the new performance management paradigm

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The "New" Performance Management Paradigm: Capitalizing on the Unrealized Potential of 360 Degree Feedback By David W. Bracken and Allan H. Church 34 PEOPLE & STRATEGY

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Page 1: The New Performance Management Paradigm

The "New" PerformanceManagement Paradigm:Capitalizing on the Unrealized Potential of360 Degree FeedbackBy David W. Bracken and Allan H. Church

3 4 PEOPLE & STRATEGY

Page 2: The New Performance Management Paradigm

Many business executives and human resources professionals today would argue that

performance management (PM) processes have failed to meet, let alone exceed, the

expectations of most organizations. A number of popular management books have highlighted

these concerns with cails to abandon PM systems altogether (e.g., Cohens & Jenkins, 2002;

Culbert & Rout, 2010), and some organizations such as Adobe are experimenting with that very

concept having banished their PMP in 2012 (Robinson, 2013). The "why's" for these barriers

to effective PM have been well-documented, and we will not repeat them here. While there is

considerable theory and research regarding various aspects of the PM process (see Smither &

London, 2009) and there have been many proposals, case studies and guidelines suggesting

possible improvements (e.g.. Corporate Leadership Council 2002, Lloyd, 2009), one area that

has received insufficient consideration and even outright rejection by some practitioners is the

use of 360 feedback as an integral part of performance management systems.

I t is our contention that 360 feedback hasevolved over the past 20 years from atargeted organizational development

and industrial and organizational (I-O) psy-chology intervention or tool focused onindividual development, to a more main-stream, established and accepted humanresource people process in most organiza-tions. As a result, the expansion of 360feedback as a tool for PM is a natural evolu-tion that we feel organizations should beleveraging more extensively. The purpose ofthis paper is to describe the ways in which,when appropriately implemented, 360 feed-back has the ability to provide newdata-based insights that will enhance theoverall quality and effectiveness of the PMprocess in an organization. In addition,having a fully aligned and integrated 360system also has potential benefits for enhanc-ing other aspects of talent managementsystems as well as reinforcing and drivingbroader culture change efforts.

The Great Debate in360 Eeedback: AnAbbreviated HistoryThe value of using feedback from multiplesources as both a leadership development anda performance measurement tool is a conceptthat has been around since the 1980s (seeBurke, Richley & DeAngelis, 1985; Hedge,Borman & Birkeland,2001). Once 360 feed-

back emerged as a specific intervention in theearly 1990s, however, it wasn't long beforesome practitioners began advocating for itsuse in decision-making applications. The firstand perhaps most visible of these was evidentin the publication of Edwards and Ewen's360 Degree Feedback: The Powerful NewModel for Employee Assessment and Perfor-mance Improvement in 1996. Their researchdocumented the superiority of well-designed360 processes over the traditional (i.e., singlesource) performance appraisal in terms ofboth reliability and fairness. Despite theirarguments along with guidelines from othersupporters (e.g., Antonioni, 1996; Dalessio,1998), 360 interventions during the 1990sremained largely aimed at either developingindividual leaders (e.g.. Church & Bracken,1997; Tornow &c London, 1998) or moresystemic OD and culture change initiatives(e.g.. Burke & Jackson, 1991; Church,Waclawski & Burke, 2001). Clearly practi-

tioners have been quite active and passionateover the years in their discussions over theappropriate use of 360 (Bracken et. al, 1997;Church, Walker &c Brocker, 2002; London,2001) and whether it can really "change yourlife" (O'Reilly, 1995).

