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Ann Ewen, Ph.D. and president of Teams, Inc. recently gave some solid advice about 360 degree feedback, including how it relates to compensation. She says that as soon as you capture 360s feedback data and give it to the manager, it is linked to pay. If the manager has it, her or she will use it to make pay decisions.
Her advice to employers is that it is important to customize the 360º feedback instrument to the vision and values of the organization, tying it to competencies and performance standards that work within the specific environment. The people selected to evaluate the individual should be appropriate for that work environment as well. It is not wise to implement off-the-shelf or cookie-cutter solutions when liking to performance management.
Sometimes the process is made more cumbersome than it needs to be, according to Ewen. If it is too complicated, people will get tired out and either not participate or give lax ratings. It won't differentiate the best performers, and you won't be able to confidently make a pay decision based on it.
Also, the progress may not be rigorous enough. If all employees are 85 percent above expectations, the instrument isn't working right. It is highly likely that it is not really reflective of the organization. If the instrument is designed correctly, you should get a fairly normal distribution on performance ratings. But people have to be trained on how to evaluate others for this to happen.
It is important to build trust into the process. A first phase of implementation should be developmental only. Position the process as helping employees grow and develop. After assuring themselves of the fairness and accuracy of the process, employees are generally the loudest proponents of linking the results to pay.
Some companies give 360s feedback the same weight as the manager's appraisal when tying it to pay, while others are moving toward a more egalitarian approach.
Dr. Ewen's firm in Tempe, Arizona specializes in multisource assessment processes and technology for enhancing human productivity.