Now that your company has started giving more frequentfeedback, you may be wondering howthis new system will impact compensation and promotion decisions.You may be inclined to directly use the information collected, asyou did with your annual performance reviews.

However, this could have consequences on your new feedbackculture. We recommend that you try and separate feedback as much aspossible from compensation and promotions. Here are two reasonswhy:

Stress inducing

One of the biggest problems with traditional performance reviews is that, ratherthan encouraging development, they often cause stress. With thepotential to have a major impact on your employee's job securityand financial situation, rather than looking at the information asan opportunity for advancement, employees often look on it withdread.

In fact, one report showed the stress it can cause led 22 percent of employees to call in sick ratherthan face their performance review. Receiving mostly positivefeedback is a relief, while constructive feedback merely inducesfear. This completely undermines the objective of feedback: toprovide insights for professional growth.

Breakthrough innovation

Instead, the feedback process should be linked moreto learning and development. The more learning based theperformance management process is, the more likely employees are totake risks that could lead to breakthrough innovation. What HR hasto do is eliminate fear of failure from the equation. Linking payand advancement to performance can stifle innovation.

When you cut these factors from the process it becomes easierfor people to take feedback as an opportunity for improvement. Ofcourse you still need a way to promote new managers and makecompensation decisions. Here are three ways continuous 360-degreefeedback can help you optimize your process:

Base promotions on leadership skills

Not everyone is cut out to be a manager — just because someoneexcels in the technical skills they bring to a team does not meanthey will necessarily be good at managing people — or want to doso.

Only 1 in 10 people have what it takes to be aneffective manager. In fact, Gallup alarmingly found that companieschoose the wrong person for the job 82 percent of the time.Together the best managers can produce 48 percent higher profitthan average managers. Companies such as Facebook are taking thisto heart by making management positions lateral moves rather thanbasing them on pay grades.

What do great managers have in common? Google’s Project Oxygen sought to answer thiscommon question within its own workforce. After conducting acompany-wide study they found that skills such as coaching ability,communication skills and concern for employees’ well-being wereeven more important than technical skills.

Make sure you’re making the right decisions

Data analysts have proven that unconscious bias in the workplaceis much more common than you think. Studies have shown that a‘rater bias’ based on age, gender, race, sexual orientation, and personalrelationships often surfaces in performance reviews.

When compensation and promotion decisions are made by oneperson (a manager), on an annual basis, there is a much higherpossibility for bias to occur.

For example, raters may often be biased due to poor performanceon a more recent project which may cloud over projects thatachieved great results in the first three quarters. Basing reviewson continuous 360-degree assessments limits the possibility forbias by bringing multiple perspectives into the equation. Havingthis more objective information allows HR to compare and addresspotential bias in the workplace.

Gamification

So aside from promotions, how do you figure out the compensationquestion? Rather than linking bonuses to reviews, a gaming companyusing our product is now making promotion decisions based on thequality of feedback people give each other. Every month people voteon the best feedback they were given and the people who get themost votes receive a bonus. This system not only encourages peopleto simply give more feedback, but to really give advice they feelwill help others develop.