It's always hard to spend money on internal tools. Budgets are especially tight, but performance review tools ARE worth the money, if there is organizational support backing their implementation. If managers show a commitment to employees, employees are more likely to stick around and be more productive on the job. Here's why it should matter to you:
Turnover costs big
Did you know that the cost to replace an employee can be anywhere from 1 to 4 times their yearly salary? Statistics vary widely on this, depending on what costs you incorporate into the estimate, but the result is significant. In one example, turnover cost an organization 11% of annual profits.
Let's think about an average employee's salary. Entry-level positions tend toward $40,000-$50,000 salaries, while more specialized (and often technical) positions can reach into the six figures.
In the best-case scenario, all voluntary turnover comes from entry-level employees who don't take with them a ton of institutional knowledge. They're the easiest to replace and have the least impact on the success of the organization. But even they take about $40,000 to replace. And you probably don't lose just one each year.
Feedback encourages participation. Participators are less likely to leave.
Implementing a system that proactively collects feedback does several things:
- It encourages dialogue between employees and management
- It provides an opportunity for employees to share ideas, suggestions, complaints, commendations, and creativity to better the company
- It gives management a "pulse of the organization" from which to make decisions
When implemented correctly (i.e. management acknowledges areas for improvement and addresses employee concerns in an open, honest manner) a feedback tool gives employees the outlet they need to participate in the success of the organization.
Employees who are encouraged to share, recognized for their contributions, valued in the organization, and allowed to use their strengths are less likely to leave their organizations voluntarily.
In a company of 200 employees, if the use of ClearGears influences even one employee to stay rather than go, the system has paid for itself for 3 years.
Stress and conflict zap productivity
A study from the UK showed that organizations lost 24 billion pounds in 2007 due to stress and conflict in the workplace.
Without a proper outlet for these issues, they will fester and affect the productivity of an entire team, not just the individuals with the problem. Can you imagine a workforce that focused only on work, all day, every day?
Additionally, stress and conflict lead to health issues and problems in employees' personal lives. It's not just work that is affected, it's employees' entire lives. When healthcare costs rise and employees have problems at home, productivity takes an even bigger hit. The cycle continues.
Feedback brings these issues to light
Think your employees don't know exactly which team member consistently slacks? Just give them a chance to tell you, and they will. And once they've shared that information with someone who can actually do something about it, the responsibility falls to management to address the issue.
Feedback systems work great when management respects them. Employees will continue to share successes and areas for improvement if they see that their feedback leads to organizational change. Organizations get happier, more productive workers who aren't talking about problem teammates behind their backs. Managers become trusted partners when employees see them take action.
Managers consistently work with incomplete information
Struggling to determine how to reward your best employees? How to strategically reward the rising stars? How to address underperformers? If you're dealing with data collected twelve months ago, you might as well give up now. Our world changes rapidly, and you need up-to-date information to make good decisions.
Continuous feedback provides real-time data
To know your underperformers, you have to see data over time. Address an issue and track an employee's development over time. Is he improving? Then keep doing what you're doing. Is he stagnating? Then consider another tactic or reconsider his fit in the organization.
You can get this data in weeks and months with a system that gathers regular feedback. Up-to-date data takes the guesswork out of managers' lives and prevents them from relying on memory. Everyone's job becomes easier.
How does this play out in your organization? Do you see interpersonal conflicts affecting productivity? What are the main causes for turnover in your org? Will better communication improve things?
