360 Feedback and Appraisals in the Oil Sector

INTRODUCTION

This chapter intends to provide background information on the nature of the present study, its purpose and significance. It is divided into four seven sections. The first section presents the overview of the study. The second part presents the problem statement of the study. The third part presents the setting of the study. The purpose of the study and its significance are revealed in sections four and five respectively. The sixth part presents the limitation of the study. The final section presents how this study is organized.

1.1 OVERVIEW

In our contemporary life, Establishments have seen some remarkable changes in the way they are organized and conducting their business. Traditional management techniques are no more effective in the competitive era, and companies are looking for new methods to manage effectively their employees. To stay in a competitive position, companies need to attain the highest productivity ratings possible. This requires higher performance from their employees, and for an increasing number of companies, the best way to achieve this is by assembling them into work teams, evaluate their performance, and enhance it by providing appropriate training course. Companies are aware that their employees require specific support structures, leadership, and performance management to function at their highest level and ensure both employee and their satisfaction.

In the same base, companies are realizing that performance appraisal is an important part of their organizational success. Organization top management typically assumes that providing employees with feedback about their performance makes it more likely that performance on the job will be improved. DeNisi and Kluger (2000), who has many contributions in the field of Human Resource Management, suggested that it is widely accepted that feedback is an essential component of an effective performance improvement strategy.

Furthermore, the Literatures of Human Resources management reveals that performance feedback increases job satisfaction and motivation (Hackman and Oldham, 1980). Organization top management that adapted a appraisal feedback approach should emphasizing that individuals learn on the basis of receiving feedback on their performance (DeNisi and Kluger, 2000). Thus, performance feedback plays paramount important role in numerous institutional activities such as career development, job satisfaction, motivation, and performance management.

Recently, and because of the great stress from external customers and stakeholders, organizations top managements all over the world seek vividly to reveals how well their employees perform on their jobs and tasks. Yet it has probably caused more controversy, applied research and practical advice than any other assertion in the history of management writing and thinking. The challenge is that both applied scientists and managers have simply been unable to provide complete feedback about job performance that satisfies an employee’s need to know how well he/she has done and where to improve (Kavanagh, 1997).

The traditional appraisal system works basically on top-to-down evaluation, employer always evaluate their subordinates. As it is single source feedback, employee performance evaluated from just one point of view and the information received one limited. Despite the predominance of feedback mechanisms in management interventions, however, single approach-feedback is not always as effective as is typically assumed.

Organizations become more aware of the limitation of single source feedback that hampers the evaluation process. The current efforts of organization management has shifted it concern from single feedback to evaluating their employees by receiving feedback from different sources in the organization as they seeking to collect the largest amount of data from all levels unlike the traditional approaches.

A relatively recent development in this context is a concept that has been termed “360 feedback” or “multi-rater performance appraisal”. The 360 feedbacks or multi-rater is one of the vehicles that is used to facilitate performance feedback and therefore deserves attention at an academic and practitioner level. The 360 feedback refer to the circular that feedback coming from different direction peers, subordinates, supervision, manager person him/her self and others for two purposes development and assessment tools. Coates (2008) uttered that multi-source appraisal became popular on the corporate since 1980s and at this time was mostly used it as an executive development tool.

The 360 appraisal system add one new criteria that was not included in the traditional appraisal system that is to focus on human behavior including employees competency and skills and thus emphasizing that it should be evaluated (Chawdron, 1990). The 360 feedbacks is consist several steps to implement in right way and to ensure success for this process. This approach should be start with set some issues to follow then to involve in this process (Chappelow, 1990).

The basic idea of 360 feedback is relaying upon two main theoretical principles. The first is that utilizing multiple sources yields higher quality, more valid, more reliable information than single source appraisal (Church and Bracken, 1997). The information collected is usually more reliable, as three or more different raters there is less chance of positive or negative bias. The information is usually more detailed, because when several different sets of feedback are combined they provide more information than just one. It is also more extensive, since there are several different people contributing their perspectives and each interacts with the rater in a different manner or capacity.

