More than 85% of Fortune 500 companies use 360-degree feedback. Done right, it can create a holistic and comprehensive view of employee performance, transform business leadership, and build an engaging company culture. However, the secret to its success lies in implementation — done wrong, 360-degree feedback can create more problems than it solves.

In this article, we’ll outline the right way to get started with 360-degree feedback, help you weigh the pros and cons of adopting the approach for your company, and troubleshoot some common issues.

What Is 360-Degree Feedback?

360-degree feedback is a method of providing employees with insight into their performance by aggregating appraisals from their managers, peers, and direct reports.

Employees and leaders can use these insights to identify their strengths and weaknesses and take ownership of their development. The 360-degree approach — also known as multi-rater feedback — gives a more comprehensive view of performance than the more traditional top-down approach, while also ensuring that managers are assessed by those they manage with the aim of improving senior employees’ leadership skills.

Benefits of 360-Degree Feedback

When correctly applied, 360-degree feedback can be a powerful tool for individual development and a significant driver of organizational performance. Some of the most significant advantages of 360-degree feedback include:

1. Building a Growth-Focused Culture

360-degree feedback supports a development-focused mentality. By receiving well-rounded input from multiple raters, employees develop a clear idea of opportunities for growth and areas in which they already excel. This allows them to drive their own development journey, spot career development opportunities, and prepare for future roles of interest. Additionally, business leadership gains a holistic view of the skillset and performance of the workforce as a whole thanks to the consolidated, actionable data generated by the process. This detailed information serves as a building block for a more data-driven HR strategy that allows business leaders to identify and address skill and competency gaps by upskilling and reskilling the existing workforce — or by recruiting new talent, where appropriate.

According to Nancy J. Lewis, leadership expert and CEO of Progressive Techniques, 360-degree feedback can also be a powerful disruptor of the status quo. Lewis noted that while some businesses have “allowed employees who have been subpar to get good evaluations over the years and just moved the problem around,” multi-rater feedback makes it far harder for performance issues to remain under the radar. By collecting a fuller picture of individual performance, companies can more easily spot and proactively address underperformance.

2. More Relevant Feedback

More than half of American office workers would prefer more feedback to a higher salary — however, for feedback to be valuable, it must be relevant, fair, and actionable. By collecting and aggregating input from multiple sources, 360-degree feedback gives employees a much clearer impression of where they should focus their learning and development efforts.

Having a more complete data set also gives managers a better sense of how their teams are doing. This makes employee performance discussions more meaningful, as managers can proactively recommend learning activities and coach their direct reports to build the skills and competencies critical to performing better, reaching goals, and preparing for tomorrow’s challenges.

3. Increased Employee Engagement

Research shows that 360-degree feedback can significantly increase levels of employee engagement, likely due to the increased sense of equity that employees experience as a result. Compared to one-directional feedback, 360-degree feedback allows employees to review their managers and peers, creating a valuable sense of unity. In fact, Gallup found that employees in a feedback culture were three times more likely to be highly engaged than those who received no regular feedback.

4. Transformative Impact on Business Leaders

Perhaps the most significant benefit of 360-degree feedback is that it provides managers with detailed, comprehensive insight into performance. Managers’ impact on company culture cannot be overstated —70% of the variance in team engagement is determined by managers, so it stands to reason that great managers typically have high-performing teams.

Moreover, 360-feedback is invaluable when it comes to improving managers’ abilities to manage. In a piece for the Harvard Business Review, leadership development consultant Jack Zenger explained that 360-degree feedback provides business leaders with a uniquely powerful set of insights. According to Zenger, leaders who embrace multi-rater feedback become:

• More likely to develop self-awareness and consider their impact on others
• More apt to change, thanks to social reinforcement from their peers
• More convinced by feedback, as a broader spectrum of appraisers yields a clearer message

As Zenger phrased it:

“When leaders find out that others see them differently than they intend or want to be seen, they have a simple choice. Either they redefine how they see themselves, or they change their behavior. For example, if others tell me that I’m rigid and don’t listen to a different viewpoint, the next time I’m in a discussion about a controversial topic, I’m more inclined to catch myself and listen. And if I continue to argue and hold tight to my views, I’ll be faced with the realization that the others’ perceptions of me were correct.”

How to Get Started with 360-Degree Feedback

Although 360-degree feedback can be a powerful optimization tool for a company, ineffective implementation of the approach can result in wasted time and money. To create an effective 360-degree feedback system within your business, consider the following steps:

Step 1: Define Your Skills and Competencies Framework

Your feedback process will only help improve performance if employees know what great performance looks like. In other words, 360-degree feedback is only actionable if your reviews are based on a consistent framework of the desired knowledge, skills, and competencies prized in your organization. Once you’ve defined a competencies framework, you can link your assessments to specific goals that provide each employee with a clear development journey.

Step 2: Create Customized Surveys

Your business is unique — and your appraisals should be, too. A sophisticated talent development platform like SumTotal will allow you to quickly create feedback forms based on defined performance criteria for each target role or employee group, aggregate competency feedback, and track year-on-year progress. In addition to reducing administrative headaches by keeping manual tasks to a minimum, using a talent development software will ensure a consistent feedback process that promotes a sense of fairness and equity.

Step 3: Communicate with Employees to Secure Buy-In

Before you roll out your 360-degree feedback process, it’s important for employees to understand the purpose and value of their input. To assuage confidentiality concerns, consider using a standardized scale-based form as opposed to inviting open-ended feedback — this way, employees won’t worry that their co-workers or managers will recognize their writing style. Similarly, transparency about how the feedback will be used is key. Will it be taken into consideration in career progress or compensation decisions? What should employees expect after the appraisals are complete? Try to address potential concerns in advance.

Step 4: Plan for Action

If you go to the effort of collecting 360-degree feedback, you should have a clear plan to encourage future action based on the resultant data. As Lewis phrased it, “The accountability has to be in place for [employees] to set an action plan in place once the feedback is given, to ensure they take necessary steps to improve.” For instance, consider hiring a coach to help managers take feedback on board and build a performance plan.

Step 5: Integrate with Other HR Processes

As a rich source of performance data that should be used to inform your entire employee journey, 360-degree feedback doesn’t only help with individual performance development — it also informs HR management optimization at a company level.

For instance, with SumTotal, you can feed your performance feedback into your learning strategy. This will enable you to customize employees’ learning pathways with tailored content recommendations that will help them address issues raised in their feedback reports. Data gathered during the 360-degree feedback process can also be used to inform succession planning and focus recruitment efforts by identifying opportunities for internal mobility and spotting skills gaps that will require external recruitment.

360-degree feedback gives you and your employees the insights you need to succeed.

This holistic approach to performance feedback can help build a growth-focused culture, improve leadership capacity, and increase employee engagement. To realize the full benefits of 360-degree feedback, it’s critical to create a clearly defined competencies framework and have a plan in place to turn feedback into action.

To find out if SumTotal could help you take your talent development to the next level, click here to schedule a free demo.