We certainly appreciate the arguments onboth sides of the discussion (and both authorshave developed systems that support devel-opment only and decision-makingapplications). But, after 20 years of practice,we would argue that the ongoing debate overwhether 360s should be used for performancemanagement and other personnel decisionsshould come to an end. For starters, the dis-tinction is not an either/or one. Except for thepure information-only 360 process where theratees are discouraged from sharing theirresults, most other development-only 360sare one point along a continuum of uses thatrequire that decisions are made with increas-

EXHIBIT 1 : USES OF 360 FEEDBACK IMPACTING HR DECISIONS

DeveiopmentOnly

Information Development SuccessionOnly Planning Planning

1 I I

PerformanceManagement/

Appraisal Downsizing

IDecisionMaking

SelfDevelopment

TrainingDecisions

High Potential IDand

Development

PerformanceAssessnrient/Measurement

VOLUME 36/ISSUE 2 — 2013 35

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ing impact on the individual and organizationresources moving left to right (Exhibit 1).Performance management is one of thosemajor uses.

The fact is that many organizations arealready successfully using 360 feedback aspart of their performance management sys-tems, as well as for other personnel decisionssuch as staffing, succession planning and highpotential selection and development. A recentbenchmark study (3D Group ,2013) of morethan 200 organizations with active 360 pro-grams reports that 47 percent of thoseorganizations are using 360 feedback for per-formance management, which represents a15 percent increase from the survey they con-ducted in 2009. While there will alwaysremain some 360 feedback processes that aretargeted for purely development purposes orbroader culture change initiatives (and, there-fore, not designed to support decisionmaking), we believe that 360 feedback is thekey to improving the quality and effective-ness of performance management inorganizations today.

The Argument forUsing 360 Feedbackin PerformanceManagementIn order to understand the unique contributionthat 360 feedback can play in enhancing PM,it is important to distinguish between two typesof performance in organizational settings thathave been recognized as important to drivingthe bottom-line: the what and the how.

The "What" and "How" ofPerformanceHistorically, performance ratings originatedfrom the need to quantify results and paypeople accordingly, e.g., with an emphasis ongoal setting and differentiation (e.g., Smither& London, 2009). In contrast, 360 feedbackwas initially a form of survey feedback focusedon driving individual development and behav-ior change in organization development effortsby unfreezing the present state (Ghurch et. al,2001). In recent years, however, these streamsof organizational science have begun to cometogether for three reasons: (a) the increasingcomfort levels and familiarity among leadersand managers with 360 feedback as a tool ingeneral, (b) the prevalence of large scale HRapplications and solutions that make linking

360 feedback and performance managementprocesses easier and more efficient, and per-haps most importantly, (c) the recognition ofthe unique role and value that 360 feedbackcan add behaviorally to the performance eval-uation process. As a result and when integratedappropriately (vs. simply being misused), the360 link to performance management canresult in (a) a more robust and valid PMP pro-cess due to the enhanced measurement aspectsof 360, and (b) a 360 feedback tool and mea-surement framework that is linked more fullyto the overall business strategy of the corpora-tion in which it is imbedded.

sions, we would argue that 360 feedback isdesigned ideally for the purpose of measur-ing the "how" of performance management.

In the next section, we describe a short caseexample of how multisource feedback hasevolved in one multinational consumerproducts company from a primarily devel-opmental tool to one that is much moreconsistently applied and aligned to thedecision-making processes in the organiza-tion while still retaining a large developmentcomponent.

In the end, performance management is not anexact science, nor is 360 feedback. Both rely onthe perceptions of others in the workplaceregarding various behaviors demonstrated andoutcomes achieved.

Although organizations remain manicallyfocused on performance management inthe context of achieving bottom-line busi-ness results or the "what" that is deliveredon a regular basis (e.g., share, volume,sales, profit, etc.), in recent years there hasbeen an increasing recognition that the"how" those results are achieved is impor-tant to measure as well (Kaiser, McGinnis& Overfield, 2012). Ghanging workforcedemographics, recognition of generationaland work style differences among variouscohorts, and the increasing importance ofsuch factors as employee engagement,integrity and manager quality have all con-tributed significantly to this trend (e.g.,Hankin, 2005; Meister & Willyerd, 2010).In response to this need to quantify the"how" dimension of performance, how-ever, many organizations have beensomewhat challenged when it comes tomeasurement. While some have looked atquantifying their corporate values, othershave pursued competencies (usually lead-ership) or other types of moreobjective-based measures such as the dualbusiness and people results model intro-duced by PepsiGo (Gorporate LeadershipGouncil, 2005). Given the multi-rater data-based nature of 360 feedback, and itsinherent flexibility to measure behaviorsrefiective of all of these types of dimen-

