The fast-paced business environment requires human resource (HR) tools that help employees know their jobs and improve job performance. Some organizations are responding by re-examining traditional performance appraisal systems and adopting a form of 360-degree appraisal.

Basically, 360-degree systems gather data from multiple raters, including direct reports, peers, supervisors, customers, and the employee (self-appraisal). The result is a clearer, more complete view of performance, allowing employees to see how others see them.

While multirater appraisals can be powerful tools, they're significantly different from traditional appraisals. Approach them with care, caution, and commitment. Any changes to your appraisal system should support your credit union's strategic goals, organizational needs, and development.

Planning Keys
Before implementing a 360-degree project, answer:

Why are you doing this? Appraisals aren't ends in themselves. They're simply measurement tools designed to address significant credit union needs: promoting cultural changes, company values, and communication; supporting succession planning, identifying individual and organizational strengths and weaknesses, and reinforcing important behaviors. Failure to determine the basic reasons for implementing a 360-degree appraisal minimizes its chance of success.

How will you use the 360-degree method? Some organizations use 360-degree appraisals for employee development only. Others incorporate them into their performance appraisal systems, sometimes tying in compensation. There's a difference between using multirater appraisal for training (basically an unweighted coaching tool used for feedback and counseling) vs. tying results to paychecks or bonuses (a major part of the complete performance review process that relates closely to advancement, salary adjustments, and continuation of employment).

Who will be involved? You can evaluate all employees, certain job groups, or managers only. Project goals should determine the type and number of raters. For example, five or six members of the management team and an aggregate average rating by board members might evaluate the CEO, while a select group of employees, two or three peers, and the CEO might review a branch manager. The employee, the supervisor, the supervisor's supervisor, HR, and/ or the board can access results.

Will appraisals be anonymous? Some observers say anonymity promotes honest, complete feedback, while others believe greater openness improves communication.

What will you measure, and what questions will you ask? Questions can involve job competencies, organizational values, or both and should support critical success factors. Open-ended questions also provide important information. But make questions concise--most companies overestimate employees' willingness to complete lengthy documents.

And make sure raters understand the importance of being specific and constructive in their comments. Saying a manager shouldn't be a supervisor has little value for someone trying to improve; saying that person fails to provide appropriate direction does.

How will you report the data? You can report in the aggregate (companywide results identifying overall strengths and weaknesses), by job group, and for each individual rated. Some companies use "Olympic scoring," throwing out extreme "highs" and "lows." Employees often receive a written copy of their individual ratings and aggregate company scores. Some organizations hold individual or group meetings to discuss results.

How will you administer the program? Many organizations use consultants to develop and implement the program. Third parties provide expertise, experience, and objectivity, and may be less threatening to employees. In any case, appoint an in-house project manager--with authority and strong project management and communication skills. Computer-assisted programs may be helpful in collecting, analyzing, and distributing data.

How will you evaluate the program's success? The intent should be to change and reinforce behavior, not fulfill appraisal requirements. Follow-up and action steps to implement findings are critical to success, credibility, and maintenance of employee support.

For a 360-degree system to be successful, customize it to meet your credit union's needs and, ultimately, contribute to its success.

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By Jerry Nelson

Jerry Nelson is president and Jane Haertel is executive vice president of HRN Management Group in Salt Lake City. They can be reached at 801-364-1230 or at jerry@hrn.net or at jane@hrn.net.