MSA Performance Tools - The cost of 360

The Price of 360 Feedback: Cost vs. Value

Lyle Spencer and Charles Morrow reported in 'The Economic Value of Competencies: Measuring ROI', that 360-degree feedback systems could yield a Return on Investment as high as 700 percent.

A brief sweep of the 'net will find many suppliers of 360 feedback services quoting this eye-catching figure. As supplier of 360 feedback myself, this claim should be music to my ears -but it's a sweeping statement that requires a good dose of realism to put it in context. Choosing the right 360 feedback supplier is a critical decision. There is absolutely no doubt that 360 feedback is a powerful catalyst for performance improvement. However, there's a lot more to selecting a 360 feedback supplier than simply the financial elements - and the price paid by companies who get it wrong is also measured in more than financial terms. What follows are guidelines that my clients have found valuable for selecting a 360 reviewer, and I've tried to list all of the factors that could be important.

You get what you pay for…right?

We all want to think that we've got a good deal. In fact, it's our obligation to colleagues and shareholders to get the best value in any transaction we do on behalf of the company. Clearly if you can achieve (and measure!) a ROI of 700%, the price you're paying for the 360 feedback service is almost irrelevant. But companies should question very general statements made by suppliers - particularly ones containing dramatic figures. So, how does this relate to the old adage that you get what you pay for? Well, in the world of 360 feedback, you cannot judge on price alone: the cheapest isn't necessarily the worst, and the most expensive isn't guaranteed to give you a 'Rolls-Royce' experience.

Let's look at the main reasons for using a 360 system. 360 reviews are conducted to improve individual (and thereby organisation-wide) performance. Often this is done in the context of a development programme or appraisal process. 360 feedback is about people - feedback from people, about people, enabling them to improve their interactions with other people. The tools, management, and support that a 360 feedback service offers are all crucial factors in achieving this individual and organisational improvement. Smart software alone isn't the holy grail of 360s - you also have to have top quality service and expertise added to the mix. Also, individuals being presented with their 360 report must be prepared to change at some level. Many people are wary of change, particularly if it's imposed on them, or if they're uncomfortable with the way the message has been delivered. So the management and support given throughout the 360 review process are critical to the desired outcomes. These outcomes all come into play on a number of practical levels, and in the following sections I've compiled the factors to consider when choosing a supplier, or specifying requirements for your system.

Overall Experience

Does the supplier have a reasonable level of overall experience in the field? If you use a software-only solution, does the supplier understand the 'people' factors that are so important in this area? On the other hand, suppliers with a wealth of 'people experience' may be short on technical background and experience. Questions to ask them include:

What evidence can they show of their experience in designing and managing 360 reviews?
What is the range of companies that they have worked for? (Size, industry, and location all count here)
What services can they provide? For example, are they able to help with advice on the development of a competency framework?
Can they provide advice on timing and context for a 360 programme?

Culture

What is the ethos of the supplier organisation? Is it a 'stack-em-high, sell-em-cheap' supplier who operates through price alone? Alternatively, do the people in the organisation focus on understanding client needs and building lasting customer relationships?

Ask how long they've been in business and who their longest standing clients are.
A supplier who builds good long-term relationships with their clients is likely to be adding value.

Focus

Is the supplier trying to be all things to all people? A Focus on core skills creates a better service. Suppliers who specialise in assessments, and particularly on multi-rater systems, may be the best prospect for you. Using a bundle of services from a team of experts who work together regularly is more likely to deliver an optimal end result compared to suppliers that claim to be experts in everything. Questions to ask them include:

What range of services can they provide and what do they outsource to partners?
Does their service show focus on core areas of expertise, or is it an unrealistically broad range?
Can they provide names of their partners with details of their services?

Quality of Support

This factor cannot be stressed enough! The difference between simply claiming to have a support facility, and the ability to provide a really user-focused service is a massive one. There is nothing more frustrating for a user (and more guaranteed to cause dissatisfaction) than lack of support, or bad quality support, at a crucial point of the process when you need their assistance. Make sure that the supplier can provide a support facility for candidates, reviewers, and for project supervisors. Carefully check the quality of support on offer - a bad answer may be worse than no answer at all. A few ways to do this include the following questions and suggestions:

Do they have a list of typical support questions and responses?
What are their expected response times for support queries?
Suggest a few support scenarios specific to your organisation and ask how they would handle them.

