Performance appraisal systems serve many purposes, such as providing formal feedback to employees on how they stack up with respect to the organization’s performance standards, serving as input for compensation decisions, identifying areas in which future development is needed, reinforcing good performance, providing input for promotional decisions, and establishing the documentation needed to justify termination of employment. Nonetheless, while performance appraisal is one of the fundamental activities in human resources, it has always been a lightning rod for criticism and has recently come under renewed attack as indicated in this chapter. Some criticisms of traditional performance appraisal systems, in which supervisors appraise subordinates, are that they frequently do not provide good assessments of managers. More specifically, traditional performance appraisal systems often do not provide accurate evaluations of opportunistic managers who take advantage of their own subordinates in order to enhance their superiors’ perceptions of their own performance. For example, such managers may not give credit where credit is due, such as to employees who may have created an innovative process that helped improve the unit’s productivity. Instead, they may attribute improved performance to their managerial skills and take the credit for themselves. With this background in mind, there is much to be learned from the experiences of the Otis Elevator Company. The company had concerns that its old paper- based performance appraisal system was too slow and cumbersome. There were also concerns about whether the raters could be assured of the confidentiality of their ratings. Because of these problems, the company wanted a better sys-tem for appraising and developing the performance of its engineering managers. Specifically, the company was interested in enhancing these managers’ project management and project team leadership skills. The engineering managers needed substantial improvement in their skills, and the company wanted a performance appraisal system that would provide feedback from the managers’ sub-ordinates, peers, and customers as well as their direct superiors. 1 Given these concerns, it is not surprising that Otis Elevator decided to develop a 360- degree feedback system. With 360- degree feedback systems, superiors, peers, and subordinates evaluate managers. The innovative aspect of the company’s approach to the 360- degree system is that the company decided to base the system on the Internet and its own intranet. An independent contractor, E- Group, developed the system and handles the collation and analysis of the feedback information. 2 E- Group chose a 75- item survey called LEAPS, which measures seven dimensions of leadership, for the 360- degree instrument. The instrument was loaded on a Web site so that all raters can pull up the information and complete the appraisal in approximately 20 minutes. After completing the appraisal, they simply submit the results via e- mail to E- Group to process. Because the system is encrypted, the company is able to provide greater confidentiality and anonymity for the raters than with the previous paper- and- pencil system. In addition to the LEAPS items, the company included a fairly large set of other items to assess managers’ technical competency and their contributions to the business. E- Group was able to provide appraisal profiles for the managers within three days after the last of the evaluator’s e- mailed their input for the manager. In addition, the profile of actual ratings for each manager from E- Group also includes an ideal leadership profile developed by Otis executives. By comparison on his or her actual ratings with the ideal profile, managers can identify areas for future development. Otis Elevator chose to use the system only for develop-mental purposes, although recently it began to consider other purposes for the system.

Questions

1. Aside from the advantage of instantaneous transmission of information, what other advantages do you see with this type of performance appraisal system on the Internet?

2. What problems do you think Otis Elevator experienced once the 360- degree system was successfully implemented on the Internet?

3. In the past, many human resource professionals have been almost obsessed with the forms or format used in performance appraisal systems. How is the Internet application of 360- degree performance appraisal systems different from the old obsession with form or format?

4. What else is accessory to help ensure that a performance appraisal system will be successful? How would you determine if the system affects the firm’s performance?