted that numerous studies have found departments headed by managers with low 360 feedback scores have less employee engagement. Similarly, managers with high 360 feedback scores tended to have departments characterized by increased levels of employee engagement. The level of employee engagement affects operational performance in the form of employee turnover, morale, efficiency, quality, and customer satisfaction. However, changes in company performance are not immediate. It takes time for a good manager, or a poor manager, to have a positive or negative effect on their staff. While the Maylett and Ribaldi study shows no correlation between top down performance appraisal scores and 360 feedback scores, they found a direct correlation between 360 feedback scores and future departmental performance. Those managers who scored low on their 360 feedback surveys, but whose departments were meeting their financial goals, were often not performing as well 12 to 14 months later. While top down performance appraisals assess what has already happened, and are usually based on financial performance alone, 360 feedback scores can give an organization a good indication of which way a manager's department is heading.

One of the first steps in manager development is the selection and establishment of individual goals. According to Brutus, London and Martineau (677), managers are more likely to respond to 360 feedback than to top down feedback when it comes to goal selection. In examining the files of 2,163 managers, they found a very close relationship between the multisource feedback received and the subsequent development goals chosen by the managers. While this finding was hypothesized in the study, the researchers were surprised to learn that subordinate feedback had more influence over the development goals chosen by the manager than any other source of feedback, including supervisors and peers. In other words, managers tend to give more weight to feedback from subordinates than to feedback from supervisors. Since subordinate feedback is not part of top down performance appraisals,