The using of 360 feedbacks as performance measurement approach provides more comprehensive information than most traditional methods (Waldman, 1997). In most cases the ratings are multi-directional – they can come from the employees co-workers, internal and external customers, and his/her subordinates (Waldman, 1997). When used effectively, 360 feedback can improve leadership and management abilities, increase communication and learning, assist employee and organizational development, improve customer service, promote teamwork and organizational change, and increase productivity and efficiency (Edwards and Ewen, 1996; Yukl and Lepsinger, 1995).

As the current study attempts to examine 360 feedbacks in the oil sector in the state of Kuwait, thus it’s important first to explain the current status of this sector. Next, the researcher presents brief introduction about Kuwait and the oil sector companies.

1.2 THE SITTING OF THE STUDY

Kuwait’s trade surplus continued to grow upwards since 2003. The Kuwaiti economy continues to rely on oil sector as its major driving force since that time. Oil represents more than 90 percent of Kuwait export earnings and 80 percent of budget revenue. In addition, oil industry is a public sector that dominates the economic sphere in terms of ownership and management of most activities.

On annual basis, both years 2007 and 2008 persist to witness ongoing growth in trade figures to support the prevailing economic growth and development projects in Kuwait. This was coupled as well with ongoing increased production levels of oil and upward prices at end of 2008. According to the latest figures from CBK, Kuwait witnessed trade surplus reaching a new high of KD15.1bn over last year’s surplus of KD11.7bn. As for the whole year, despite such decline, trade balance is estimated to report a surplus of KD2.1bn. Looking forward, Global research has expected the financial turmoil and declining oil prices to have much more impact on trade surplus to decline by more than 20% for 2009 (www.globalinv.net).

However, the recent reports and researches indicate that Kuwait economy has significantly affected by economic crisis in 2009 and may post much lower growth for the year. For the year 2009, the expected the real GDP growth for Kuwait could be marginal. The oil prices, which are the significant drivers of Kuwait economy, are expected to remain in the range of US$40 to US$50 per barrel for the year 2009. The projected oil prices for 2009 are much lower than their average levels for 2008. However there are chances of higher oil prices in the second half of the current year if the global economic condition stabilizes. This will be helpful for Kuwait’s economy. Looking further forward to 2010, research expected that economic growth will be higher than 2009 as expect to see stabilization in the world economic order by then (Global Investment House report, 2009).

The public sector in the state of Kuwait and institutions are using the traditional top-to-down evaluation systems since institutions have ever emerged, moreover, the private sector also using the same approach to evaluate employee’s performance. Recently, few banking retails have applied the KPI’s (Kaplan approach). Coming to the oil sector establishment, the oil sector in the only public sector in the state of Kuwait that adopted 360 feedback approach since 2006. Development purpose is the main reasons why this approach implemented. Recently, oil companies have taken an action to collecting historical data to implement it as an appraisal system, however only one company has implemented 360 for both development and assessment objectives.

The current study attempts to investigate Kuwait Oil sector companies by exploring employee’s perspectives toward 360 feedback as instrument for development assessment and employees career plan. Next the researcher presents problem statement of the study.

1.3 PROBLEM DEFINITION

To manage the employees performance, appraisal system should been implemented in all organizations. (London and Smither, 1995; Walker and Smither, 1999, Church and Bracken, 1997; Yammarino and Atwater, 1997) There is relationship between organization mission and appraisal system, it means that through evaluating employees’ performance organization can guarantee achieving their objectives, by assess the actual performance of their employees.

Several studies indicate that the use of 360-degree feedback helps people improve performance (Hazucha et al., 1993; Walker & Smither, 1999). Multi-rater feedback use steadily increased in popularity, due largely to the use of the internet in conducting web-based surveys (Atkins & Wood, 2002). Today, studies suggest that over one-third of U.S. companies use some type of multisource feedback (Bracken, Timmereck, & Church, 2001a). Others claim that this estimate is closer to 90% of all Fortune 500 firms (Edwards & Ewen, 1996). In recent years, internet-based services have become the norm, with a growing menu of useful features (e.g., multi languages, comparative reporting, and aggregate reporting) (Bracken, Summers, & Fleenor, 1998).

