international journal of pure and applied mathematics volume … · 2018-06-16 · logistic...

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The Need for 360 and 720 Degree Performance Appraisal System in Indian Organizations

Ms. Ramila Devi Ram Sing,

Research Scholar, Department of Management Studies - MBA, Bharath University, Chennai -73, India.

Dr. S. Vadivelu,

Professor, Department of Management Studies, Bharath University, Chennai -73, India

Abstract

Since Independence, Indian economy has experienced near stagnation except in 1970s shows a

significant increase in agricultural sector followed by market recovery a decade later. However, the

fundamental economic reformation took place only in 1991 with strengthening in global demand, foreign

investments; commitment based fiscal policy by Indian government, moving the Indian economy from

socialist to free markets (Mohan, 2008). Major contributions came mainly from tertiary sector which is

informationtechnology, communications, entertainment and secondly from secondary sector which is

manufacturing (Nagaraj, 2000). The change in economic structure and globalization has created a niche

for Indian organization to move from “collectivism” nature (Hofstede, 1980) of human resource practices

to more of liberal and widely accepted practices. The aim of this paper is to provide an insight on the

current human resource practices of 360 and 720 degree performance appraisalin Indian organizations.

This paper is also designed to examine the advantages and disadvantages of the performance appraisal

and its implicationson continuous learning, proactivity, teamwork, technology and trends towards

International Journal of Pure and Applied MathematicsVolume 119 No. 15 2018, 1101-1118ISSN: 1314-3395 (on-line version)url: http://www.acadpubl.eu/hub/Special Issue http://www.acadpubl.eu/hub/

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globalization (Sonnentag, 2002). An analysis on the need for the modern 360 and 720 degree performance

appraisal system for Indian organizations is presented in this paper.

Case Study

„TVS‟stands for TV Sundram Iyengar a founder of TV Sundram Iyengar & Sons Group of

Companies established in 1911,manufactures automotive electrical components, auto ancillary,

2wheelers, 3 wheelers, tyres, rubber products and logistics. TVS Group is akey supplier for car

productions in India. Over its century of management,TVS Group did notencounter any serious labor

tribulationsdue to its employer – employee commitment as shown inFigure 1. However, in recent years

due to increased competition and challenges, this group hasstarted deviatingfrom its original employer –

employee relationship practices.

Treat employees like family.

Put employees‟ interest ahead of company‟s mission and vision.

Constantly communicate with employees to build trust.

Always honour assurance given to employees.

Involve employees while taking major decisions.

Empower employees at work.

Condone errors of judgment but punish dishonesty.

Figure 1: TVS Harmony Mantras

In 2012, contractual employees of TVS Logistics plant which handles the car manufacturer‟s

logistic services at Sriperumbudurwent on a 3 day strike. The main reason for this strike to take place is

workers are demanding for higher wages from INR 6,500 to between INR 10,000 to INR 13,000 in

accordance to the current cost of living. This incident has subjected the TVS Group to

managementcriticism, productivity and profitability loss,as well as its motor car customer, Hyundai

Motor India suffereda daily loss of 63 crore (Balaji, 2012). Similar type of strike also took place recently

in January 2016, when 2400 apprentice workers at TVS Lucas, Padi went on a hunger strike demanding

International Journal of Pure and Applied Mathematics Special Issue

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for better working environment and increased wages. Most of the apprentice workers recruited as trainees

and have been working in the factory for the past 2 to 3 years (Thozhilalar Koodam, 2016).

TVS family run conglomerate with 90 companies under its umbrella spans across industries like

Automobile, Aviation, Education, Electronics, Energy, Finance, Housing, Insurance, Investment,

Logistics, Service and Textiles. Despite of being one of the top ten company in the world with an

approximate turnaround of 13,363.43 Cr INR (2016-17) nevertheless, subject to labor problems that can

be linkedto inadequatehuman resource managementpractices. The cause of this plight can be traced to the

employees are continuously kept on contractual basis and there is no any appraisal system in place to

evaluate and motivate them despite serving the organization for a number of years. Thewages and

working conditionstagnationover the service period has resulted in diminishingemployee‟s morale.The

TVS incapacity incountering Maslow theorythat every management must understand the psychological

process involves in motivation so that they can effectively direct employees towards attaining

organizations vision, mission and goals (Maslow, 1943) has led to this scenario. Nevertheless,TVS

management quickly resolved the issue and resumed production, except it reflectedhow its management

lacked competence in handling manpower and this is the case for many other organizations across India

(Bhattacherjee, 1988) due to their collectivism” nature (Hofstede G., 1980).

