A few months ago, a single e-mail message from someone at Reuters was mistakenly sent to more than 33,000 unintended inboxes. Even worse, it generated days’ worth of responses in what became known on social media as #ReutersReplyAllGate.
Among other descriptions, this misstep is a textbook example of a poorly executed feedback loop.
Here’s a more typical scenario: sending Excel templates for financial reporting and analysis to LOB managers across an organization. They review it, verify back to the sender that they have done so, and offer value-added insights into the numbers – but they do it one email and spreadsheet at a time. For many finance departments, this may sound like business as usual, or a logistical nightmare of version control and data consolidation issues.
Don’t give up hope, though: more effective, automated and auditable feedback loops are both attainable and worth the effort involved.
Know Your Loops
Josh Kaufman, author of The Personal MBA, offers a great breakdown of different feedback loops, which he defines as something that exists “when the output of a system becomes one of the inputs in the next cycle. Feedback is how systems learn — if the system is capable of perceiving its environment, that feedback helps the system understand whether it’s under control and satisfying the required selection tests.”
Finance departments today might suffer from what Kaufman calls “balancing loops” — where hundreds of pages are distributed in the reporting process, offering great insights and variance analysis, but executives fail to carefully understand their results, assess the impact, and make faster, smarter decisions as a result. That’s when change becomes difficult, if not impossible.
A better variation – for Finance in particular – is what Kaufman calls “reinforcing loops,” which amplify the system’s output. In other words, the reporting process becomes something that continuously pushes everyone involved to improve their contribution and the overall result.
When Feedback Gets Formalized
No one likes introducing more structure, of course, but a formal process for offering and tracking feedback make sense on every level, according to a post on EffectiveManager.com, whether it’s manager-to-manager, manager-to-subordinate and so on. Just make sure to treat it as a living, breathing process rather than something you try once and then abandon:
“To be effective, they need to be regular and ongoing in terms of keeping in touch with subordinates, but also ‘just in time,’ to help managers have the appropriate conversations when necessary,” the post said. “As a means to collaborate, to stay informed and to communicate, feedback loops are an essential part of effective management.”
The whole point of the reporting process, in part, is to help business leaders accelerate the identification of threats and opportunities while ensuring everyone is on the same page. A recent article in Entrepreneur magazine suggests it will also create a healthier corporate culture:
“People are driven by extrinsic motivators like recognition and compensation or the intrinsic achievement of mastery,” the article said. “All these share the common theme of positive transformation. When leaders vocalize that, they empower their employees to do their best work and step into expertise or leadership roles.”
The reporting process isn’t just about “keeping people in the loop,” in other words. It’s about creating a feedback loop that keeps companies cohesive, strong and focused on the same strategy and goals.