Case Example of theEvolution of 360FeedbackPepsiGo has a long history as a pay for perfor-mance culture. As a result, the performancemanagement process has been designed torecognize and reward individuals at three dif-ferent levels of impact: individual, team andorganization. While the team and organiza-tion levels are based on relativelystraightforward business performance met-rics, the individual level performancecomponent is somewhat unique and its evolu-tion and impact over time have been profiledseveral times by the Gorporate LeadershipGouncil (2002; 2005) and at a number of pro-fessionalmeetingssponsoredbytheGonferenceBoard and the Society for Industrial and Orga-nizational Psychology from 2007 to 2012 asan example of a best practice performancemanagement system. In general, it features adual five-point performance rating schemethat evaluates individuals along two separatedimensions: business results and peopleresults. In many ways, this system reflects theconcept of the "what" and the "how" of per-formance described above. However, thepeople results in the PepsiGo model are just asoutcome-based (and therefore require con-crete measurement) as the business results.

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Designed and launched in 2001, the dual rat-ing process was intended to address the needto improve manager quality (CLC 2002,2005) and drive a culture of diversity andinclusion throughout the organization(Thomas & Creary, 2009) as a result of turn-over and other lingering cultural elementsdating back to the 1980s (e.g., Pearson,1987). When the initial program waslaunched, the weighting between businessand people results was set at 67 percent and33 percent respectively given the sensitivityand complexities of introducing such a newperformance model to the organization. As aresult of the new people results componentimpacting performance outcomes, there wasan immediate need to help leaders and man-agers quantify these results. Whileperformance metrics such as sales, revenue,share and volume were easy to calculate,there were questions regarding the best meth-od for assessing people outcomes.

At the time, the organization had a robust 360feedback process in place. However, a reviewof that process revealed that (a) the leadershipmodel on which it was based was not alignedto the future business or people strategy, and(b) the execution was fragmented and usedprimarily for individual development acrossthe business. The first major overhaul of theprocess resulted in a new leadership model forthe 360 tool that reflected the behaviors fordriving the desired culture change. It also pro-duced a harmonized, consistent and unifiedadministration and delivery process and time-line to meet the performance managementcycle so that the feedback could be used forpeople results discussion. Despite the wide-spread familiarity of the organization with360 feedback as a process, the shift in orienta-tion of the results from development only toperformance management required that theinitial messaging focus on "input" versusbeing hard-wired. This was done to allow the360 results to have teeth and influence thepeople results but not make the link so directthat manager and HR discretion could not beapplied to have a balanced rating outcome. Ingeneral, the approach was well-received andthis application of 360 lasted for approxi-mately five years.

With the change in CEO, however, came afurther refinement of the business and talentstrategy of the organization (Morris, 2008),and as a result, the performance managementprocess evolved accordingly as well. Whilethe business and people results remainedintact, the weighting shifted to 50 percenteach making the "how" aspect of manager

EXHIBIT 2: CHANGING EVOLUTION OF FEEDBACK TOOLS AT PEPSICO

tInfluence

Leadership

Development& "inpuT for Tatem Mgt

Management

Upward reedbäck•feed" for PMP

Development& 'input" foi PMP

Unaligned Process &Development Only

quality that much more significant in the PMprocess. As a result, there was increased pres-sure to tighten the link between the 360process and the people ratings. This wasaccomplished successfully by separating theexisting 360 process into two different multi-rater feedback tools: one administeredannually to direct reports only that wasdedicated to performance management ( i.e.,the Manager Quality Performance Index orMQPI — see Church, TuUer, Desrosiers, 2013for details on that specific tool), and a full 360process focused on leadership capabilityadministered on a rolling basis that was pri-marily developmental but was linked totalent management and succession planningat more senior levels in the organization(Church & Waclawski 2010). By separatingthe two feedback tools, the organization hadeffectively achieved three goals:

