Why External 360-Degree Feedback Benchmarks Should Be Avoided
Create internal benchmarks instead. They're more reliable and useful
Articles » Why External 360-Degree Feedback Benchmarks Should Be Avoided
External or cross-company performance benchmarks are a popular
request on many 360-degree feedback and performance review RFPs these
days. We're often asked about the feature from prospective clients both
large and small. Dig a little deeper, though, and the appropriateness
and usefulness of these nebulous metrics becomes questionable.
As a policy, we do not provide cross-company benchmarks. This is
because, in short, cross-company benchmarks are unsound from a research
and performance measurement perspective and provide little actionable information.
Creating them would also require that we intermingle client data, and
that runs counter to our confidentiality-focused belief that one
customer's data should never be used to serve another's account.
It's understandable to want to know how a particular employee's
performance or behaviors compare to his or her peers outside of the
organization. This is a particularly attractive proposition when
internal benchmarks are not available. However, external benchmarks are
generally nothing more than gimmicks when it comes to employee performance
management systems, and worse, they could land you in hot water legally
if used to render decisions of employment. Further, internal benchmarks
are easy to create with the right tools.
Below are a few more detailed reasons as to why we think external
benchmarks aren't worthwhile, along with tips on how to create
benchmarks that do provide valuable comparative measures.
Too Many Variables
Not all 360 reviews or performance review processes are alike, even
when automated with the same tool. In fact, across
companies, they are usually very different. From a research perspective,
comparisons of datasets are most reliable when variance is minimal. This
is rarely the case when dealing with HR surveys and performance reviews
Differences in content. Competencies and Items, though worded similarly might have
totally different purposes from one company to the next. Comparing
"communication" as a competency between two companies is difficult
because the behaviors evaluated might be completely different.
Rating scales vary. Companies on the EchoSpan system can employ
custom rating scales. Comparing results on unlike scales is very
difficult, even if scales have the same number of values if they are
measuring different things.
The role, tenure and skill level of participants vary. Though
two of our client companies might have the same exact review content
(unlikely), they could be using that content to survey two or more
different levels of employees. Comparing a line manager's "Team
Building" scores against those of Senior Vice Presidents isn't fair.
Even if results are segmented by title group, the problem isn't
solved as a Senior Vice President at a bank has a very different
skill set than a Senior Vice President at an aircraft manufacturing
Environmental factors influence review content and results.
Companies facing difficult economic times may use our performance
evaluation tools to decide the best approach for downsizing. During
times of economic ease, they may be used for decisions of promotion.
Lumping datasets together for the purposes of aggregate benchmarks often
ignores environmental factors that impact review results.
Benchmarks get stale quickly. Companies that offer
external benchmarks as a feature of their performance management
tools often tout that their benchmarks span years or even decades.
Benchmarking data gathered in the 1990s have little bearing on the
performance of the modern worker.
Think how much the importance of an item pertaining to "Uses and
understands communications technology" will have changed between
then and now.
The purpose of reviews vary. Some companies use 360-degree
feedback reviews as developmental aids. Others use them as
replacements or complements to performance reviews. Scores are
difficult to aggregate reliably when the purpose of the review isn't
taken into account.
Population Not Representative
Another complicating factor in relying on external benchmarks
provided by a performance management tool is the size and relevance of
their population. EchoSpan is a larger provider of review tools spanning
six continents and more than 3,000 client companies. We're regularly
running 3,000 to 5,000 reviews per day. Still, this is a tiny population
size for extrapolating overall employee performance statistics and
trends. What's more, our client base can be skewed to particular
industries or employee levels, making comparisons to other types of
And Then, There's Confidentiality
Creating benchmarks between clients means intermingling data. Even if
done in the aggregate and only with opted-in companies, this introduces
data security risks. It's our policy that all client information should
always be separated and never mixed. With EchoSpan, you can rest assured
that any data entered into the system is protected and only used for the
purposes of serving your company.
Use Internal Benchmarks Instead
With all of this in mind, does it really matter what other companies'
employees are scoring in competencies with the same names as yours?
All of this is not to say that benchmarks themselves aren't valuable.
They are. Internal benchmarking of peer employees is a better way to go
and can be incredibly useful in determining an employee's relative
standing. By their nature, internal benchmarks do away with all of the
problems listed above and are also easier to create.
With the EchoSpan system, internal benchmarks are generated and
presented automatically as part of every performance review or
360-degree report. They are even automatically isolated to an employee's
peer group, so you are assured that comparisons between similar
individuals are being made. These benchmarks also adapt themselves over
time so that you're always updating your comparative data points. As your
database of reviews grows, so does your benchmarking database.
Another alternative is to create benchmarks by surveying management
as to expected employee proficiency levels for reviewed behaviors. This
process can be conducted using an online tool like EchoSpan, and then
superimposed on employee feedback reports.