Performance Management Systems: How Do You Decide Which Method Truly Works?

As there are several ways in Performance Management Systems (PMS) rather than in the performance appraisal system, how do we justify which method is more effective? Whether it is forced distribution (bell curve) or 360-degree feedback, what are the criteria for determining effectiveness?

360-Degree Feedback: A Tool for Development

360-degree feedback is more useful for obtaining input from the environment about areas of development or to find out how the environment perceives people as business leaders. Therefore, it is a preferred option for managers and above in an organization.

If managers, in their development, are trained and tuned up for the appraisal of their subordinates, the Performance Appraisal system becomes objective and thus more acceptable across the company. Additionally, if the performance evaluation is goal-based, the concept of accountability sets in. All these factors together have a positive impact on the growth of the business.

You may choose what suits your company best since you know better about your business and its needs.

Thank you so much for your reply. I would like to mention that forced distribution is very budget-specific and hence widely accepted across industries. On the other hand, a more open organization can utilize 360-degree feedback.

It varies from company to company. The Performance Management System (PMS) depends on the company culture, business model, and the maturity of its HR department, etc. Suddenly, you can't jump to a conclusion just by reading a few materials; it depends on the talent structure:

1. What talent base does your company have?
2. What are your future plans for the next 3-4 quarters?
3. Do you have any retention plans or systems in place?
4. What is the pay structure, perks, and incentive structure you offer?
5. Does your HR department have the necessary backups, resources, and manpower to support the entire PMS process? Is the department ready for the new venture financially, and is it mature enough to start such a new process all of a sudden?
6. What performance model will suit your business model and sentiments?
7. What modifications or additions do you need to make in the process?
8. Do your employees possess any knowledge about PMS, any literature regarding performance, and why it is important? For example, if you use Key Results Areas (KRA) based PMS appraisal, then your employees should know what KRA is and how it differs from normal responsibilities and duties.
9. Is your talent base ready to accept the change in company culture?
10. Always remember, no one likes to be appraised by someone else. So, it's not an easy task; employee sentiments and growth are attached to it. It's very crucial. A single mistake can backfire in a bad way.

Thank you so much for the reply, Soumik.

Comparison of Forced Distribution and 360-Degree Feedback

Nashbramhall, it is not at all a hypothetical question. I want to know, in general, where forced distribution has several merits and demerits but is widely accepted. At the same time, 360-degree feedback is gaining prominence. So, why are companies considering it better than forced distribution?

Please reply; it's urgent.