1. made the distinction clear betweenwhat are considered to be effectivemanager behaviors at any level versusleadership behaviors needed to be suc-cessful at higher levels

2. formally articulated the linkagesbetween the different feedback toolsand their respective uses (i.e., perfor-mance managemen t , t a l en tmanagement/planning, and individualdevelopment)

3. adjusted the timing and execution win-dows to align each feedback process tobest match the cadence of the HR systemit feeds (e.g., performance calibration,people planning / talent reviews, etc.)

Although the MQPI as implemented in thiscase was a direct report only feedback mea-sure (i.e., technically an upward or 180feedback application), this decision wasbased on the goal of focusing on "peopleresults" as a manager quality initiative vs. amethodological concern over using a full-blown 360. Had collaboration with peers ina matrix environment or client-centeredbehaviors in a professional services firm beenthe primary cultural concerns with respect topeople results, the organization would havefocused on peer or client ratings as in othercases (e.g.. Church et al., 2001; 2002). Today,both feedback systems (the 360 and MQPI)are currently in place with considerabledemand from the field for each. Results frominternal employee surveys over time point toboth increased perceptions of managers beingheld accountable for both business and peo-ple results since the MQPI was put in place,and very positive outcomes with respect tothe impact and utility of the 360 feedback forindividual development and career planningapplications. Exhibit 2 provides a summaryof the evolution of the feedback process.

How 360 Eeedback CanImprove PerformanceManagementIn general, our experience has shown that aproperly implemented 360 feedback process,installed across a whole organization such asPepsiCo (or subgroup specific business unit,region or function), can provide a number of >•

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benefits, including enhancing the quality ofthe performance management process. Eachof these benefits is described below:

Alignment: One of the most important needsfor employees from a performance manage-ment process is a clear understanding of whatthe organization expects of them (Smither &London, 2009). In a properly designed 360process, the means for achieving businessstrategies and goals are translated into lead-ership competencies and behavioralstatements that uniquely capture the needs ofthe organization for current and future suc-cess. These behavioral statements bring to lifein very tangible terms the "rules of game" forbeing successful in this specific organization.

of 360 feedback (Bracken et al., 2001). Butit usually at least starts with requiring thatwe are measuring the right things in a reli-able way. The "reliable way" part hasliterally dozens of design elements in 360s,but, when done correctly, do produce infor-mation that is appropriate to use for decisionmaking (including performance manage-ment) (Church, 2000; Edwards & Ewen,1996; Murphy, Cleveland and Mohler,2001 ), and typically has less negative impacton groups such as women and older workers(Edwards & Ewen, 1996; Eichinger 6c Lom-bardo, 2004).

The most compelling support for validitywhen measuring the "how" of performance

A properly implemented 360 process, installed acrossa whole organization can provide a number of benefitsincluding enhancing the quality of the performancemanagement process.

and are communicated through the contentof the 360 instrument and the underlyingmeasurement framework on which it is based(Bracken & Rose, 2011; Church et. al, 2002).

Agility: Today, 360 feedback is almost exclu-sively technology driven (vs. in the 1990swhen it was first introduced). Therefore, theprocess can quickly reach a wide range orleaders and managers in an organization andthe behavioral requirements can be easilymodified to reflect the changing external andinternal environment and quickly dissemi-nated through the measurement process. Aslong as the timing of the behavior change ismanaged in consort with the performancemanagement cycle (to maintain the alignmentdimension as noted above), it is relativelyeasy to shift these behavioral indicators andlink them to the desired results. If the entireorganization is using a 360 process on arepeated, regular basis (e.g., yearly or evenmore frequently), changes in definitions ofleader requirements can be communicated tothe entire employee population very quickly,followed by the accountability inherent inintegration into performance managementand other HR systems.

