Peer performance review

Treat your peers well. They may soon be responsible for your performance reviews.

As some companies flatten out their management hierarchies and encourage more team-work, they’re doing away with traditional top-down, manager-led performance reviews and leaning more heavily on the rank-and-file for evaluations.

Through online platforms like Globoforce, firms encourage workers to give each other constant feedback. Globoforce

Some are using new online technology to regularly collect “crowdsourced” feedback. Others are asking their workforces to participate in more formal peer reviews throughout the year. The thinking is that more people can provide deeper insight into an individual’s performance than a single manager.

Hearsay Social Inc., a San Francisco-based social-media software company with some 90 employees, began doing peer reviews for all of its employees several months ago. (Before that, the company, which was founded in 2009, didn’t have a formal review process.) Each employee chooses several reviewers, and department heads identify other co-workers who might be able to provide relevant feedback.

In addition, any employee who wants to give feedback about another worker can chime in, says Steve Garrity, the chief technology officer. To help make the reviews more candid, the feedback presented to the employee is anonymous, he adds.

The system provides more valuable information about each worker’s performance than a review by just one person would, Mr. Garrity says. That’s particularly true at Hearsay Social, because it has very few formal managers, most employees work across multiple teams, and leadership changes from project to project. “We are decentralizing as much decision making as we can, so we also need to decentralize reviews,” he says.

But the process, which the firm plans to do twice a year, is also time-consuming and complicated, he says, and it may not work as the employee count grows. Some employees were tapped to review dozens of colleagues and worried they would have to spend days on reviews, he says, so the company is trying to streamline the system.

Crowdsourced evaluations go a step beyond traditional 360-degree reviews, which are generally more structured and often involve lengthy surveys. Usually under the 360 review process, a small group of designated peers, supervisors and direct reports submit their evaluations of an employee during a set period. And most 360 reviews are reserved for senior managers as part of leadership development, according to a 2011 study by the research and advisory firm Corporate Executive Board.

But critics argue that crowdsourced feedback may not provide better data. Like online restaurant or product reviews, feedback may gravitate toward positive and negative extremes, says Tracy Maylett, chief executive of DecisionWise, a Provo, Utah, organizational-consulting firm, who has conducted studies on reviews with multiple raters. Another potential downside is “rating fatigue” and lower quality information, he adds.

John Sullivan, a professor of management at San Francisco State University, says that crowdsourced reviews can create irrelevant noise because some reviewers may not know much about the job description or duties of those they are appraising.

The new breed of feedback is aided by a growing number of employee-recognition software programs and social networks that enable workers to post quick real-time comments, sometimes anonymously; solicit “how am I doing?” feedback; or post praise or recognition for a colleague. Among these programs, whose offerings vary, are Salesforce Rypple, a unit of Inc. CRM +0.37%; ViewsOnYou; Checkster; Globoforce; SendLove; DueProps; Laudits; WorkSimple and iDoneThis.

LivingSocial, a Washington-based daily-deal company with some 5,000 employees, uses Rypple to allow workers to comment any time on peers’ work. “Anyone can give feedback to each other, private or public,” says Jennifer Trzepacz, the vice president of human resources for LivingSocial, which has some 5,000 employees.

LivingSocial takes peer recognition into account as part of its quarterly performance reviews, and it uses peer feedback to help set bonuses, she says.

LRN, an advisory-services firm with nearly 300 employees, last year began letting workers determine their own performance rankings and bonuses through the “Principled Performance review process.”

As part of the system, each employee selects 20 peers to grade them on about 40 set questions about their performance, such as “can be trusted to timely execute on commitments made” and “seizes authority and takes responsibility, especially during times of change.” After reading through all the reviews, the employee rates himself. That rating is later published internally for everyone to see.

CEO Dov Seidman says he has seen very little “grade inflation.” Last year, 70% of employees rated themselves as “fully met expectations” and received the full bonus amount. Another 11% said they “exceeded expectations” and got the full bonus plus 25%.

But 18% of employees conceded that they only “sometimes met expectations,” and they received just 75% of their bonuses. Another 1% said they “did not meet expectations” and forfeited their bonuses entirely. There were “very few cases” where Mr. Seidman felt the rating didn’t match reality, he adds.

Meanwhile, computer-security software maker Symantec Corp. symc +1.02% began using Globoforce in 2008 to help determine rewards. Managers were doling out big rewards to a small minority of employees after projects without explaining their reasoning, says Tom Aurelio, vice president of global human resources.
Last year, about 80% of the company’s 20,000 employees received recognition through the platform, he says. Employees simply nominate a colleague for retail gift card prizes, which range from $25 for good handling of customer-service calls to $1,000 for exceptional performance on a project.

Mr. Aurelio says the program has helped boost morale without increasing rewards spending.

The company is now looking into ways to integrate more peer-based feedback into its annual performance-review process. Symantec still largely depends on traditional manager-to-employee and 360 evaluations to determine bonuses and merit, he says.

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