Navigating the 360-Degree Feedback Process in Family Businesses

The 360-degree feedback process has recently been reported to be used by more than 85% of Fortune 500 firms as a part of their performance management systems [1]. The “360-degree” moniker comes from how the process solicits feedback for participating leaders in a full circle: from those working above (supervisors or in the case of the CEO, the Board), below (direct reports), and alongside (peers of) the individual being assessed. 360s invite and require some vulnerability in that, if done as intended, thoughtfully receiving and then using feedback is a developed as a skill in and of itself—one where some introspection and reflection come in handy.

In combination with a self-assessment and/or other performance assessment input, a 360 can serve to validate what an individual is thinking about their own strengths and areas for improvement. Conversely, a 360 can also point to less well understood gaps in performance—or blind spots—that can then serve as valuable focus areas for development attention over the longer term.

Typically, development goals fall into two buckets: (1) those that require more immediate attention and are seen as potentially impeding the individual’s ability to achieve current performance goals and (2) longer-term objectives identified as necessary building blocks for future role aspirations. In family businesses especially, if an individual falls short of a goal, they can become stereotyped as “not up to it” when considered for higher level leadership. By separating development into near and longer term—the job today and job aspired to—stereotyping can be minimized and development can be emphasized.

Hurdles to Success

In most corporate settings, 360-degree feedback is collected anonymously via survey by HR or by an outside firm, with the rationale that those providing feedback can more comfortably offer an honest assessment when answering anonymously. A good 360 contains questions that probe for insights on an individual’s current job performance, demonstrated skills and behaviors, and future leadership potential.

360s require intensive review and feedback to work properly. The process can feel risky, both for those providing feedback and for those being assessed. What are some of the specific considerations to weigh when thinking about introducing 360s in a family business? Can this tool hold its own in a setting where roles as owner, family member, and business employee often overlap? Can the goal of obtaining feedback be achieved when some of those being asked to provide feedback (particularly other family members) are at risk of being influenced by countless other considerations, including family dynamics, ownership rights, succession planning, etc.?

While there are other hurdles to using 360s in a family business setting, we want to assuage concerns that they might not be just as effective as in non-family settings. In our years of working with family businesses, we have found that both family business leaders and their next generation crave honest feedback about their performance, but rarely get it. More often than not, emerging leaders recognize that the stakes are high and that skill development and tests along the way are critical to their own credibility and success. These leaders want feedback to improve their leadership potential for the family business—which often represents the lion’s share of the family’s wealth and, just as importantly, their identity and psychological sense of purpose and value.

We’ve learned that raters usually struggle with: offering the right level of honesty, determining what will be most helpful, and worrying that the person evaluated will be either very thick- or very thin-skinned. Often, non-family supervisors, peers, and direct reports express hesitation in being candid about a family member’s strengths and, more worrisome, weaknesses. Lastly, absent a tight feedback collection process with an objective third party, concerns also creep in: how anonymous, really, is the feedback?

In CFAR’s experience, particularly in our next generation development and executive coaching work, we find that a few considerations are critical when collecting and delivering feedback in a family business:

1. Ask yourself whether the family business’ present climate or culture is conducive to a 360. For the 360 process to be taken seriously (and for the feedback to be useful, well received, and put to use), it is critical that the company’s culture prizes learning and prioritizes using mistakes as a basis for improvement rather than punishment. If the climate is not right for a 360, consider putting it off a future date—not never, just to a future date. Culture work might need to come first.

2. Consider combining 360s with a development program for all leaders, including family and high potential non-family members. On its own, a 360 is already extremely powerful. A 360 contextualized within a multi-year development plan is even more so: it matches strengths and weaknesses to concrete educational and professional steps. On-ramps to leadership positions in a family enterprise are years-long, intentional paths that benefit from being carefully and objectively shaped. A 360 can be a useful component of such a plan and, indeed, nesting it inside of a long-term development path amplifies its power. And for non-family, it signals that everyone’s development matters. 

3. Where possible, use seasoned supervisors and mentors (that is, people with experience and training in delivering the synthesized feedback and helping figure out what to do with it) who understand that while there may be some risk in providing honest feedback, there is even greater risk in uplifting an ill-equipped leader. Just like the climate must be right, the individuals involved must have the right support and skills.

4. In designing the 360 questions for a family business, be clear to seek input about how an individual is performing in their business role. Questions can also be framed to allow the space for respondents to comment on whether other elements (e.g., family conflict, ownership dynamics, etc.) are impacting their effectiveness or performance, as well as the rater’s thinking. While these other elements should not be the focus of the process, they should be taken into account. Don’t lose sight of the 360-degree feedback process being aimed at an individual’s development within the business.

5. Weigh the benefits of 360-degree feedback data collection through interviews versus using a survey to collect the feedback. At a minimum, there is a speed/efficiency tradeoff between using interviews versus surveys—but that is not the most important decision criteria and, if undertaken in a large organization, the number of raters prohibits effectively using interviews. That aside, having a conversation about someone’s performance, strengths, and gaps with someone known to be objective and trustworthy, usually offers a richer picture than reviewing survey output.

A “narrative 360” process—whereby a trained interviewer speaks with people about the subject—can provide some flexibility to ask complex questions, probe more deeply, etc. and has the added benefit of increasing accountability. There is great power in using insights garnered from the interviews to provide the foundation of a development plan.

6. Provide support for a family member’s growth by hiring an executive coach of their choosing. As the 360 process gets started, individuals can also benefit from a professional executive coach to help them develop the frame of mind and skillset needed enact change and growth based on the feedback they’ll eventually receive from their 360. Ideally, it is optimal to have several “getting to know you” conversations to ensure a good fit between the “coachee” and coach before 360 feedback is collected.

7. Supplement 360s with competency and/or assessment tools. Often used when recruiting and assessing new hires for important leadership positions, competency screens—a suite of validated and reliable assessment tools—offer additional insight about High Potentials’ (HiPos) skills and capabilities. These tools can help provide additional insight about an individual’s learning agility, ability to motivate others, innovation management, etc., and serve as critical input into a development plan.

Honest feedback is both desirable and necessary inside any family business. Indeed, a family business’ future success depends on the next generation’s awareness of their own strengths and weaknesses and what they do about them, within an environment where everyone values feedback that can improve the whole: person, leadership, firm. The 360-degree feedback process is a time-tested, reliable way to obtain and provide feedback in all contexts, whether Fortune 500 or family business. In the family business, 360 feedback—collected appropriately and shared effectively—can be powerful for both family and non-family leaders who wish to develop their leadership, followership, and peer interactions.

How Effective Are Your 360-Degree Feedback Assessments?