In contrast, many authors indicated that the 360 processes are much too complex to make blanket generalizations about their effectiveness (Bracken, Timmreck, Fleenor, & Summers, 2001b; Smither, London, & Reilly, 2005). The fact that feedback relied on multi level and source of feedback bring another draw back from middle-manager of how they evaluated by the lower-level management. In other hard subordinate refuse to feedback their managers because of fear of put in danger their relationship with top level probability and affect their evaluation score as consequence. Smither et al. (2005) suggest, “We therefore think that it is time for researchers and practitioners to ask, “Under what conditions and for who is multi-source feedback likely to be beneficial?” rather than asking “Does multi-source feedback work?'”

Previous studies conducted on the topic of employee’s performance assessment and training development has extensively studies the implementation of 360 feedback approach and its advantageous over the traditional single-approaches. However, few studies have studied employee’s perspectives toward the implementation of this method. Quantitative studies are rarely done in organizations to ensure that training is effective (Carnevale and Schultz, 1990; Stephen et al., 1988). The similar is true also of management training based on 360 feedback approach (Church, 1997). Most of the previous studies have been conducted in the United States and in Europe context. Since there is a scarcity of works on the topic in East Asia, especially in the Middle East countries, this study attempts to partially fill this need through an empirical investigation of the effectiveness of using 360 feedbacks in the oil sector and from the employee’s perspectives.

In the state of Kuwait, companies in the oil sector are concern to accomplish its objective and its purpose. The only path to ensure that these establishments goals are satisfied is to improve employee’s performance by obtain better evaluation methods and approaches. Organizations in the oil sector are implementing 360 feedbacks since 2006 for development purpose as an alternative to traditional single-approach methods (e.g. up-warding methods). However no study has indicated that reveals employees perspectives and attitude toward this approach.

Thus the current efforts attempts to examines critically the introduction of 360 feedback in the oil sector in the state of Kuwait, which has recently moved to make 360 feedback available to all of its managers and employees. The paper explores three specific issues. First, it examines the organization’s rationale for the introduction of 360 feedback. Second, the effectiveness of this approach and, third, it evaluates employees perceptions of the value of the 360 feedback scheme used in the oil sector companies.

1.4 RESEARCH OBJECTIVES AND QUESTIONS

The objective of this study to provide empirical-based evidence on the usefulness of 360 feedback and explore employee’s perspectives toward this approach as development instrument for employees training and career devilment. In state of Kuwait, the 360 feedbacks as development approach are rarely implemented. The researcher argues that oil sector only has fully adapted this approach. The current study attempts to examine the oil sector setting in the sate of Kuwait. Thus to examine employees perspective toward this approach is necessary and justifiable.

The researcher examines this approach in two large establishments in the oil sectors. The study seeks to measure the 360 feedbacks from several issues; acceptability, level of involvement, and more that will be mentioned in chapter two. Hence, the study will investigate the 360 feedbacks system before apply it as an appraisal system. They main focus of the current study is to explore the effectiveness of the 360 feedbacks as appraisal system from employee’s perspectives.

The current study attempts to provide empirical-based evidence for the following questions:

What are the general perspectives of the oil sector employees toward 360 feedback?

From employee’s perspectives, what is the degree of acceptability of this approach from employee’s perspectives?

How employees agree/disagree with the Benefits of the 360 feedbacks system?

How employees agree/disagree with Effectiveness of this approach?

1.5 SIGNIFICANCE OF THE STUDY

The significance of this study is the potential contribution at two primary levels: theoretical and practical. At the theoretical level, the present study is expected to bridge a gap in the literature for empirical research focusing on the effectiveness of the 360 feedbacks as appraisal system from employee’s perspectives. For the practical contributions, this study is expected to make a contribution by providing additional evidence that top management may considered when implementing this approach and to avoided any problems that may arise. Exploring employees perspectives toward this approach is very important to the top management in order to understand how to better implement and conduct this approach.

