Performance reviews can be the lowlight of an employee’s year — not to mention HR! I’ve written before about ways to improve the performance review process, but more and more companies are turning to 360 degree feedback processes.

Three-sixty degree feedback is all about answering the question, “How well are our people performing in the eyes of those who have a stake in their performance?” It provides an individual with a broad assessment of their performance based on the views of those who have a stake in their performance, including their supervisor/boss, reporting staff members, co-workers, customers, suppliers, and so on. Results are confidentially tallied and presented to the employee, usually by a manager.

These insights are often used by companies in employee training and development, but they can also be used for making administrative decisions around pay and promotions.

But there’s a great deal of controversy surrounding the implementation and application of 360 degree feedback.

The Good

The results of 360 degree feedback reviews are often viewed as more valuable than traditional top-down appraisals because they rely on many different points of view instead of just one. Traditional performance reviews can be biased based on the reviewer’s personal feelings toward the employee.

If an employee and his manager don’t get along personally, he could have terrible traditional reviews, but the negative views of the manager might be the outlier in a review that came from his peers, customers, etc.

Three-sixty degree feedback aims to democratize the review process by weighing the opinions of many people. If employee A is seen as distant by his co-workers, but well loved by his clients, that helps HR understand where development is most needed.

The Bad

Costs and effort of collecting 360-degree feedback scores can be very high as it will require significant time commitment for scoring, evaluation and feedback. There are few ways of bringing costs down other than simplifying data collection through the use of software and electronic data collection.

Another problem that can arise is that because the feedback is anonymous, employees have no way to clarify criticisms or request additional feedback. That’s why it’s very important to have coaches — HR staff or managers in most cases — trained to help employees understand and interpret their feedback and develop an action plan based on that feedback.

Finally, some employees may become very defensive if they believe that their co-workers and other people beyond supervisors and managers are deciding whether or not they get a pay rise. It can be helpful, then, to make sure that employees understand that the 360 degree feedback is only one factor of many determining promotions and pay — not the sole determining factor.

The Ugly

The biggest problems arise when 360 degree feedback surveys are not conducted properly. For example, confidentiality (or lack thereof) is the biggest negative factor I see. If it’s possible to trace comments back to reviewers, negative feedback could engender bad feelings between co-workers and lead to a hostile work environment. To ensure confidentiality:

  • Select a neutral administrator (e.g. an external consultant or human resources representative).
  • User-names and passwords should be required to access the survey and the response data should be encrypted.
  • Ensure that online systems are encrypting the data and storing the results on a secure server.

Also, to make sure that participants have enough time to complete the surveys thoroughly and accurately, they should contain as few questions as possible. If survey items are carefully researched to ensure relevance, the number of questions should not exceed 10.

This article is published in collaboration with LinkedIn. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Bernard Marr is a Best-Selling Author, Keynote Speaker and Leading Business and Data Expert.

Image: Hays Recruitment Consultancy Section Manager Ignacio Ramos (L) interviews Vicente Balmaseda at the Hays offices in downtown Madrid December 5, 2008. REUTERS.