HR Advice

How Creating A Feedback Culture Improves Performance

March 2, 2021
4 Min Read
How Creating A Feedback Culture Improves Performance

Organizations recognize the value of feedback, but many hesitate to make the investment to integrate it as a core part of their culture – whether that’s because they’re uncertain of the ROI or don’t have leadership buy-in. In this post, we’ll explain how cultivating a culture of feedback can have a direct impact on a company’s overall performance. 

What does a feedback culture look like?  

A feedback culture is an environment where all employees – regardless of team or seniority – feel comfortable sharing their ideas, feedback, and opinions about relevant issues. But this type of culture isn’t only about cultivating a feedback-friendly environment – it’s also about creating opportunities to share this feedback through:

  • Performance reviews
  • Surveys and other feedback collection tools
  • Communication channels
  • Team-wide and company-wide meetings

The feedback that comes in should also be regularly reviewed by company leaders, who can take action on the feedback they receive. This can take the form of introducing new initiatives or incorporating employee suggestions into business decisions. 

While a feedback culture sounds great, it’s not something that just emerges overnight. It requires an investment in the right tools, processes, and policies. However, we recognize that it can be challenging to secure buy-in for that initial investment. That’s why we’re going to use the next section to demonstrate how a feedback culture can positively contribute to your organization’s overall performance. 

3 ways feedback culture improves performance 

1. Boosts employee-oriented outcomes 

When your workforce feels heard, you’ll see a direct impact on employee-oriented outcomes like retention, productivity, and motivation. A study on performance feedback cultures found that these positive employee outcomes can lead to improved financial performance. This includes a doubling of net profit margin, return on investment, and return on assets, as well as a tripling of return on equity.

Also, keep in mind that employees who feel like their voice matters at the organization are more likely to be engaged. According to Gallup, these employees tend to be more present, attuned to the needs of customers, and observant of processes, standards, and systems. When taken together, these behaviors result in 21% greater profitability for companies.

2. Strengthens company culture 

Making feedback a pillar of your company culture comes with many benefits. It builds trust across the organization, makes employees feel psychologically safe, and encourages a growth mindset – rather than one that’s based on a fear of failure. 

Most company leaders recognize the power of having a strong company culture like this. In fact, 82% of CEOs and HR leaders believe that culture is a potential competitive advantage. Not only is a positive company culture good for your employees, but it can also directly impact the performance of your organization. Research has found that happy employees who work in a positive environment are 12% more productive, whereas employees who feel that they work in a negative workplace are 10% less effective.

3. Drives innovation 

Feedback and innovation go hand-in-hand. Creating a culture where feedback is not only welcomed, but also acted on, leads to increased sharing of ideas. This allows diverse voices to be heard, which results in innovative ideas and allows companies to adapt quickly to changing circumstances. 

Studies show that these innovative companies see better performance. Specifically, there’s a significant correlation between the ideation rate at innovative companies and growth in profit or net income. According to this article from MIT Sloan Management Review:

“When a corporate culture is designed not just to encourage innovation but to systematically nurture employee ideas, the results are dramatic. Companies like this boost employee participation in innovation challenges created by management, generate more actionable ideas, and then implement those ideas in a way that generates profitable growth.” 

Nurturing a feedback culture is an investment. But it’s one that will pay itself over many times by improving your company’s overall performance – whether that’s by strengthening employee-specific outcomes or driving innovative ideas. Curious to see how AllVoices can help your organization create a feedback culture? Request a demo to learn more.

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