1.6 LIMITATION OF THE STUDY

The limitation of this study lies in the differences of demographic and personal factors. The current study has selected only two establishments in the oil sector to investigate employees perspectives toward 360 feedback approach. The limited response rate also considered one of the study limitations. Finally, other studies are required for the purpose of generalization. Finally, the result of the current study may not be appropriate to generalized to other sector or GCC countries related to differences in demographic factors.

1.7 THESIS STRUCTURE

This study expected to comprise six major chapters. Chapter 1 provides a discussion of nature, purpose and significance of the study. Chapter 2 presents an extensive review of the literature on bank selection criteria for the purpose of laying out the theoretical foundation of the study. Chapter 3 presents research methodology, it discuses the population and sampling, data collection procedures, questions of the research and instrumentation. Chapter 4 presents the result of data analysis. Chapter 5 reveals the discussion of the study. Finally, chapter 6 presents Summary, conclusion and other implications of the study.

CHAPTER TWO

LITERATURE REVIEW

In this chapter, the researcher presents previous studies for performance appraisal and specifically the 360 feedback approach that could be the framework to understand and systematically analyze the effectiveness of this approach. The current chapter begins with explanation of the purpose of appraisal and reasons behind the need to measure employee’s performance. The researcher develops the literature with more intention given to the 360 feedback as an appraisal approach. At the end of this chapter, literature reviews are summarized.

2.1 PURPOSE OF APPRAISAL AND FACTORS AFFECTS EMPLOYEES PERFORMANCE

Literatures reveal that the appraisal is inspirable management tools to improve organization performance. Organizations use these appraisals systems in order to satisfy many objectives and purposes. However, these purposes vary from one company to another but rarely. “The main purpose of the performance appraisal is to further the organization’s purpose by strengthening the performance of every member of the organization” (Grote, 1996). Furthermore, Grote (1998) has suggested that the most common objectives purpose of the appraisal system could be summaries as follows:

To identify training and developing need to start with.

To assess employee actual performance and compare it with the desired performance during specific period of time. To support the strength and reduce the weakness.

To determine the job need and do recruitment modification for the future.

To develop the relationship between manager and subordinates avoiding jeopardize relations.

To do change if needed for the payroll and round system.

To receive feedback that could take part in manager’s decisions.

Setting and measuring goals.

Confirm the good decisions.

Previous studies reveals that those organizations concern of cost and profit as major objectives in their mission may review financial data related to cost and gained profit in specific period then to based on it they take an action toward it (Niculite, 2007) Many studies emphasize that there are factors affects organizations growth and employees performance. But it is different from one organization to another depending on the company’s industry wither it is technological, investment, electronic, service provider and etc. (Industry system research, 2002). Even individual differences effect their reactions toward these factors. Hence, employee’s performance varies from one organization to another for many reasons:

Environment: in this factor it is required to provide all needed issues to start job with comfortable atmosphere, people like to work in place let them to feel comfortable not stressed from their managers. Because it is hard to involve in any assigned task in such environment (Bruce, 2003). Managers encourage people to motivate themselves to work as desired. This occurs by appear managers concern of people to stratify both parties organization and employee to highly productivity and best outcome and others factors related are to share feeling and positive experience, this could happened once a week. Furthermore, to ensure sufficient training to do work as planned.

Experience: Human with long experience in this field will lead to high productivity unlike new person who just start his job in the same filed, but it is not rule. It illustrate that employee with previous experience have a background of how to involve job better than whose first time participant. It will affect his productivity (Heska, 2009).

Personal problems: getting your own problems to workplace affect your behaviour in workplace. It could lead to task mistakes and lower level of productivity as consequence your colleagues will be bothered from repeating complaining from you and could affect their mood on doing work (Guerin, 2007). In similar cases manager should take an actions to solve these types of problems.