Your best interests

A supplier should be able to listen to what you need, provide solid advice and deliver a service that provides you with the right reports in the right time frame. If you feel that the advice you are being given is not in your best interests, and you're being 'sold' something that you don't need, take a step back and review the following points:

Does the supplier suggest ways in which you could save costs?
Are you being sold a 'bigger better' system than you really need?
How often does the supplier suggest you repeat 360 reviews? Anything more frequent than an annual measure is not advisable.

Hidden costs

This area pertains directly to the question of price. It's reasonable to expect to be charged for any specific development or tailoring. Equally, a per-candidate fee is a standard way of charging for the service. Outside of those areas though, check whether there are setup fees, additional fees for support, or for any backup documentation that may be provided. Make sure that you understand the actual price that you will be paying at the outset.

Are you being charged an annual licence fee on top of a per-user fee? If so, what do you get for it?
What would the cost be if you just wanted to run a single 360 review for one employee? Will the supplier even do a review for a single candidate? Some suppliers have a minimum number, or a minimum set up fee.
Ask for typical pricing on minor amendments to the system. Beware if you're told that amendments are not possible, or if the price is excessive…
Ask about second and third year costs.
Is there a setup fee for each review group? A low per-candidate price can be misleading if a high setup or annual fee is added into the mix.

Supporting documentation

Part of the value that you should get from a supplier is in the value they can add to the communication and management of the review process. They should be able to supply supporting documentation to help you with the briefing process, as well as guidelines assist candidates and reviewers. They should have the experience to assist you with templates or guidelines for any other aspects specific to your individual projects.

Ask what supporting documentation they can provide.
Ask if there is an additional fee for this. If you're using off-the-shelf material that they've developed and it's in electronic format, there should not be an additional cost if they're serious about providing top-quality service.

Strong technical skills (and not just in the development team)

Where do the technical skills lie in the organisation? Are they only with the technical team? The technical team must have strong qualifications and experience to be able to develop a robust system. However, anyone dealing directly with clients should have a level of technical skill that enables them to impart a sound understanding of the system's basics.

The breadth of knowledge shown by the main members of the team is a good indication of the level of expertise you will be getting with the service.
You could ask your IT department to have a conversation with the supplier in order to check on the supplier's technical skills.

Track record

The supplier's track record provides the key to success. Suppliers who provide a high quality of service priced to deliver value for money will be able to demonstrate that value in their track record.

Ask who they have worked for in the past.
Ask what proportion of their client base has used their service continuously for 3 years or more. A loyal client base is a valuable endorsement.
Don't be afraid to ask for references.
In particular, ask if you can speak to a couple of their clients. Written references may be out of date. If they are proud of their service, they will be happy for you to talk to their customers.

Rapport

This is in some ways the most important factor in determining the supplier's value, but in some ways, the most subjective. A good place to start is to determine whether there is a good 'fit' between your organisation and the supplier.

Do you get on with the people in the organisation?
Are they easy to deal with?
Do you trust them to do a good job? If you believe that people are your company's most valuable asset, would you risk using a supplier who didn't have the same approach to quality and service as you do?

Conclusion

If you are an HR professional, then there is a lot at stake when choosing a service provider.

As a trainer, your reputation is in the hands of your supplier when you sub-contract. Make sure they are a credit to you. All suppliers should recognise that their service won't be right for everyone. For the client, however, it's vitally important to get just the right service at a reasonable price.

If you are an HR manager looking for a 360 feedback supplier, the trust of your employees, and the performance of the organisation is at stake. Make sure that you choose someone who has the experience to enhance your programme. Buying cheap and getting poor quality service is a huge risk, so when evaluate the price of a 360 review, it is critical to consider the cost in relation to the value that you are getting. Think through the potential results before making a decision. The range of 360 solutions on offer and the prices charged is increasing all the time: DIY, off-the-shelf, cut-price versions are available, but what about that essential backup service? On the other hand, those suppliers who claim to provide top-of-the-range solutions and price accordingly may not actually deliver on their promises or may even be over the top for your company's needs. Trust is a major factor in the success of a 360 feedback process. In these guidelines, I hope that I've been able to quantify some straightforward, practical measures for finding a supplier that you can establish a strong connection with to create the value your organisation deserves.