How Continuous Performance Management Saves You Money
You already know that continuous performance management has lots of benefits for your employees. For one, it greatly increases the quality of the feedback by being more timely, specific and actionable. Moreover, it provides useful insights that help identify and close skill gaps. Lastly, the approach motivates employees by creating a forward looking focus and the opportunity for continuous improvement. All well and good, but what does continuous performance management give you in terms of cold hard cash?
How does continuous performance management improve your employees’ performance?
First of all, we should look at the various outcomes that continuous performance management could create in your company:
- Your employees have a clear comprehension of expectations
- Your employees can pursue tasks that fits them and where they can use their strengths
- Your employees have a better self-perception
- Your employees’ development is supported and learning opportunities and possibilities for further training are offered
How does continuous performance management improve your employee engagement?
Crucially, continuous performance management helps you save money by enhancing employee engagement. The chart belows shows some astonishing findings:
Amongst employees who only receive negative feedback the number of employees that are engaged with their job is more than 22-times higher than amongst those who never receive feedback.
Furthermore, these employees are only half as likely not to be engaged than those who don’t receive feedback at all. Amongst employees that solely receive praise, the number of actively disengaged amounts to only one percent, which is statistically insignificant.
How does employee engagement affect your revenue?
Employees that are engaged with their workplace will be more productive, motivated and dedicated to their company. But how does this show in numbers? According to Gallup converting five percent of employees with low emotional engagement into employees with high emotional engagement will save a company with 500 employees an astounding amount of 87,000 euro every year.
This article will look at two ways higher employee engagement saves your company’s hard-earned cash: absenteeism and employee turnover.
Absenteeism:
In its Engagement Index Deutschland 2015, Gallup estimates that by increasing the emotional engagement of their employees, a company with 500 employees could save approximately 278,000 euro every year thanks to lower absenteeism.
Employee Turnover:
Again based upon data from Gallup, one can estimate that improving an employee’s emotional attachment to a company leads to savings of millions of euros. The company mentioned above with 500 employees, could save an extra 477,000 euro thanks to lower fluctuation among its employees.
These two figures alone already show possible savings of 755,000 euro every year. And this is before taking into account increased productivity and a better work experience. In the same report, Gallup presents findings that employees with higher emotional engagement to their job are up to 21 percent more productive. That dwarfs the above numbers in terms of its impact on the company.
Now, these are numbers for German companies, which are only valid to a certain extent for Switzerland. However, according to some estimates, the costs for a Swiss company to replace an employee with an annual salary of 85,500 Swiss Francs is approximately 72,880 Swiss Francs. For a company with 100 employees and a 12% turnover rate, this would equate to 874,560 Swiss Francs in turnover costs per year!
Conclusion
We are able to conclude that implementing a continuous performance management process can improve employee engagement. In turn, improving employee engagement can save you a lot of cash by reducing absenteeism and turnover.
If you want to know how to improve your employee engagement using continuous performance management, feel free to contact us. We’re offering a cloud-based application enabling ongoing, real-time feedback and frequent conversations between managers and employees. The result is a culture that engages, empowers and aligns your talents to deliver on your organization’s top priorities.
