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How Better Feedback Can Mean Better Business

December 5, 2023

Around 70% of multinational companies are moving away from the outdated annual review approach to feedback, according to data from Josh Bersin of the Harvard Business Review. In this group of forward-thinking companies you’ll find powerhouses such as Adobe, Deloitte, Dell, GE, and Microsoft. But this move away from the annual review doesn’t mean there’s a move away from feedback in general. Rather, there’s a move toward more ongoing, consistent and even daily feedback. Study after study in workplaces across the globe have shown that businesses that incorporate effective feedback into their daily operations have better outcomes in employee satisfaction and overall productivity. In a feedback-rich culture, employees receive regular, helpful feedback from direct supervisors, and they are empowered and encouraged to provide meaningful feedback to co-workers and leadership.

“Study after study in workplaces across the globe have shown that businesses that incorporate effective feedback into their daily operations have better outcomes in employee satisfaction and overall productivity.”

How Feedback Affects the Bottom Line

It follows both logically and statistically that workplaces without effective feedback techniques suffer in a variety of ways. According to the Engagement Institute, disengaged or under-engaged employees cost companies around the world between $450-$550 billion annually. There are a variety of factors that lead to those losses, but four major ones stand out.

  • Employee Turnover. Companies that implement regular employee feedback experience 14.9% lower turnover rates. Employees who are unengaged at their jobs are finding new ones where they feel seen and appreciated, and when they do – they stay.
  • Lost Productivity. Four out of 10 workers feel disengaged when they do not receive feedback from their managers or colleagues. Disengaged workers are less productive, less concerned with the overall success of their organization, and can cause other employees to lose morale.
  • Sub-par Customer Service. Highly engaged business units achieve a 10% difference in customer ratings and an 18% difference in sales. Businesses with lower employee engagement are losing customers, sales and leads to those who have invested in and engaged their workforce.
  • Current Ineffective Feedback Systems. Your business may already have a system of feedback in place – perhaps an annual or semi-annual performance review. The problem is that these siloed and infrequent systems of feedback are not truly effective, and, in fact, are often detrimental to morale and budget.

The Future of Feedback in the Corporate World

As we noted, many Fortune-500 companies have nixed the outdated once-a-year model of employee feedback, but when companies move to an informal system, it requires creating a culture that keeps continuous feedback going. Only about half of HR leaders surveyed in a 2018 report by SHRM and Globoforce feel that their current performance appraisal process is accurate, but those who conduct more frequent reviews are 1.5 times more likely to say those reviews are an accurate appraisal of employees’ work. “Peer feedback, more frequent reviews or check-ins and a supportive feedback environment can effectively spur employee growth and development.”

In addition to the inaccuracies and gaping holes the current review systems have, many of those same companies are also ditching them because of their cost. Research by CEB estimates that the annual review system costs companies of 10,000 employees roughly $35 million a year. When you consider that the results of that effort are minimal at best, that’s an extremely low return on investment.

So the replacement to this antiquated system is a Feedback Culture, but instituting that is easier said than done. When companies ditch a formal review, the expectation is that people are giving more feedback more frequently to more people – a constant and multidirectional system. But when the shift is made from a formal to a less formal model and that structure of the employee performance review is removed, a company is now dependent entirely on the feedback skill of its workforce. With this burden now on each individual employee, they must have the required skills to provide helpful and constructive feedback in healthy ways that they feel comfortable with. If they don’t, then the whole thing could come crashing down.

Why Feedback Training is Necessary

Surveys have shown that nearly half of managers find it difficult to give negative feedback. Because of this, some managers resist giving their direct reports any kind of feedback at all. Additionally, there’s a perception that “feedback” is always negative feedback when in fact a true feedback culture thrives on both positive and constructive feedback that is multidirectional.

In a study published by The American Psychological Association, they found that about a third of all feedback interviews resulted in a decline in individual performance. The researchers suggested that in most cases this happened because the review had led to hurt feelings which left employees demotivated and emotionally upset. So it stands to reason that both parties involved in a performance review are not excellent at giving or receiving feedback.

When people aren’t good at something that is necessary for their job, or when a new system is implemented and everyone needs to get up to speed the solution is typically pretty simple – train them. But for some reason, many organizations overlook the need for training their teams on how to give and receive effective feedback.

We know that people are not naturally good at giving constructive feedback, but we also know that people crave it and are leaving their jobs for ones at organizations that focus on value-centered, ongoing feedback. We know that this is costly to businesses, causing a loss of revenue and decreased performance and productivity.

So what’s more disruptive – implementing organization-wide training or continuing to lose talent to companies who already have?

Giving good feedback is a skill that can be taught and learned, but it also needs to be practiced. Much like how ongoing, timely and frequent feedback seems to work better for most individuals, training should follow a similar pattern. Training systems that can be incorporated into everyday workflow make it easier for individuals to retain and use the skills they’re learning. And once a skill is practiced regularly, confidence emerges and better feedback and happier employees is the outcome.

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