Validity: The definition of what "validity"means can be elusive, particularly in the area

may be clear alignment with organizationalvalues that defines successful performance(i.e., requiring a leader to comply with orga-nizational values to be considered"successful"). While we justifiably turn topossible legal challenges to reinforce the needfor valid measurement, the fact is that a muchbetter argument for validity is that it pro-duces information that helps us make betterdecisions that affect individuals and the orga-nization as a whole.

Accountability: This has been called theAchilles heel of 360 feedback (London,Smither &c Adsit, 1997) and is arguably oneof the most important factors in ensuring thesuccess of any 360 process in general (Brack-en, Timmreck & Church, 2001; Bracken &Rose, 2011). The importance of account-ability only intensifies, however, in thecontext of using 360 results for performancemanagement. More specifically, if the orga-nization believes that the "how" side ofperformance is at least as important as the"what," then there needs to be comparableaccountability for each. Accountabilitycomes in two forms in this context. One typeof accountability is defined by the content ofthe 360 items that define successful leaders.In other words, high scores on the 360 feed-back do not necessarily have to predict

successful leadership (though in some orga-nizations the leadership model on whichthey are based may well have been validatedto do just that for talent management pur-poses — see the discussion earlier about theimportance of validity), but state that youare a successful leader because you behaveconsistently with organizational values orcultural norms, with appropriate conse-quences. The second type of accountabilityis defined by the leader's performance ofactivities that create a trusting feedback cli-mate, including coaching and feedback.These two types of accountability are inter-woven when the 360 also asks whether theleader is performing those actions.

Consistency: One of the pitfalls of many HRsystems (beyond just 360 feedback programs)is inconsistent administration and use, lead-ing to real and perceived unfairness in theprocess. Examples of potential inconsistencyin 360 processes that translate into real andperceived unfairness includes steps such asthe selection of who participates in gettingfeedback, giving feedback (e.g., all directreports, only select direct reports, only somedotted-line individuals, etc.), the method andnumber of raters selected, and rater training.Inconsistent use can occur on both the front-and back-end of the process when decisionmakers (managers, human resources) misin-terpret, misapply and/or ignore the feedbackresults, often due to lack of training andmonitoring. Inconsistent use of performancemanagement practices is undoubtedly one ofthe reasons that they have been unsuccessful,perhaps in part due to no way to clearlydefine and measure the "how" side of perfor-mance without the use of 360 feedback.Having a robust feedback measure based ona set of well-defined behaviors aligned to asingle leadership model, a set of core valuesor strategic business priorities will add rigorto any PM process and increase the consis-tency of its application.

Response to theNaysayersWhile it should be clear from the exampleabove that 360 feedback processes can, andin our opinion should, be effectively used forperformance management purposes in orga-nizations today, we would be remiss if we didnot acknowledge the vehement resistance ourposition creates on the part of some. Theobjections most commonly come from twocohorts (that are not independent). The firstincludes the leader development purists who

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¡EXHiBiT 3: THE SYMBIOTIC RELATIONSHIP BETWEEN 360 FEEDBACK AND PMP

Better, Fairer InformationforDecisions

360°Feedback

ACCOUNTABILITY

believe that feedback should be a safe, privateevent, sometimes to the extent that resultsshould not be shared with others in the orga-nization (with external coaches being perhapsthe only exception). The concern here is that,despite the best of intentions, sharing feed-back results with others may somehowinadvertently influence internal perceptions,and therefore influence talent- or perfor-mance-related decisions.

We are in full agreement that some feedbackscenarios are focused solely on developing asingle leader and the results of those process-es are rarely appropriate for use in decisionmaking. Our intention is not to argue againstindividual development, but rather to improveanother very flawed HR process (i.e., perfor-mance management) with a powerful toolthat should, by the way, always include adevelopment component. We are in no waysuggesting that all 360 processes should beused for decision making, though we are sug-gesting that all 360 processes could benefitfrom being designed and implemented as ifthey might be used to make decisions aboutemployees at some point in the future.

