can 360 degree feedback predict potential

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T A WHO CAN GO FARTHER, FASTER? #6, The Potential Issue N T L E Quarterly

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TA

WHO CAN GO FARTHER, FASTER?

#6, The Potential Issue

NTLEQuarterly

TALENTQ i

THE POTENTIAL ISSUE SPECIAL DOUBLE ISSUE!

About Talent QuarterlyOur mission is to make organizations more successful by providing their leaders with the science-based, insightful and practical in-formation to make critical talent decisions. We accomplish that mission by publishing serious, provocative and practical articles and interviews that raise the quality of dialogue about talent.

We believe the current dialogue on talent issues provides few insights and little guidance to senior level leaders. We believe that an “honest broker” is needed to adjudicate the claims made by consultants and academics about the effectiveness of talent manage-ment practices and products. We believe that serious dialogue on this topic requires more than 500-word stories.

Print and digital subscriptions, issues and articles are all available at www.talent-quarterly.com.

Talent Quarterly is published by The Talent Strategy Group, LLC, One Penn Plaza, 36th Floor, New York, NY 10119. Talent Quarterly is protected by copyright and no part of it may be reproduced in part or in whole without the express permission of The Talent Strategy Group, LLC. All opinions are those of the article authors and do not indicate endorsement by Talent Quarterly or its publisher.

+ Talent Humor 42 + Start with the Science 49

Can 360-degree Feedback Predict Potential?Jack Zenger & Joe Folkman

1Removing the Politics from High Potential ProgramsBlaine Gaddis & Michael Sanger

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When Talent Reviews go WrongEric Hanson & Richard S. Wellins

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The Pursuit of PotentialAllan Church

29Potential: The Raw Material of the FutureKaren Strella, Jens Riedel, Tilman Gerhardt

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Are You Wasting Your Money on High Potentials?Joy Hazucha and Claudia Hill

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Coffee, Cupcakes and ChallengeKevin Wilde

57Getting Pragmatic about Potential: MasterCard’s David Deacon and General Motors’ Michael Arena

52

The TQ Interview: Robert Steven Kaplan

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Medical researchers are thrilled when a molecule that they have been studying in the pursuit of one therapeutic effect is discovered to have other posi-tive outcomes. For example, discovering a molecule that alleviates pain, reduces inflammation and low-ers a person’s temperature is an obvious winning combination.

This article raises the hope that when implemented thoughtfully and carefully, a process that has been successfully used for leadership development, may also be used for two other purposes, the assessment of a person’s leadership potential and for perfor-mance management.

Using 360 Data for Development 360 assessments have been found to be a valuable

tool that leaders have used to develop key skills and capabilities. Our studies have shown that leaders can make significant increases in leadership effectiveness by identifying competencies that need to be improved or strengthened, creating a plan for improvement and

executing on that plan. In a study of 882 leaders at five different organizations we found the majority of the leaders made significant improvements.

Throughout the years Zenger Folkman has been a strong advocate of using 360 as a developmental tool. To that end we have generally encouraged organizations to provide feedback to the participant engaged in a development process and advocated that the data not be accessed internally for any form of performance management, selection for promo-tion or compensation decisions.

We estimate that 85% of Fortune 1000 companies use 360 degree feedback as part of their develop-ment process for leaders. It is working well and could easily remain a prime example of the “if it ain’t broke, don’t fix it” group of activities in our lives.

Another need arisesHowever, over the years a few of our clients have

wanted to utilize the 360 data to help them in their performance management decisions. One CEO

Jack Zenger is a world-renowned behavioral scientist, bestselling author, consultant, and a national columnist for Forbes and Harvard Business Review. With more than five decades of experience in leadership development, he is recognized as a world expert in the field of people development and organizational behavior.

Joe Folkman is a globally recognized expert in the field of psychometrics, a frequent keynote speaker and conference pre-senter, a consultant to some of the world’s most successful organizations, and the author or co-author of eight books. His research has been published in the Harvard Business Review, Wall Street Journal’s National Business Employment Weekly, Forbes, CLO Magazine, and Training and Development Magazine.

