Calculating ROI on a 360 Feedback Process


Q. We are contemplating the implementation of a 360-degree feedback process as part of our leadership development program. I'm creating a case for our CEO that addresses the ROI for such a project. Do you have any advice?

A. Calculating the ROI (Return on Investment) for leadership development initiatives has become increasingly important over the past few years. Many executives best understand the benefits of leadership development if it can be tied directly to the bottom line.

Although these activities clearly lead to improved results, it is often difficult to establish an accurate ROI on development activities. Measurements are hard to tie directly to development activities, and even when you can attribute success to a particular activity, it is often a fuzzy correlation.

When dealing with the ROI on multi-rater feedback, it is important to keep two thoughts in mind:

    1. Feedback alone is not the cause of behavior change; it is the action people take in response to the feedback that generates a return on investment.

    2. 360-degree feedback is a measurement process, not a one-time intervention or event.
Multi-rater feedback may be the beginning of an intervention, but not the intervention itself. The return comes generally not from the assessment itself, but from the action taken as a result of the feedback. In other words, the assessment allows employees to see strengths, weaknesses, and gaps in perception vs. other raters. Using this information, the employee can undertake a targeted intervention: training, formal education, job reassignment, development opportunities, etc. The return on investment therefore comes from what is done as a result of the feedback. The feedback serves as an important catalyst to make this occur.

There is extensive research data on the improvement experienced in organizations that use multi-rater feedback, versus those that do not:

  • Multi-rater feedback ratings are directly related to hard performance measures. Studies show a positive relationship between 360-degree feedback ratings and assessment center performance. Ratees who receive more favorable narrative comments from direct reports also generally receive more favorable annual performance reviews.


  • Managers who received more favorable 360 feedback had lower turnover and higher service quality. 360-degree feedback ratings were directly related to production measures.


  • Various studies over a period of several years show significant improvements in multi-rater feedback scores between 1st and 2nd year of administration.


  • Discrepancies between self-ratings and feedback from others can lead feedback recipients to perceive the need to change behavior.


  • Results from 360-degree feedback provide a more comprehensive and precise picture of development needs, allowing organizations to target specific training and development initiatives where they are needed most. Managers who participated in development activities, AFTER receiving multi-source feedback are more likely to improve performance than other managers.


Remember, multi-rater assessments provide a measurement. The intervention you use with 360 surveys determines the impact the process has on a manager's performance.

To make the process a success, make sure that:

  1. Effective coaching is provided to each participant
  2. Participants complete a solid development plan that is shared with their supervisor
  3. There is adequate follow-up during the year on these development plans
  4. Participants are held accountable for reaching their development plan goals
  5. 360s are repeated every year to track progress- consistency is key!