Introduction

The above discussed TVS case studyisa classic example whichdiscusses the implications onthe

absenceofthe performance appraisal system in an organization. Performance appraisal although a complex

and controversial tool (Roberts, 2003), yet extensively used by organizations globally to evaluate,

motivate and retain employees. There are numbers of performance appraisal tools used in Indian

organizations however, mostly applied is traditional and outdated methods such as graphic rating scale

which rate the employees based on scale, ranking method, critical incident method, narrative essays,

check list method, forced distribution method and confidential report system (Balu, 2006). Around 70 to

85 percent organization in India use force distributionmethodto appraise their employees (Bhattacharya &

Roy, 2014). The recent contemporary approach of performance appraisalincludes Management by


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Objectives (MBO), Behaviourally Anchored Rating Scales (BARS), Human Resource Accounting,

Assessment Centers, 360 Degree and 720 Degree.

History & Definition of Performance Appraisal

Ironically, performance appraisal was first time used during the First World War by US Army

which adopted “Man-to man” rating to evaluate military personnel (Oberg, 1972). Since then there is a

great deal of studies focused at the philosophy of performance appraisal that has undergone tremendous

change (Leong, 2013 and Lawler et al., 2012). The performance appraisal system has been labeled and

described by experts in different ways over the year (Mamoria & Gankar, 2006). One of the most

universally mentioned performance appraisaldefinition as “a set of activities carried outby organizations

which seek to assess employees and develop their competence, enhance performance and distribute

rewards” (Fletcher, 2001).

360 Degree Performance Appraisal

This method first used in 1940s and the one of the earliest research conducted on the uses of 360

degree is at Esso Research and Engineering Company in 1950s (Bracken et al., 1997). From then

onwards, the idea of 360 degree gained momentum and it is one of the most practiced tools of appraisal in

US suggesting that one third of the US companies selects this method (Bracken et al., 2001).

360 degree incorporates performance review from all the staff directly associated to the employee

as shown in Diagram 1. The purpose of the organizationto carry out this type of appraisal is to collect all

rounded feedback on the employee‟s job that is often reviewed, discussed and critiqued by other peers,

subordinates, suppliers and customers. The main aim of this appraisal is to better understand how the

employee is functioning as part of the team. Besides, this appraisal system also eliminates biasness in the

rating process based on superior and subordinate “like – dislike” relationship which is norm deeply rooted

in Indian businesses (Jain and Venkata Ratnam, 1994).


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The 360 degree appraisal more appropriately used to assess the performance of middle and senior

level of management due to the complexity of their roles. A meaningful 360 degree designed to gather

information on the following areas such as customer focus, teamwork, communications skills, leadership

skills, technical abilities, ethics and etc. The feedback results facilitate the management in making

administrative decisions such as pay increase, promotion, training, and others.

Diagram 1: 360 Degree Performance Appraisal System

360 degree focuses on 5 integral aspects of assessment which are (i) self-assessment, (ii) supervisor,

(iii) peers, (iv) subordinates, (v) customers and sometimes (vi) suppliers; which is also called “full circle”

program. The details of the five aspects of assessment are discussed below (An Overview, Performance

Management Practitioner Series, 1997).

(i) Self-assessment is where the supervisor will ask the employees to identify the key

accomplishment that they feel best to representtheir performance. In certainorganizations, the

supervisor gives the appraisal form to the employee themselves for initial self-evaluation for

effective self-reflection.

(ii) Supervisor assessment is where employee‟s responsibilities and actual performance is rated

and compared by the superior.

Superiors

Customers

Suppliers Subordinates

Peers

Employee


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(iii) Peer assessment is the most relevant 360 degree performance evaluation. Feedback from

peers can be collected when the employee‟s expertise is known or the performance and

results can be observed. Peer assessment gives an insight

(iv) Subordinates assessment referred to as SAM (Subordinate Appraising Managers) significant

however controversial. This assessment provides valuable data on the performance elements

concerning managerial and supervisory behavior.

(v) Customer assessment divided into two categories:

a. Internal customers – users of product and services supplied by another employee or group

within the organization.

b. External customers– outside of the organization. The feedback from these customers

serves as an anchor for all other performance factor.

The design of 360 feedback must be holistic in its reach and breaks the traditional frame of organizational

bureaucracy in ensuring management accountability towards employee‟swelfare (Madhavan, 2011).

360 Degree Performance Appraisal Research in Indian Businesses

A research conducted on 51 Indian Business Process Outsourcing (BPO) companies on the

dynamics of HRM practices indicatedthat many of these firms uses 360 degree to evaluate their

employees (Budhwar et al., 2006).There are other organizations in India such as SAIL, NTPC, Indian Oil

Corporation, HPCL, Bharat Petroleum, NALCO, SBI, Reserve Bank of India, Pfizer, Larsen & Toubro

Aditya Birla Group, Titan Industries, Dr Reddy‟s, Infosys to name a few appraise their employees using

360 degree feedback method (Rao, 2014) Thus, organizations have been using 360 degree feedback

appraisal and is not a new concept to Indian economy.There have been various researchesconducted on

360 degree appraisal in India itself to test the validity and impacton employees.Some of the outcomes of

these researches are discussed in this section. A research carried out by Banu and Umamaheswari (2009)

for Reliance Life Insurance located at Udulmalpet on 50 employees shows that 360 degree has a positive


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outcome in identifying the employee‟s performance, training needs, rewards and effective

communication.