Rewarding system as motivation: Organization must pay attention to those high qualified employees with skills and talent in managing their job (Lawler, 2000). Through this rewarding system you support this group of employees and emphasize their motivation.

Lower level involvement in set company’s mission: the lower levels employees involvement in set organization objectives facilitate achievement the desired goals. It will affect in better performance because they understand what they should do (Worley and Cummings 2008).

wages and salaries: there is link between job satisfaction and salary, any employee build his decision to accept his new job on how much they will pay, they need to be satisfied to accept this job or they will not accept. The concern seeking higher salary with less responsibilities or it affect their performance in negative way (Streingold, 2007).

The majority of organizations considered performance evaluation measurement as one of the top priority of the top management. However, the importance of this approach varies depending on the nature and objective, Job tasks, and the organization process. Studying human resource management reveals that person behaviour is significant aspect to be evaluated although it is difficult to be measured. In addition, the productivity level outcome from each person should be measured regardless the activity of the organization. Service or product it will be assessed depending on desired goal of productivity

2.2 THE 360 FEEDBACK: DEFINITION AND PURPOSE

Feedback in general describes the situation when output from an event or phenomenon in the past will influence the same event in the present or future. Multi-rater feedback, 360 feedback; co-worker feedback; multi-perspective ratings; and full-circle feedback are just a few of the names used to describe this type of feedback. The literatures reveal that there are numerous contribution that propose definitions of the 360 feedback approach. “Feedback from multiple sources or ‘360 feedback’ is a performance appraisal approach that relies on the input of an employee’s superiors, colleagues, subordinates, sometimes customers, suppliers and/or spouses” (Yukl and Lepsinger, 1995). In the same base, Tornow (1993) observes that in 360 feedback approach, feedback about a target individual is solicited from significant others using a standardized instrument.

Yukl and Lepsinger (1995) explained that 360 feedback approach is a performance appraisal method, while Jones and Bearley (1996) has defined 360 feedback as “the practice of gathering and processing multi-rater assessments on individuals and feeding back the results to the recipients”. Hoffman (1995) uttered that 360 feedback is: “an approach that gathers behavioral observations from many layers within the organization and includes self-assessment”. Clevland (1995) has defined this approach, he said that “its one to provides accurate, complete, and fair evaluation for each person’s performance and that provides information useful to both organization and individual”

In explaining this approach, Hoffman (1995) has suggested that the feedback receiver completes the same structured evaluation process that managers, direct reports, team members and sometimes external clients use to evaluate an employee performance. Lepsinger and Lucia (1997) point out that the 360 feedback process involves collecting perceptions about a person’s behavior and the impact of that behavior from a number of rating sources. Therefore, a 360 feedback approach seeks to relay feedback to the receiver regarding an employee behavior in the workplace and how it affects other organizational members that work with that employee.

In an era where the boundary less organization is gaining increasing currency, the concept of 360 feedback seems to fit very well with the tenets of this approach to organizational theory (Ashkenas et al., 1995). Walton (2003) has elaborate the concept of 360 feedback and uttered that “360 feedback is the process of formally judging the value or quality of person or thing for managers, as employee evaluation is core mean for ensuring effective employee performance”

More recently, Steven (2007) has confirmed the similarity of these definitions. He uttered that “the analysis in term of initial objectives, and estimate usually made of accomplishment using an automatic data processing to provide information on operating and identifying action require if any”. Erasmus (2009) suggested the concept of 360 feedback is a formal and systematic process by means of which the job-relevant strength and weaknesses of employees are identified, observed, measured, record and developed”.

For the purposes of this study, the term 360 feedback is employed. Figure 1 presents a graphical representation of potential evaluator in a multi-source appraisal system.

Supervisor

Subordinators/

Direct reports

Suppliers

External Customers

Internal

Customers

Other Boss

Cp-workers

An employee to be

evaluated

Figure 1: potation evaluator in multi-source appraisal approach

Source: Lepsinger and Lucia (1997)

The figure reveals that the most commonly employed rating sources are the boss, subordinates, self and peers. In some organisations there is a more limited use of feedback which does not include all the evaluator and these types of feedback systems can be termed: upward appraisal; subordinate appraisal; reverse appraisal; co-worker feedback or colleague assessment.

