Eunhee Kim Cornell University Hun Lee Michigan State University Academy of Management 2016, Anaheim Why and When Does Multisource Feedback Increase Firm Performance? Evidence from Korea

- 2 - Shedding Light on MSF Research question Why and when does multisource feedback increase firm performance? Drawing on interpersonal and relational perspectives and contingency approach of HRM

- 3 - Shedding Light on MSF MSF? Firm Performance ?

- 4 - Definition of MSF Multisource feedback (MSF), also known as 360- degree feedback : A performance appraisal process in which employees receive feedback from more than one source (e.g., subordinates, peers, supervisors, customers) In popularity over several decades in practice

- 5 - Prior Research Prior Research: The prior studies on the effects of upward feedback or MSF have shown inconsistent results (Atwater, Waldman, & Brett, 2002; Kluger & DeNisi, 1996; Smither, London, & Reilly, 2005) Some studies found its positive effects on performances improvement Others found that the effects on performances were negative => Highlighting contingency factors

- 6 - Prior Research Prior Research: Focusing on employees’ behavioral and performance outcome -Insufficient understandings about interpersonal relationships and communications in organizations -MSF vs. traditional performance appraisal (boss) -competencies measured by multi-source feedback are supposed to be broader -TP: focusing on in-role / MSF: emphasizing extra-role behaviors (e.g., organizational citizenship behavior) and social skills (Beehr et al., 2001) -Under MSF, employees have incentives to have high-quality relationships with others

- 7 - Prior Research Prior Research: Organizational strategy as one of important contingencies for HR practices has been less examined in the extant literature on MSF -Contingency approach of HRM highlights organizational strategy as a primary contingency factor in affecting the effectiveness of HRM -Innovation strategy demands high levels of informational exchange and high-quality coordination among employees -Important contingency for the effectiveness of MSF

- 8 - Current research Relational coordination (RC) as an important but to-date under-researched mechanism through which MSF affects firm performance Innovation strategy as a boundary condition that determines the MSF-RC-Performance relationship

- 9 - Overall Model MSF Relational Coordination Firm Performance Innovation Strategy

Hypotheses Development MSF – Relational Coordination Under MSF, Employees understand diverse perspectives of different constituents in the organizations Employees are motivated to make favorable relationship with others (OCB and communication) Discrepancies between self- and other-ratings from MSF also can facilitate employees’ behavioral and perceptional changes H1: MSF  Relational Coordination

Hypotheses Development MSF X Innovation Strategy – RC Under Innovation Strategy, Firms emphasize learning and development of employees Firms necessitate high-level of coordination among employees Employees should be able to adapt to the fast- changing environment and change their behaviors accordingly H2: MSF X Innovation Strategy  RC

Hypotheses Development RC – Firm performance High levels of RC… Create supportive relationships at work Minimize process losses and improve efficiency Help employees discuss emerging issues and obtain new, diverse information H3: RC  Firm Performance H4: MSF – RC – Firm Performance H5: Innovation Strategy moderates the MSF- RC-Firm Performance relationship

Design A government-funded research agency, collected data in collaboration with the Korea Ministry of Labor 322 companies operating in manufacturing (82.6%) and service (17.4%) A total of 8,236 full-time employees participated in the survey (On average, 25 employees per firm) A year gap between RC and Firm performance

Design Measure Relational Coordination –In our organization, we emphasize collective effort and collective identity –In our organization, we emphasize good teamwork –In our organization, employees trust each other –In our organization, employees are informed about the overall company issues –How much do you understand the overall work process of your firm –In our organization, employees freely talk to their superiors about their opinions –In our organization, we have high-quality inter-group communications

Design MSF –dummy-coded item indicating whether the firm is implementing multisource feedback or not (1: yes, 0: no) –the degree to which a firm actually used multisource feedback (0: not used at all, 4: heavily used) –the intensity of utilizing multisource feedback was measured (0: not used for any purpose, 1: used as a reference for self-developmental purposes, 2: used for promotion or pay)

Design Innovation strategy –3: “Our firm has an early-mover strategy by putting emphasis on new product or service.” 2: “The focus of our firm strategy is to selectively develop new product or service, following the leading company in our industry.” 1: “The focus of our firm strategy is to maintain the status quo and our firm rarely tries to develop new product or service.”

Design Firm performance –the 2011 operating profit per employee data –Department heads’ ratings of subjective firm performance –1) new product development, –2) efficiency in work procedures and processes, –3) cost savings –4) product quality. Controls –industries (manufacturing and service) –firm size and firm age –changes in business environments –labor/management relationship

Results Hypothesis 1 supported MSF  Relational Coordination Hypothesis 2 supported MSF X Innovation Strategy  Relational Coordination Hypotheses 3 supported Relational Coordination  Firm Performance Hypotheses 4 supported MSF – RC – Firm Performance Hypotheses 5 supported Innovation Strategy moderates the MSF-RC-Firm Performance relationship

Results Low Multisource Feedback High Multisource Feedback Relational Coordination

Results Hypothesis 5 Supported Mediation only when high innovation strategy ModeratorLevel Operating profit Indirect effect CI (Low) CI (High) Innovation Strategy Low High

Discussion Importance of relational coordination as a mediating mechanism through which multisource feedback affects firm performance Innovation strategy as a boundary condition Testing relational coordination in a broad context

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