Can 360-degree feedback predict potential?

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undoubtedly received feedback about the issues that led to their termination, they had made little effort to improve. The HR executives concluded that this lack of taking action and practicing self-development had an influence over the decision for them to be terminated from the organization.

Problems with Utilizing 360 for Performance Management

There are a variety of complications associated with the use of 360 for performance management or assessment of potential.

1. As soon as leaders realize that they may be judged harshly by some colleagues on the 360 process, they begin to attempt to manipulate the assessment. When they were the only person who received the feedback, they were open to asking a wide variety of respondents for their opinion. But when they are being evalu-ated for promotion or compensation, we see a much more careful selection of people invited to provide assessments. If the recipient of the assessment believes that someone will have a negative impression, they will obviously avoid asking that person.

Organizations have attempted to control for this by having a participant’s manager review the list of respondents to ensure that all key stake-holders are included. But they can’t control the subtle influencing by the manager prior to the assessment.

We frequently receive calls from a manager’s

commented, “One of the most challenging questions I need to figure out is, “Who are my star performers? You have data that predicts the correlation between leadership skills and organizational outcomes, so I want to know which people are my best performing leaders.”

Indeed, we had been able to show the CEO clear evidence that a leaders’ effectiveness as measured by our 360 assessment, predicted employee engage-ment, employee turnover, customer satisfaction, dis-cretionary effort, profitability and a variety of other outcomes. Having the evidence that this measure-ment tool can accurately predict valued organiza-tional outcomes provides ammunition for using it to predict who will succeed in the future..

Over the years we conducted a variety of studies that gave us confidence that our 360 results would be an excellent predictor of potential. In one of the first of such studies, we were able to look at the correlation between “nine box” placement ratings, psychometric assessment data (using a popular bat-tery of tests) and our 360 ratings. The study revealed that the correlation between the nine box placement data and 360 results were above r=.50 while the best correlations with a few sub-scales of the psychomet-ric personality assessments were dramatically lower, hovering around r=.14.

In another study the organization’s Board and top management decided to downsize the organization. This included the termination of 78 senior leaders. After the individuals had severed their ties with the organization, we analyzed the 360 results for those leaders. Even though these 360 results had not been used in the downsizing decisions, we wondered to what degree the 360 assessment data would have predicted those who were asked to leave.

The graph to the right shows the results comparing those who were downsized versus other leaders not downsized. The results shows significant differenc-es in all rater groups except for the self-ratings. The 360 data had been collected 12 to 18 months prior to the downsizing efforts. Senior HR leaders in the organization felt that while these individuals had 0

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grades. These usually balance out when you combine the average 13 raters for each manager.

3. Senior leaders often love numbers and if they have access to numbers along with other subjec-tive assessments, they have a tendency to over-weight the 360 score. This can be a significant problem. Results from the 360 need to be viewed as just one more indicator alongside a variety of other factors.

One Organization’s ApproachOne of our clients that had a “I want my cake

and eat it too” mindset took some innovative steps. They wanted to keep the 360 as a key part of their developmental process so that leaders would receive feedback on their performance and be motivated toward personal improvement; and at the same time, utilize the data to assist with performance manage-ment. They made a series of decision that seem to be working well for them.

1. First, the participant receives the feedback along with developmental training and coaching. They are encouraged to create a development plan and share that plan with their manager before their manager receives a copy of their feedback report.

2. The manager receives a copy of the feedback report approximately a month after the partici-pant. This creates accountability for the partici-pant and it also informs the manager about some

colleagues who have been asked to respond to a 360 degree feedback instrument. They call inquiring about how the information will be used. The caller frequently states that if the data will be used for evaluation and not solely for develop-ment, this will change the answers they provide. Most of us have received a pep talk from a customer service person after a sale or a major maintenance process about the importance of the firm receiving the highest possible rating. We’re told that anything below a perfect score will reflect badly on them. Managers sometimes resort to the same kind of process to influence raters. Occasionally we hear about peers who have agreed to a “I’ll take care of you if you take care of me” proposal.

