One way many business owners choose to evaluate their executives and top managers -- or even their own performance -- is by using a 360-degree approach. 360-degree feedback produces a more complete picture of an employee's performance than if he or she were just reviewed by supervisors. It can include internal and external feedback. Internal comments can be solicited from management, subordinates, colleagues, and people from other departments. External comments can come from clients, suppliers or outside consultants.

Getting 360-degree feedback is often important because profits can erode when leaders are not effective. Numerous studies have shown that the Number One reason people quit their jobs is because of what they call a "bad boss."

Here are some considerations when using a 360-degree approach:

• Look at it as a tool for development and communicate that philosophy to everyone involved. Of course, you want honest opinions, but participants need to know the goal is to make the best use of an executive by providing constructive feedback.
• Take pains to ensure anonymity. Some people will not say what they really think because they fear retribution. To alleviate such fears, it may help to use an outside facilitator, such as a human resources professional or an online company specializing in confidential surveys.
• No matter who conducts the evaluations, confidentiality must be assured. In one case in Virginia, an employee sued her employer after being fired. A short time earlier, she had participated in a written evaluation of her boss, who obtained the results from an outside consultant. The former employee was awarded $3.5 million in punitive and compensatory damages, but on appeal, the state Supreme Court remanded the case for a new trial. Despite the pending outcome, the case serves as a warning to employers to ensure that confidential evaluations remain confidential.
• Keep questionnaires short and simple. But give respondents a way to provide more feedback if they choose (i.e., include an optional free-response section at the end so that additional comments may be made if desired).
• To ensure fairness, disregard super-negative responses that are only given once on any given question.

Don't miss out on opportunities to develop future leaders
Yes, employee reviews can be time consuming and distracting. But if you never tell employees that they aren't performing up to the company's expectations, they may assume that you are satisfied with mediocrity or less. More importantly, without proper communication, you could lose your top achievers and most valuable employees. If you don't take the time to point out their exceptional performance records or discuss the company's future plans and how they fit into them, your excellent employees may conclude that their efforts are unappreciated or that there is no potential for growth at the organization and begin to search for work elsewhere.