Every now and then I read a business book that changes how I think about my company. One such book was Winning by Jack Welch. In it, the former General Electric chairman discusses the importance of promoting candor within an organization.  It must be delivered in a way that is clear, direct, and timely. When a situation arises that calls for a manager's intervention, you must make a concerted effort to address it as quickly as possible.

Welch's perspective caused me to completely reevaluate how I manage my business, Smarsh, an e-mail archiving business based in Portland, Oregon that services customers in the legal and financial industries. Winning inspired me to encourage open criticism and to build a culture of regular, direct feedback within my organization.

Of course, I have to admit it's not always easy to say what needs to be said. But when you are committed to candor within an organization, you must accept the fact that many of the conversations you will subsequently have with employees and co-workers are not going to be easy. However, if these conversations are direct and professional and if your feedback is clearly intended to assure the long-term success of the employee (as well as the company), then I think you will find that providing constructive criticism is almost always worthwhile.

Here are some tips on how to do it right.

Providing Constructive Criticism: How to Start the Conversation

• Schedule a meeting offsite.  Take the opportunity to step away from the day-to-day routine. Go to a coffee shop or a restaurant or a hotel lobby. Getting out of the office will help both you and the employee get a fresh perspective on the matter at hand. It will also insure the privacy and confidentiality of the conversation.

• Communicate and prepare. As an entrepreneur, you are always juggling many urgent, day-to-day responsibilities. But the only way to change the behavior of an employee is to make some time for the process, and make sure that both parties are as prepared as possible. This is not one of those times when it is helpful to have the element of surprise on your side. A startled employee is likely to react to criticism in a defensive way, which means he or she will be less likely to absorb the lesson or direction you are trying to impart. "Candid comments definitely freak people out at first," Welch writes.

If your conversation comes in the context of a formal performance-review process, make sure you get a copy of last year's review and a list of the current year's goals into the employee's hands a few weeks beforehand. You should also make sure the employee submits a written self-evaluation well in advance. The review should be more than just a verbal report card - it should be a discussion on how to improve individual performance, as well as the performance of both the employee's department and the company at large.

• Create a true dialogue. It is never a good idea to focus the conversation solely on the ways in which you believe the employee is lacking. Just as you are candid with your employee about his or her flaws, so too should you solicit feedback about your own management skills and style. Make sure the employee has the opportunity to be candid, honest, and forthcoming with you about things you could do in order to help ameliorate the problem.    

• Focus on the future. Conversations concerning performance too often devolve into cheerleading sessions or lectures from a "disappointed dad." To get away from this, set measureable goals at the beginning of each year and use the progress made against these goals to drive any discussion about performance. That said, it never pays to dwell on a goal that has already been missed; spend more time and energy discussing the road ahead rather than what's in the rear-view mirror. In the words of Welch, you want to use the "encounter as an opportunity to evaluate, coach, and build self-confidence."

Providing Constructive Criticism: Striking the Right Balance

One of the problems with creating a culture of candor is that you will constantly find yourself correcting employees—to the point where both you and they feel as if you have become a micromanager. You have to manage the anxiety this will create both in you and in them. 

In his book Setting the Table, the restaurateur Danny Meyer writes about how he was taught by a mentor that everyone who comes into one of his restaurants behaves as if it were his or her job to mess up a table setting. Meyer's mentor observed that it was the owners' job "to teach everyone who works for us to distinguish center from off center and always to set things right."

Meyer extrapolated from that advice the need to apply "constant, gentle pressure" to his employees. His theory is that if you provide your staff with feedback only on an occasional basis, it doesn't stick. You have to be candid with them all the time. But if you are constantly challenging employees to do better, you have to be very gentle—otherwise, you risk being an overbearing boss. That said, you can't go too soft—feedback isn't really feedback unless you apply corrective pressure. You have to blend all three elements when providing constructive criticism.

Providing Constructive Criticism: Final Thoughts

Learning how to build a culture of constructive criticism is something I am working on at my company. I am also working to refine my skills at giving and receiving feedback. Like many business owners, I tend to have a bias toward focusing on the things that are not working well, as opposed to the things that are running smoothly. The feedback my employees receive more often than not probably seems like dissatisfaction. That's not the case. If something is simply not working well or I disagree with a decision, I tend to say so and call it like I see it.

I learned from Welch that I should never shy away from this, and should encourage my employees to be as vocal in challenging me as I am when it comes to challenging them. Constructive criticism is needed at all levels, up and down the organizational structure, and people who are good at giving direct feedback should be rewarded. As Welch writes: "Leaders establish trust with candor, transparency, and credit." Keep those words in mind the next time you find yourself shying way from a difficult conversation with an employee who is underperforming in one area or another.

Providing Constructive Criticism: Additional Resources

Winning by Jack Welch with Suzy Welch, HarperBusiness, 2005.

"10 Tips for Delivering (Constructive) Criticism" by Dr. Barton Goldsmith, BankersOnline.com

Topgrading by Bradford D. Smart, Portfolio, 1999. Topgrading.com