2. A person’s results on a 360 assessment are the amalgamation of several influences:

• First, and most dominating is that person’s leadership skill and observable behavior.

• Second, the situation or environment of the current job or position. Many of us have been in very positive environments that made it easy to perform, and we have also been in environments that were challenging and complex. An excellent leader in a difficult situation will receive less positive ratings.

• Third, the general rating approach of the people providing the assessments. Some are generous, easy graders; while others are stricter and less inclined to give good

Over the years we conducted a variety of studies that gave us confidence that our 360 results would be an excellent predictor of potential.

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of the challenges being faced and strengths the participant possesses.

3. 360 results are shared with the talent manage-ment committee but not with all senior leaders. The feeling was that some senior leaders would focus only on the numbers. Promotion decisions are made independent of the 360, but develop-mental needs of participants are discussed by the talent management committee so that everyone is aware of a leader’s strengths and potential fatal flaws.

4. Data is tracked quarterly and high performers are identified along with those in need to improve-ment. A “heat chart” like the one above helps the talent management group with this process.

Here are a few of the notes that the above heat chart generated:

Person 1 – Clearly one of our best performing leaders – already on our Hi-po list

Person 2 – This woman is a real surprise. She has been a steady performer but perhaps we have not been aware of her true potential. She could be ele-vated to a much larger role.

Person 5 – Engagement result and teamwork are of some concern. We ought to investigate and see if there are some developmental needs.

Person 26 and 27 – Two of our most brilliant research-ers but peer rating reflect their lack of collaborative

skills. Low rating on “developing others” and “build-ing relationships” need to be improved.

Imagine how helpful a heat chart like this would be for a talent management group attempting to make informed decisions about what developmental assignments people need to prepare them for addi-tional opportunities.

Can you have your cake and eat it too?It appears that organizations may utilize 360

assessments for both development and talent man-agement if they handle the data correctly. Would your organization benefit by keeping the 360 as a great developmental tool and by having insights into the prediction of top talent in the organization?

We would all love a crystal ball to predict who will be the talent to lead an organization in the future. The 360 data provides a surprisingly clear view of talent. We have not found any other leadership mea-surement tool that provides better predictive capabil-ity than 360 assessments when they are developed appropriately.

We invite readers to weigh in on this question. Is it possible for more organizations to gain the consider-able benefits of using the 360 degree feedback pro-cess for development, for performance management and for assessment of future potential?

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Person 1 18 88 96 75 80 77 67 75 96 72 83 88 90 76 78 66 92 75 93 90 Person 2 11 83 79 73 72 92 94 75 82 88 94 78 88 65 85 75 64 61 80 55 Person 3 8 83 44 75 99 86 96 75 74 87 74 67 82 86 76 62 60 96 Person 4 25 81 69 53 97 76 89 72 89 71 45 79 80 68 85 54 92 68 88 89 Person 5 10 77 64 82 60 69 87 87 61 97 83 65 94 70 33 85 58 65 64 31 Person 6 12 77 88 74 77 96 74 89 70 95 75 63 62 69 77 81 45 61 75 Person 7 25 72 55 49 77 70 58 39 71 98 81 73 68 59 65 50 65 64 70 43 Person 21 14 36 74 57 14 18 23 28 27 39 42 47 23 55 34 20 52 64 65 Person 22 18 34 36 21 64 43 65 26 14 29 57 29 63 38 29 25 29 41 72 Person 23 14 30 19 44 24 45 61 67 51 20 55 28 26 25 19 34 26 42 13 62 Person 24 19 25 77 34 49 2 23 25 19 46 66 13 41 23 14 13 38 26 21 21 Person 25 15 25 76 43 16 18 34 45 40 66 36 16 21 25 20 28 16 14 24 42 Person 26 13 21 56 8 51 31 57 37 17 71 56 9 54 14 5 38 19 11 14 55 Person 27 13 21 37 18 65 18 47 40 27 52 82 28 17 65 11 63 2 9 5 68

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