Literatures explain that there are varying forms of the 360 feedback process, for example 270 feedback that considered one source of feedback is omitted such as customer ratings. Another form is 180 feedback where it is only peers that provide feedback (Peters, 1996). The study of Handy et al. (1996) suggested that some organizations use an extended version of the 360 feedback process which is termed “540 feedback”, because suppliers and external customers are included with the other evaluator. However, it is acceptable to use the term 360 feedback or multi-source feedback, even if the process does include suppliers and customers as evaluator.

The use of 360 feedback presents accepted method for both enhancing the learning of the participants and improving the evaluation process. Feedback is seen as a essential element in affecting change in an organization (Bennis et al., 1969). According to Zemke (1995) employees undertake learning experiences if they see necessitate for a new or different skill or knowledge. Studies explain that when 360 feedback is presented in an organization, top-management can see clearly the skills they need to improve their employees (Shipper et al., 1991).

The implementation of 360 feedback is the first step in Lewin’s (1948) model that suggest this approach is necessary to enhance the learning process. In addition, adapting 360 feedback approach before and after the training, the first step in evaluating the effectiveness of the training can occur. In addition, the second round of feedback can be used both as review of past learning and also an enhancement for future learning.

In his study, Kirkpatrick (1976) suggested that the data from the second round of 360 allows one to examine for positive changes in the subjects’ managerial skills and for the collection to come from a source other than the manager. By definition, as explained above, 360 feedback observations are collected from the employees as well as from the manager, the superior to that manager, and the peers. Qualities of studies have reveals that the employees’ observations of the managers’ behaviours have the highest correspondence of all four with performance (Schriesheim and Kerr, 1974; Bass, 1990; Clark et al., 1992; Shore et al., 1992). Thus, collecting 360 feedback forms both before and after the training may both improve the learning and provide the required data to evaluate the training.

2.3 THE 360 FEEDBACKS AND TRADITIONAL APPRAISAL SYSTEM

After explaining the importance of performance appraisal and defining the 360 feedback system, its very important here to clarify the differences between this appraisal and the traditional Top-Down appraisal. Review the literatures, many academics and practitioners argue that the performance appraisal process has traditionally been viewed in a negative light in many organisations, even though it is a very important element of the overall performance process. In his study, Meyer (1999) argues that most managers see performance appraisal as an “onerous and distasteful” chore that has to be carried out.

Old literatures reveals explain that the performance appraisal considered as an unpleasant activity for both top-management and managers that is either avoided or carried out in a hurried or automatic manner (Lawler et al., 1984). Furthermore, in their study, they explain that managers dislike the performance appraisal process so much that, without administrative pressure to perform it, they will not carry out appraisals with subordinates at all. Later, Taylor (1995) assist Lawler by suggesting that performance appraisal system is a practical challenge to all involved in the process.

The prior study Napier and Latham (1986) uttered that an organization employees often see no value in the performance appraisal interview and view it as another organisational intervention which does not, in reality, have a significant influence on their performance or development. They explain that managers performance evaluation may depend more on unit performance than on observations of the individual employee’s actual behaviour.

Folger (1998) give details explanation for the complications associated with negative feedback in the context of the performance appraisal interview. They explain that most managers dislike giving negative feedback and they are as well not skilled in providing it. As a result, evaluations are often positively inflated. If this is the manner in which the interview is conducted, the effectiveness of the performance management process is significantly undermined. Meyer (1999) finding assess Folger (1998) explanation, he explain that because of inaccurate performance feedback, an organization employees may have a distorted view of their actual performance which will then be inconsistent with administrative decisions on issues such as salaries and promotions.

In his study, Longenecker (1997) has collected a sample of 120 managers from top five US companies to investigate the factors that lead managerial performance appraisals to be ineffective. Longenecker study reveals that fail to focus on the issue of management development and performance improvement is the main cause of ineffecti