By Stuart R. Levine

Published In, CU Times

An overwhelming number of companies use annual or semi-annual performance appraisals that focus on ratings and employee weaknesses, without commensurate tools to engage or develop their employees. Furthermore, too many managers believe that compensation is all that matters, and if the pay and benefits are good, people should be motivated. Numerous studies, however, show that once a certain level of compensation is attained, feelings of empowerment, purpose, and achievement are what really matter. Employees need to know they are valued, valuable and trusted with the organization’s customers and assets. All too often, however, performance management systems, which are usually tied to compensation, send the opposite signal.

Engagement and employee development are especially crucial with today’s multi-generational, technology savvy workforce. When organizations worry less about rating, ranking and tracking employees, and focus more on inspiring employees to stretch their skills and expand their leadership capacity, they are better prepared to meet today’s challenging new business situations. Leaders must appreciate that the technological revolution means employees can create value in ways that were never contemplated by traditional performance-management systems. Today, they interact with customers and each other in new, innovative and creative ways to produce economic benefit.

In this environment, leaders should shift their thinking from “managing talent” to creating an optimal culture where talent can thrive. This means developing a workforce with more independent judgment, ability to deploy technology, higher levels of expertise, ability to collaborate, and better problem-solving skills. Leaders must have the courage to transform performance management systems into new employee development systems that work for modern business, especially for those businesses emerging in the new millennium.

Traditional appraisal systems have been backward looking, and often focused on what was wrong, usually without giving the employee the needed tools to improve. For decades, under the theory of “you get more of what you measure”, quantifiable metrics, like Key Performance Indicators, have been employed to track how well an individual is achieving stated goals, which were generally tied to the organizational objectives. These historical systems, however, consume management and employee time, often without providing a commensurate payoff. In fact, they can undermine performance as people focus on their ratings, over personal growth and organizational mission.

The best current systems are forward looking. Feedback is gathered to identify areas where a person’s skills need to be strengthened, and the organization provides the person with resources to develop those skills. For example, Google utilizes a system that collects developmental feedback, which is decoupled from compensation, in order to uncover areas where managers can strengthen their leadership skills. Google provides the manager with resources like coaching, and in-person and on-line learning, to strengthen those areas. Feedback systems are in place to track the progress and identify areas for more attention.

When organizations as a whole commit to learn and improve, the culture shifts. This starts with formal and informal systems to give employees the skills they will need to develop themselves, and help to develop others. For example, with one of our health insurance clients, we assisted their leaders with the implementation of an educational program that helped employees acquire new feedback and coaching tools. This program taught the individuals to use feedback from others to identify areas of focus for their personal growth, and to give feedback to support the growth of others. They learned coaching skills for mentorship and peer-to-peer coaching. They saw that a great coach leads with the expectation of greatness from their team, and generates energy, trust, and confidence. These employees prepared themselves for the rapidly changing environment of health care reform. The organization saw the results in new levels of competence, confidence, and follow through.

Technology can be employed to help collect needed feedback data. Mobile apps, company internal surveys, and “crowd-sourced” feedback, can provide real time insights to employees and their teams. This data can rapidly be employed as a basis for customized learning and individualized coaching. Feedback can be most effective when it is timely.

Today’s environment demands that organizations focus on development and learning, creating a culture where feedback is a positive force for improvement. This is an environment where people support each other. They identify, plan and envision expanding behaviors and processes that work well for themselves and the team. They build on what works, rather than trying to fix what doesn’t. This culture lets people know they are valued, valuable and trusted. Take a hard look at your performance evaluation systems. Ask yourself, “Do they support and create an organizational culture where people feel heard, constantly learn, and improve?”