Other research by Raj and Singh (2013) in 4 organizations, western part of India indicated that

interpersonal communication and quality of working life have effect in the relationship between 360

degree feedback and performance. Besides, leader-member exchange (superior – subordinate relationship)

also affects the employee‟s quality of working life. A study by Mary & Suganya (2012) on effectiveness

and impact of 360 degree at Wheels India Ltd, Chennai illustrated that 360 degree is used as a motivating

tool in enhancing employee‟s performance.

A comparative study on public and private banks in India by Shrivastava & Purang (2011)

showed that private banks have a much better competitive edge due to the 360 degree and balance score

cardperformance appraisal method practiced by them. This research also indicated that these private

banks have greater fairness and employee‟s satisfaction level compared to public banks.Another research

on private banks in Rohtak City, India confirmed that 31 percent of these banks exercises 360 degree and

the results from the study signifiesthat the respondents are vastlysatisfied with the current appraisal

method (Rani et al., 2014).

A large amount of the directed researchfocuses on already functioning 360 degree feedback

effectiveness by identifying what are the mediating variables that augment employee‟s performance. A

summary on the psychological outcomesthat are beinginvestigated by the researchers is presented in

Diagram 2. These listed factors are normally used by the organizations to help employees to plan and

develop their career path.


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Diagram 2: The mediating variables tested on 360 Degree Performance Appraisal System

720 Degree Performance Appraisal

While 360 degree is still subject to ongoing debate on the applicability in Indian businesses, the

recent contemporary development will be 720 Degree. 720 is the extension of 360 and it is an integrated

method of appraisal whereby individual is assessed twice using time frame and targets. The process of

720 involves pre-evaluation where feedback is given in the beginning of the year. Goal and time frame

are normally set at this juncture. The employee will be appraised again for the second round known as

post evaluation incorporating all the feedback given earlier to seek for further improvements (reference to

Diagram 3).

360 Degree 360 Degree

Pre Evaluation Review &Feedback Post Evaluation Review &Feedback

Final Results

Diagram 3: 720 Degree Evaluation Process

The evolution of 720 degree performanceas shown in the Diagram 4 started from 90 degree

appraisal involves manager evaluating the employee which offers little opportunity for appraisal

discussion. 180 degree appraisal includes self-appraisal followed by superior and subordinate assessment.

360 Degree

Training Rewards

Motivation

Communication

Leader - Member exchange Leadership Environment

Teamwork

Satisfaction


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Later in 270 degree, peer group is added and the average bias factor is calculated and multiplied to the

ratings allotted. 360 degree known as „multi rater‟ designed to include additional input from customers,

suppliers or vendors and other interested stakeholders.720 involves ongoing „feed forward‟ on the

employee‟s performance.

Diagram 4: The Evolution of 720 Degree Performance Appraisal System

Nevertheless, 720 degree is costly and time consuming however it is suitable for new economy

businesses that gives constant feedback to ensure employees reach their goals before the next appraisal

(Anupama et al., 2011). The goal of 720 degree is to create transparency and reduce biasness, prejudice

and discrimination in the work place environment (Anupama et al., 2011). Besides, 720 is also intended

to support with rationalization process of employees behaviour in not committing unethical or fraudulent

act (Anand et al., 2004). This system is premeditated to identify and prevent the „like-dislike‟ rating,

unrealistic goals and clash of interest.

Discussion on the Need for 360 and 720 Degree Performance Appraisal in Indian Management

90 Degree - Employee and Manager

180 Degree - Self assessment and Subordinates

270 Degree - Peer Groups

360 Degree - Customers, Suppliers and Other Stakeholders

720 Degree - 2 times of 360 Degree Performance Appraisal


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Economic liberalization since 1990s (Rakesh Mohan, 2008) and the emergence of India as largest

nation, has created the need for Indian management to rapidly change and adapt new HRM practices

(Pawan & Naresh, 2001). In the last 10 years, HRM field has continuously contributed to improve the

organizational performance and to stay in par with competition from abroad (Schular& Jackson, 1999;

Pawan & Naresh, 2001). Furthermore, globalization in India has created organizational diversity and it is

necessary to have a complex and integrated appraisal system in meeting employer, employee and

customer‟s expectation (Anupama et al., 2011).

As discussed earlier, there are still many organizations in India practices the traditional approach

of performance evaluation.These methods are often subject to criticism. According to Harvey‟s 1994

study foundthe traditional system fails to assess the overall performance of the individual due to the

following reasons:

1. The organization and individual goals and needs cannot be met entirely by one performance

evaluation.

