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According to Forbes, it’s been estimated that 85% of Fortune 1000 companies use 360-degree feedback; the process that involves gathering information about an employee’s skills, attributes and areas for development by asking for feedback from multiple other people – through an online rating or ranking system – usually a combination of colleagues, managers, peers, direct reports and even clients.

In its ideal state, this multi-source feedback can be a predictor of the future success of your employees and business. Sadly, traditionally, it doesn’t always roll out like this. To understand what can impact the effectiveness of a multi–source feedback process, we need to understand the challenges in its traditional approach – and how to adjust it.

Game theory
Game theory takes into account how people will respond based on how they think others will react. The easiest way to understand this is by thinking about the game “Rock/Paper/Scissors”. If I know that you always start with rock, I’ll start with paper, but if I know that you know that I know that, I would change my response…

With multi–source feedback, respondents will be thinking about how their response will have an impact on the system they are in, will it get the person in trouble, can they trade positive ratings with others?

The time and cost

There is a trade-off between credible and comprehensive measurement and the time required to provide feedback. The challenge is to retain the power of multi–source feedback and not only increase efficiency, but also improve the “utility” of the information.

If you have to keep asking different questions in order to assess different things, you will create rater fatigue. The challenge is to collect the least amount of information, that has the greatest utility.

The frequency of assessment

There is a recognized limit to the rate at which people can change their behavior. Behavior is the result of a combination of factors, each of which is more or less difficult to change. Behavior is influenced by knowledge, experience, beliefs, personality and contextual pressure. Knowledge and experience take time to acquire and apply, beliefs and personality are relatively stable over long periods of time, and the pressure exerted by context increases only when people have to deal with higher levels of complexity, like promotions.

If behavior doesn’t usually change that fast, why do we need to measure it so often?

Feedback as punitive or predictive

If the process is driven by punishment and reward, the process will be “gamed” to produce the required result. It will focus on what happened in the past, not what will/must happen in the future. Using feedback to punish or reward performance is like driving a car by looking in the rear-view mirror, rewarding when the person didn’t crash and punishing them when they did. On the other hand, using feedback to predict the future is like having headlights that can bend around corners on a dark night.

The impact of cultural differences

Research has indicated that there are 10 distinct dimensions that impact organizational and leadership culture. Uncertainty avoidance (strengths of social rules and norms that govern behavior), Power distance (impact of hierarchical authority), institutional and in–group collectivism (degree of association with company or group), gender Egalitarianism, Assertiveness, Performance orientation and Humane orientation.

These factors differ significantly across cultures, and the research even places black and white South Africans in different dimensions. The culture and value system will influence how feedback is given and received, and it will skew data if a rating system is used.

The solution?

There is no doubt that feedback from more than one source is more powerful than feedback from a single source. In order to increase the value of the process, we have to increase the function/usefulness and decrease the cost (time/money and emotional). The best way to address this is to move away from ratings, to a ranking process. And to assess on a complete set of behavioral attributes that have been linked to high performance, across different levels of complexity, different cultures and different industries.