In the typical performance review, bosses talk and employees listen. That's fine if an employee is accountable only to a single individual. But in today's networked, team-based workplaces, accountability gets spread around. Enter the 360-degree feedback, where everyone who deals with a person on a daily basis gets the chance to evaluate his or her performance. At most small companies, that means that everyone reviews everyone else -- including you, boss.
Many entrepreneurs find 360-degree reviews to be a particularly effective way to evaluate and reward employees, as well as improve their own leadership skills. But beware: The truth can hurt, and not every small company can withstand the honesty.
Start by creating a survey to review employee performance, with questions that can be answered on a rating scale, say from one to five. Michael E. Wojtaszek, principal at Rehman Robson CPA & Consultants in Grand Rapids, Mich., recently designed a 15-question survey for a client, a 60-employee general contracting company. Among the questions: Did the person exhibit a spirit of cooperation? Was this person a team player? Did this person demonstrate willingness to try new ventures, while accepting risk?
OUTSIDERS HELP. The survey, which Wojtaszek administered, took just five minutes to complete. Total cost to the client: $2,500. (Price varies according to the size of the company and the level of detail you're after.)
You don't have to hire a consultant. But without an outsider tabulating the results, you can't guarantee anonymity to the raters. Of course, at most small companies, anonymity is an illusion anyway, since everyone knows who's rating whom.
At Trinity Communications, a Boston marketing outfit with 65 employees, each employee, ranging from the lowest-paid to the owner, is reviewed both internally and by clients, and the process is conducted entirely online, using software developed by in-house tech talent. (Software and Web-based application service providers will also tabulate results, but these can be pricey, and are mostly designed for larger companies.) Managers use the ratings to design training and development programs, and determine annual bonuses.
It works at Trinity, because the staff is relatively thick-skinned. That wasn't the case for Serge Knystautas, president of Loki Technologies, an 11-person Web-development company in Bethesda, Md. After using 360-degree reviews for six years, he pulled the plug last year when the process degenerated into name-calling. So make sure your staff can handle it, or you could find yourself refereeing a particularly nasty fight. By Alison Stein Wellner