The second group of objectors or naysayersregarding linking 360 to performance man-agement comes at us from the data integrityside of the argument, stating that using thedata for anything other than developmentonly will cause raters to be less willing toprovide honest feedback for fear of eitherharming the leader's career or causing retri-bution from the leader. This position issomewhat amusing because the development-

only proponents generally implement systemsthat are the least likely to have any impact atall because they bypass the majority of bestpractices described above in their approachto 360 by recommending a far less systemicand robust process in general (e.g., one thathas not been validated, consistently applied,or customized to the meet the strategic busi-ness needs or cultural change agenda of theorganization, etc.). In addition, our experi-ence has suggested that overt ratermanipulation of 360 results occurs no morefrequently than standard manager perfor-mance rating biases in performancemanagement systems. Moreover, there aremethods to correct many of these issues, suchas implementing high caliber rating nomina-tion (selection) review processes withmanager and/or HR review and approvalsuch as those used at PepsiCo (e.g.. Churchetal., 2013).

Some detractors point to the mixed researchresults -regarding the reliability and validityof 360 systems, another "half full, half empty"situation. Different rater groups do appear tobring different types of baggage to the feed-back process (Eichinger & Lombardo, 2004;Nowack 6c Mashihi, 2012). At the same time,each perspective group seems to have a validperspective on performance, even thoughthey may not agree with each other (Bynumet al, 2013; Church 2002). Potential "unreli-ability" as seen from this context (i.e., lack ofintragroup agreement) can be addressedthrough ensuring sufficient numbers of ratersin each group, another design element oftenneglected in "development-only" processes.

The main point here is that the problemsassociated with unreliable 360 feedback rat-ings are the same ones that plagueperformance management processes in gen-eral. Thus, the arguments against making thelinkage between 360 and performance man-agement do not have much merit from ourperspective. In addition, many practitionershave implemented various interventions toimprove rater accuracy, including ratertraining and well-researched and designedrating scales that reduce leniency effects(Nowack & Mashihi, 2012).

SummaryIn the end, performance management is notan exact science, nor is 360 feedback. Bothrely on the perceptions of others in theworkplace regarding various behaviorsdemonstrated and outcomes achieved.Similarly, rater performance is a complexphenomenon, involving opportunity toobserve, ability to observe, and then boththe capability and motivation to performthe rating task competently. We are stilllearning how to improve rater performance.While we don't have all the answers yet,there are some solutions and the field hasprogressed immensely from where we were20 years ago. We ask you to consider as towhether 360 feedback should ultimatelyreplace PMP (or become the "new" PMP,which is an even more radical concept).This would mean using a methodology forcreating a feedback culture with ongoingcoaching and evaluation that leverages itspotential to generate better data to supportboth performance and talent managementprocesses. At a minimum, a well-designedand implemented 360 process can be inte-grated with a performance managementsystem so that they create a symbiotic rela-tionship, each benefitting from the other(see Exhibit 3).

In closing, we propose that 360 feedback hascome of age and it is time for organizationsto fully utilize its potential for driving indi-vidual performance and broader culturechange. As Smither, London and Reilly(2005) stated some time ago, we are long pastthe point of arguing whether 360 "works"and if it can and should be used to improveHR processes such as performance manage-ment. We need to turn our attention toimproving practices that increase the likeli-hood that we are using the best methods toimprove our performance and talent man-agement systems.

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David W. Bracken, Ph.D., is vice presi-dent of Leadership Development andAssessment with OrgVitality LLC. Hereceived a BA from Dartmouth Collegeand MS and Ph.D. degrees in Indus-trial/Organization Psychology fromGeorgia Tech. Bracken is a CertifiedProfessional Coach and resides in theAtlanta area.

Allan H. Church, Ph.D., is vice presi-dent of Organization Developmentfor the Global Groups, Functions andCorporate, and Executive Assessmentand Development for PepsiCo, Inc. Hereceived his Ph.D. in OrganizationalPsychology from Columbia Universi-ty. He is a Eellow of the Society forIndustrial-Organizational Psycholo-gy, the American PsychologicalAssociation, and the Association forPsychological Science.

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