2. Single source of appraisal form may be inherently problematic because it may not consist of all

the relevant information.

3. The effect of the appraisal and feedback on employee development can be lost or overlooked.

4. Many managers do not have the capabilities or capacity of providing appropriate evaluations.

Therefore, there is a growing need for Indian organization to implement the 360 and 720 degree.Rao

in his book „The power of 360 degree Feedback‟ highlighted the following reasons for Indian

organization to implement 360 degree appraisal.

1. Job environment in Indian organizations is extremely unpredictable due to the competition in the

market.

2. Some organization still practices „old school of thought‟ resulting in employees‟ low morale and

motivation level. For instance,most organization in Indiafails to accept the concept of working

from home.


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3. High employee turnover due to low employee satisfaction level contributed by poor work

environment, doing non related work, low salary, heavy workload, etc.

4. Manyorganizations in India also lacked in leadership development strategy.

Further, Robert Hoffman, 1995 highlighted the ten rationales as to why and organisation should adopt 360

degree appraisal. Authors explanations are discussed below.

1. Define the core competencies of the organization which serve as an instrument between

organization strategic plan and performance expectations.

2. Focus on building customer experience for enhanced customer satisfaction. 360 degree

reinforces Total Quality Management (TQM).

3. Team based culture important for achieving organizations objectives thus, 360 promotes team

building.

4. 360 also allow greater employee‟s participation at all levels.

5. Decreases hierarchies such as bureaucracy and red tapes, promotes streamlining.

6. Detects barriers to success by planning training needs that is required to develop the necessary

skills.

7. Use 360 as a developmental tool for long run effectiveness.

8. To eliminate discrimination, errors of leniency, personal bias and subjectivity.

9. Identifies performance thresholds for career development.

10. Can be easily implemented by HRD staff or outside consultant compare to other assessment

systems.

Figure 2: 10 reasons you should be using 360 degree feedback

The 360 and 720 appraisal feedback can make a difference in organization since this tool

enhances the effectiveness of the employees as well as allows superior to be employee-centered (Bowers

et al., 1966). John & Jeffrey, 1997 further specified that for an effective and efficient utilization of 360 or

720 degree performance appraisal, organizations must account the following factors:


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1. It is vital for organizations to have clear set of standards and goals that to be followed before the

implementation of the appraisal system.

2. Time factor is important in amassing information therefore, organizations must set up information

technology (IT) system to process, pool and store data. Today ,many firms already use Enterprise

Resource Planning (ERP) systems for execution, analysis and evaluation.

3. Feedback or analysis received through these systems should beused for continuous manpower

improvement programs and to check whether the standards and goals are met by their employees.

Moreover, the feedback process of 360 and 720 degree helps to identify individual, manager or

leader‟s areas of strength and weakness which requires continuous learning and improvements as

described in Diagram 5. 360 and 720 degree assessment feedback tool is also used to provide insights into

effective performance roles, activities, styles, traits, qualities and competencies (Rao, 2014).

Diagram 5: 360 Degree Feedback

The congregated feedback data of 360 and 720 degree,laterserve in the preparation of developmental

plans, a basis for rewards, aligning individual and group goals and building organizational culture more

Individual

Manager

Leader

Recognize strengths and

leverage them

Areas needing

improvements

Awareness through

communication

Explore new areas to

make an impact


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objectively (Rao, 2014). Even though the organizational culture in India has reached a level of maturity,

however there are limitations to its applicability (Rao, 2014). The absence of clarity in performance,

feedback process and strong human resource management policies may lead to a dysfunctional 360 or 720

appraisal systems. Current human resource management policies in Indian businesses are determined by

the following factors (Tenneti, 2012).

1. By community interest or impact of pressure groups such as politicians, social reformers and

union leaders. For instance, reservation of a particular position of a job for a specific caste.

2. Strong political support and the existence of pro-labor laws which decides on the policies related

to recruitment, career development, transfer and even retirement.

Thus, as long as these factors persist, the appraisal system fails to make the required impact in the

organization. Rao also stated that the application of 360 should not be done at individual level, and must

involve the organizational level data and backing it up with appropriate training programs.

Conclusion

One of the TVS Group Company, Joint Managing Director of Sundram Fasteners,Arathi Krishna

once highlighted that “the employees of today are different. Their loyalty is not deep and they resent a

paternalistic approach. They expect the workplace to be innovative, attractive and progressive or else

they leave” (Madhavan, 2011). Today not only feedback is important however the organizational

environment and culture also an important aspect of aligning, retaining and motivating employees.

Theorganizations can use any form of appraisal toolprovided that there is right work

placeatmosphere,attitude,perception, culture, follow-upmechanism and training that seek for further

employee‟s career improvements.

References


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