Wednesday 28 May 2014 8:02 pm

Peer ratings: The future of feedback?

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Crowdsourced assessments spot the real stars, but risk turning into popularity contests

VERY few of us look forward to the annual performance review. And according to a survey by employee recognition company Globoforce, 45 per cent of human resource (HR) managers don’t think these meetings function as an accurate appraisal of an employee’s work. But would it be much better if businesses paid more attention to peer feedback, rather than just the judgement of line managers?

Technological advances have made what would once have been a cumbersome process remarkably slick. Video games developer Valve, known for its “flat”, managerless structure, uses peer feedback technology to allow team members to rank each other based on key metrics (skill level and technical ability; productivity and output). The scores are then aggregated, and used to generate a figure expressing an employee’s “relative value” to the company. Even the professional services giants have jumped aboard the peer rating bandwagon, with project staff ranking each other (across pay bands) to help determine bonuses. So is “360 degree feedback” the future?

“Peer assessment can be highly effective,” says Andre Spicer, professor of organisational behaviour at Cass Business School. He points out that the current use of computer software belies the fact that peer assessments have always played a role in shaping the unofficial pecking order in a firm. Word spreads quickly around an office, and employees “on the ground” often have a better idea of who’s doing well than the management. Peer rating technologies only formalise and streamline this process, the system’s proponents argue. Those who consistently make the best contributions to a project will quickly rise to prominence, rather than just the employees who do the best job of sucking up to the high brass.

And peer evaluations are a particularly valuable form of feedback. Writing in the Harvard Business Review, Globoforce’s Eric Mosley argues that “social recognition is the epitome of effective reviews” – we all care what others think of us, and the prospect of peer recognition can be a powerful motivating factor – far “purer” than the top-down box-ticking of the annual performance meeting, he argues.

But negative peer feedback can be especially crushing, and studies suggest that the effect this can have on employee motivation could cancel out the benefits. Researchers at the University of South Carolina found that negative ratings produced “significantly lower perceived performance, cohesiveness, satisfaction, and peer ratings on a subsequent task.”

And Maury Peiperl of IMD Business School has argued that peer feedback is subject to the “Paradox of Roles” – employees are expected to act simultaneously as supportive colleagues, and hard-nosed judges of performance. Striking a balance is difficult – staff don’t necessarily have the incentive to act as an impartial spectator. This is where the Halo Effect can creep in, warns Spicer. Likeable character traits (smiling a lot, and general affability) often artificially boost the ratings of some employees at the expense of equally productive, but slightly misanthropic, colleagues. Peer assessments rapidly degenerate into office popularity contests if not managed properly.

But the issue, according to Spicer, is using only one form of assessment, rather than anything unique to peer ratings. “The best organisations use a mix of metrics, with peer review used as one part of an overall picture.”

Get to know your peers
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If you’re going to be writing the performance assessments of colleagues, it’s probably worth at least remembering who they are. Colleagues is a corporate directory app that allows you to quickly see contact details for each employee, how they fit in the corporate structure, and who they work with.