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February 26, 2014

Reduce the Cost of Turnover with Effective Performance Appraisals

The cost of turnover can be crippling for most organizations.  In a study by Center for American Progress (CAP), it was found that when replacing a mid-level employee it costs about 20% of their salary.  With the cost of replacing employees being so high it behooves management to take actions to reduce turnover.  One of those ways is to have an effective performance appraisal.

Employees often fear their annual appraisal.  Why is that?  More frequently than not, an employee will only receive feedback during their annual appraisal.  This lack of communication can cause a breakdown between a manager and their employee.  It is important to provide feedback to employees throughout the year.  Maynard Webb, author of Rebooting Work: Transform How You Work in the Age of Entrepreneurship says, “When it comes to retaining talent, one tactic I’ve often found crucial is implementing informal weekly and formal quarterly check-ins.”  He explains that by doing this you are able to avoid disconnects within an organization and between managers and employees. Feedback is critical when attempting to get employees to buy into an organization’s culture.

Performance appraisals can be used as the perfect conduit to facilitate ongoing feedback between a manager and an employee.  When managers continually check-in with employees they will have the opportunity to provide and ask for feedback.  Increased feedback will lead to increased employee “buy in” which leads to increased employee satisfaction and reduced turnover.

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