No matter your job title, all deliverables boil down to return on investment: How can this project be most beneficial and profitable for the company?
When real-time, continuous feedback enters the conversation, it’s almost always in the context of millennial talent or how modern workforces need regular check-ins. We can’t argue those points. In fact, we support them.
That support, however, comes from deep research into how much better organizations that provide continuous feedback perform against their competitors.
Reduced Voluntary Turnover
It has been estimated that turnover costs a company 6-9 months’ worth of an employee’s salary. That means replacing a manager making $40,000 a year could rack up $20,000 or $30,000 in recruiting and training costs.
And that only accounts for one manager. Consider losing multiple people in a short span of time, or losing a higher-level executive with a much larger salary. Don’t forget to tack on the non-monetary costs like time to proficiency and productivity.
When continuous feedback is implemented, communication between employees and leadership opens up. It might seem a little touchy-feely to say, but human capital management is still focused on humans. You’ve probably heard the “employees quit managers, not jobs” bit. It may be overused, but it’s true! For employees to feel connected to their employers, they need to know they can trust their managers or supervisors.
A manager can lower turnover rates by using real-time feedback as a primer on sharing and attaining goals, workplace challenges, deliverable struggles, and so on.
Additionally, 26 percent of employees withhold information about workplace problems or new ideas because they believe sharing it will not effect change. When performance feedback is delivered in a regular and professional way, employees will feel more open about sharing their stances on company policies and practices.
Reduced Annual Review Costs
Many organizations seem to believe that one hour of performance feedback is enough to cover an employee’s entire year on the job. What that performance management model lacks, however, are opportunities to address performance issues before they lead to termination and to build a record of performance throughout the year.
According to a SHRM article, 77 percent of HR executives believe performance reviews don’t accurately represent employee performance. The very professionals leading the appraisal process are not happy with the way performance is evaluated! As for employees, only a little more than half feel the process is actually effective in terms of their development. The problem with traditional annual performance reviews is twofold: many opportunities for skill and goal development are missed in the time between reviews, and the actual process of tracking performance metrics is inefficient.
When a continuous feedback model is used, employees gain the means to improve immediately and managers gain access to clear checkpoints of success and failure. Efficient leaders who record performance notes throughout the year will spend less time scouring files and trying to remembering what employees have done since the last review. Continuous feedback also cuts down on recency bias, thereby granting employees fairer and more well-rounded performance reviews.
Increased Employee Engagement
Employees who don’t reach their full potential and ones who doesn’t feel connected to their jobs anymore cost money. Gallup estimates that actively disengaged employees cost the U.S. economy between $450 billion and $550 billion in lost productivity each year.
Luckily, only about 17.2 percent of of employees are “actively disengaged.” However, depending on the size of your organization, that can be a large portion of the workforce. The more frightening fact is that only about 34.5 percent of employees are engaged at work. That means 65.5 percent of workers aren’t reaching their full potential – but they are receiving their full paychecks.
Don’t get us wrong: Employees need and deserve compensation, but they also need and deserve developmental direction.
Continuous, real-time feedback keeps your talent on track and builds each into a better employee. An engaged employee is a more productive and happier employee. Innovation, performance, and satisfaction increase and unscheduled absences decrease as engagement goes up.
Engaged employees show pride in their companies, which spreads to their networks and boosts interest from potential talent. It also creates a more positive reputation for your company. All of this means top talent and lucrative clients are more likely to approach you, saving on sales and recruitment costs down the line.
Above all, the bottom line is directly impacted by engagement levels. Companies that average 9.3 engaged employees for every actively disengaged employee experience roughy 147 percent higher earnings per share than their competitors do.
Continuous performance feedback is pivotal to retaining, managing, and engaging talent. Businesses need good products or services, but the success of those products and services is wholly dependent on employee actions. When we crunch workforce investment numbers, it’s easy to get caught up in the costs associated with time, tools, and resources while overlooking just how much a company can benefit from a more skilled and satisfied workforce.
When continuous performance feedback is integrated into employee management systems, it provides more than just the intangible cost savings. It directly improves organizational success.
A version of this article originally appeared on the iRevü blog.
Michael Heller is the CEO and founder of iRevü.