If you’ve ever spent time sitting across from a financial planner, you’ve probably heard about "the miracle of compound interest." When you put money into an interest-generating investment, and set it up so that each year the interest earned is rolled back into the investment, the investment grows far more rapidly than you might think. The reason is that each year you earn interest on both your initial investment and on the interest you earned previously. Over time, that adds up. For example, if you invest $5,000 at 8% (an estimate of market returns I found here) when you’re 30 years old and you don’t touch it until you’re 60, you’ll have just over $50,000. Whee!
Now, it’s reasonable to ask why I’m bothering you with this when I’m unqualified to give financial advice. The answer is that there is an analogous phenomenon in leadership, and like compound interest, few people use it to its full effect. I’m talking about feedback. I encourage leaders I work with to think of feedback like they think about compound interest. By providing the people you lead small bits of frequent and useful feedback, you can drastically improve their effectiveness over time. As a thought experiment, if each piece of feedback you give someone improves their effectiveness by 0.1%, and you give one piece of feedback per day, that small daily act will improve their performance by about 30% over a year. And that’s above and beyond any other causes of performance improvement.
Unfortunately, most leaders fail to give regular feedback. There are two common responses that leaders give me when I tell them that they should give regular feedback: 1) “I don’t have time for that,” and 2) “I give people feedback at their annual/biannual/quarterly performance reviews.” To understand why I now halt both of these responses mid-sentence, let’s first talk about the basic psychology of learning from feedback.
How People Learn
In its most basic form, learning involves developing an understanding of the relationships between causes and effects. Without feedback, your employees don’t get to see the effects of their behaviour, thus robbing them of the opportunity to develop an understanding of how their behaviour affects their performance.
The reason that small doses of regular feedback are so powerful is because it provides the three conditions under which feedback has the strongest effect on learning and behavioural change. People learn best when feedback is:
Make Feedback Specific
If your subordinate sends you a report and you send it back with a note that only says “this doesn’t meet my standards,” you’ve squandered an opportunity to improve this person’s future performance. Leaders who take this approach fail to develop the critical skills their employees need. Make your feedback as specific as possible, while still providing guidance on how to apply the critical lessons to future tasks.
Sadly, the human mind is fairly feeble (or, as psychologists who don’t want to feel bad about themselves call it it “limited”). We have limited focus, attention, and working memory. (I’ve written previously about how to consider the limits of the human mind when you design your organization in a previous post.) Since you want your feedback to have a powerful effect on learning, the best way to achieve that is by providing only small doses of feedback at a time. Try to provide one, two, or at the very most three pieces of feedback at once. One is often best.
This approach has two advantages. First, it allows the person receiving your feedback to really focus on it, understand it, and learn from it. This will reduce the frequency with which you need to provide the same feedback repeatedly. Second, limiting the amount of feedback you give focuses your own attention on identifying the lessons that will lead to the greatest improvement. For some leaders, not identifying all the issues may feel like you’re holding back valuable information, and therefore be difficult at first. However, by not overwhelming people with feedback, you’re actually allowing the person to fully learn the most important lessons. And since you’re giving feedback frequently, you know that other problems with be addressed in due time.
Feedback is a Dish Best Served Hot
Learning happens fastest when problems - and a way to correct them - are identified quickly. In a recent study educational psychologists reviewed the science on common study techniques to see which were most effective. One strategy that is consistently powerful is self-testing (e.g. using flashcards for learning multiplication tables or vocabulary). This technique is so effective because the learner gets performance feedback immediately. Leaders can harness this power as well by providing feedback immediately, and giving subordinates opportunity to correct their mistakes. (An interesting side note: the most commonly used strategies - highlighting and rereading material - appear to have little or no effect on the amount of material that a student learns.)
Don’t Wait for Performance Reviews
You can see from the research summarized above why I discourage leaders from withholding feedback until formal performance reviews. By the time formal performance reviews happen, too much time has passed for the feedback to be sufficiently specific, there is too much feedback to give at once for it to be easily learned from, and the powerful effect of immediate feedback on learning has been forfeited. To see why regular feedback need not be time-consuming, let’s consider the two ways that leaders commonly respond when subordinates submit work that fails to meet their standards.
Responding to Imperfection
Leaders I’ve worked with typically respond in one of two ways when a subordinate submits work that doesn’t meet their standards, regardless of whether the deficit is small or woefully large. The first response is that the leader corrects the work herself, without the subordinate's further involvement. The second response is to provide extensive comments, in which the leader suggests specific solutions (rather than identifying problems), and then sending it back to the subordinate for revision (which often involves little more than unthinkingly accepting all of the boss’ changes).
The first option is time-consuming, and the second even more so. Furthermore, neither unleashes the compound-interest power of frequent feedback. I tell the leaders I work with to find the middle ground when possible:
Explain the one, two, or - if absolutely necessary - three specific lesions that will have the largest effect on the quality of the work.
Identify one or two examples of where those lessons can be applied, and encourage your subordinate to find any others.
The subordinate revises the work and then resubmits it.
This process can be repeated as many times as is necessary.
When done skillfully, this feedback process requires little of the leader’s time beyond that required to read over the work. Admittedly, it can sometimes be challenging to identify which underlying problems are the most detrimental to the quality of the work and explain those problems in a way that allows the subordinate to correct them. However, cultivating this skill will save you enormous time in the long-run by producing better, more skillful employees.
Build Your Organization's Nest Egg
At one point or another, almost every organization claims “our employees are our most important asset.” If this is true, then it’s worth investing resources into developing and increasing the value of that asset. While formal training is an important part of employee development, capitalizing on the compound interest effect of regular feedback is the quickest and easiest way to develop each of your employees to expand their potential.
Geordie McRuer completed his PhD in Organizational Behaviour at the Rotman School of Management and is now the founding partner at Bastet Organizational Strategy, a consultancy that helps organizations successfully plan and execute their scaling strategies. You can learn more about Bastet here.