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The Pros and Cons of Peer Review Four things to consider to make peer reviews more effective.

By Gwen Moran Edited by Frances Dodds

Opinions expressed by Entrepreneur contributors are their own.

No company founder can be on the ground all of the time, fully aware of every employee's performance and interactions at every turn. As a result, you may be missing important interactions, strengths and weaknesses that can tell you a lot about an employee's potential.

Some companies have turned to peer review systems -- either on their own or as part of a 360-degree review program which includes other components such as self-review and assessments by managers.

Peer reviews allow an employee's colleagues to assess the individual's performance. They can provide important insight into how employees interact with each other, including employees who have quietly emerged as leaders within the ranks without the accompanying formal title.

Related: The Best Ways to Praise Your Employees

However, these review systems can also be subjective, with employees letting personality issues and competition color their feedback. Joe Shaheen, managing principal of Human Alliance, a Washington, DC human resources consulting firm, weighs in with four ways to make these systems more effective.

1. Choose wisely. Whether choosing stand-alone peer-review, 360 degree, or other employee review systems, be sure you get good information about how the program will be executed. Who will be reviewing whom? Does it make sense "to have Joe, who doesn't know his job, reviewing who I am or what my performance is?" Shaheen asks.

Poorly structured review systems waste time, money, and resources. Ensure that the system you use has a clear rationale for defining peer groups and eliminating such waste, he says.

2. Identify top-performer traits. It's important to understand the skills and qualities you need in your best performers. Do you need people who are adept at technology and willing to learn new platforms? Is your business service-oriented, where it's important that employees be good under pressure, open to collaboration, and accessible? This will give you an idea of the types of questions you should be asking an employee's co-workers, as well as the type of feedback you should be looking for in review results.

Related: How to Make a Poor Performance Review More Effective

3. Allow flexibility. Review methods and questions shouldn't be set in stone. Include some core elements that are important for all employees, such as adherence to company policy, supporting co-workers, and willingness to learn. "But give some leeway for managers and departments to modify the system you create slightly," Shaheen says.

"Leave some flexibility in order for people to readjust the peer review system [for their needs]." This may include adding other questions or considerations, such as how an employee performs in the field or how accurate the employee is in performing duties.

4. Review social structures. Relationships within organizations are extremely important and may have an impact on peer review results, says Shaheen. While it may be assumed that peer reviews could be just a popularity contest, that doesn't bear out in his experience. While people are likely to give their office friends high marks, "most high-performing people in organizations tend to have a lot of positive relationships," he says.

So, while there is a subjective nature to peer reviews, such patterns are effective for revealing employees who have developed specific strengths and spheres of influence within the organization.

Related: How to Start Off New Employees on the Right Foot

Gwen Moran

Writer and Author, Specializing in Business and Finance

Gwen Moran is a freelance writer and co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010).

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