The performance management process plays a critical role in leadership development, whether companies recognize it or not. Unfortunately, in the midst of day-to-day pressures, leaders are often so focused on the results that they miss the learning. But performance management systems can be structured so they drive high performance and develop leaders. The challenge is to perform - and learn. In this chapter, we discuss the elements you can build into your performance management system to achieve these dual goals.
The primary purposes of performance management systems will always be: to drive business strategy; to engage, motivate, and reward employees; to hold people accountable; and to ensure that everyone is treated fairly. Too many organizations don’t even have these basic elements in place. However, four other elements are needed for a performance management system that also builds strong leaders: well-written performance goals, ongoing feedback and coaching, rigorous evaluation, and a reward system that reinforces both performance and development.
Most companies talk about how important it is for all employees to set goals for the year, but it is amazing how often this doesn’t happen. Taking care of day-to-day crises can be so overwhelming that leaders never quite get around to establishing yearly goals. Beyond the rather frightening legal risks (e.g., making reward decisions at the end of the year without documentation to justify them), development opportunities are also lost. Yearly performance goals challenge leaders to think through both the results they want to achieve in the coming year and the ways they can use the assignments to develop their leadership capabilities.
Ongoing feedback and coaching. The performance management process should include regular feedback and coaching throughout the year. For example, ongoing one-on-one meetings between managers and employees can be used to discuss project status, emerging challenges, and support needed to reach goals. When used for development, these meetings move beyond the work to also discuss the overall company strategy and why actions should or should not be taken. Leaders are challenged to move beyond the current problem and think about larger systemic issues, and how they are (or are not) developing their leadership skills in the midst of those challenges. Managers can also create the conditions for team members to challenge and coach each other. This can be modeled in staff meetings and become a natural part of the culture. Think back to your last staff meeting. Did you only discuss deliverables or did you make time to discuss what you are learning as a team?
Rigorous evaluation. Effective performance management systems hold people accountable for the results and how they got those results. As noted in earlier chapters, leaders develop the most in situations that stretch and push them to the edge of their comfort zones. Rigorous evaluation creates the pressure and visibility to support strong developmental experiences. Weak performance systems don’t hold leaders accountable and don’t provide the rich feedback about what leaders did well and where they failed to meet expectations.
Reward systems. Reward systems send strong messages about what is really valued in the organization. Steven Kerr points out in his article “On the folly of rewarding A, while hoping for B” that often what is publicly proclaimed as important is not what actually gets rewarded. For example, organizations might say that people are their most important asset, but they promote leaders who get results at any cost. Reward systems should measure and reward how well leaders are developing the people around them.
Some of the indicators to watch include: the ability of managers to attract strong talent to their groups; on-time completion rates of performance goals, development plans, and performance evaluations; the number of employees from the manager’s group who are promoted; and employee attrition rates. Some organizations collect employee feedback informally (see sample e-mail below) or through a more formal process like 360-degree feedback systems. Formal ratings can be extremely challenging when used for evaluation given how threatening it is for employees to rate the boss who, in turn, will rate their performance at the end of the year. However, this can be a valuable source of feedback about the leader’s ability to manage and develop others if it is done well in a supportive organizational culture. If used, several precautions will need to be taken to protect employees (i.e., ensure it is anonymous, know that ratings will be inflated, protect employees against retribution from managers with low scores, determine what you will do if only a few employees respond, etc.).