The 360-degree feedback process can be quite troublesome. It’s troublesome not because of the process itself, but rather because of the people who participate in the process. They are those who have different relationships to the person being assessed and they all have different worries and concerns. Companies should pay attention to the most common concerns about 360-degree feedback and make an effort to alleviate those concerns if they want the process to be smooth, effective and beneficial.
Readiness. To implement 360-degree feedback successfully, managers and employees alike must understand what it is and how it will be used. They need to see that adopting this technology is more than an experiment. It’s going to become a beneficial part of the culture. Ideally, an organization will have previous experience with performance feedback, such as performance appraisal.
Confidentiality. Most people want to give fair and honest feedback, but they don’t want to be punished for doing so. If they suspect that people in authority will evaluate their input, they may not want to give honest ratings and comments. Ideally, feedback remains anonymous. Also, the people who receive honest feedback don't want to be punished for receiving it. You will want ratings and comments to be kept confidential. Managers are responsible for coaching employees, but the organization must decide what kind of summary information bosses actually need.
Trust. If people don't trust the process, they’ll find it nearly impossible to give honest ratings and comments. They might even withdraw support or try to derail the assessment process. Several aspects of 360-degree feedback require trust. Feedback recipients are likely to learn where they need more development. Who will handle or see this information? How will it be stored? All parties must trust that the system guarantees anonymity and confidentiality. If people are told that detailed information will be given only to those who receive feedback, these promises must be kept. If leaders say that feedback is to be given for developmental purposes only, participants must feel confident that it won’t be used later for pay or personnel decisions.
Follow-up. The purpose of 360-degree feedback isn’t self-awareness. It’s performance improvement. Organizations that use 360 should be prepared to support these developmental activities. 360-degree feedback can identify strengths and areas for improvement, but it doesn’t go beyond that. If an organization doesn't follow through with an individual development program that includes opportunities for on-the-job reinforcement, the feedback may have no benefits. Even worse, people may be upset that it was a futile exercise.
Impact on compensation. Although many managers believe that 360-degree feedback can help solve problems with performance management, many of them don’t understand how to use it properly. Most appraisal systems have been linked to compensation and other types of personnel action. This is why validity and fairness of ratings have been issues. It's difficult for people to give objective ratings about someone else's performance when they know it will have an impact on that person's pay or career. For this reason, most organizations use 360-degree feedback solely as a developmental tool.
Source: 360 FYI