I often work with companies who want to measure the effectiveness of their leaders but don’t have a plan that they are confident in for how to do that. Too often we resort to downstream results, such as sales numbers, as our only way of determining if our people are good leaders or not. The problem with only using the bottom line to measure leader effectiveness is that leaders are responsible for not just the what, but the how. It also doesn’t give us any indication of how new leaders that have only been in their role for a short period of time, are impacting the bottom line. As a result, if sales, profit, or growth are our only measurement of how leaders perform in our business, we don’t really have a measurement. We’ve probably all seen situations where leaders can get a team to hit numbers for a while, and even drive short-term growth, but down the road we learn that they used management techniques that cost us more in terms of retention, employee satisfaction, or HR issues than they could ever make up for in dollars. Those things affect our culture and our future, and if we put a price on those things, I’m confident the bad managers would cost a company far more than they generate. If you doubt this is true, take a look at this infographic from INC. Magazine.
Just one stat from the research shows that 33 percent of employees admit to doing less than their best for a bad boss. Admit might also be a key word here. But how do we determine how good the leaders in our organization are? Is it a gut feeling? And yes, I’ve heard that answer when I pose the question. Is it how well their own boss likes them? What others say? If we can’t measure them well, how do we identify leaders for promotions, succession planning, or even development?
Here are some other tools to consider as you think about determining who the best leaders are in your organization.
It seems that almost every company has come to terms with the fact that if employees show up with the mindset of contributing all they can to the business, the business wins. In terms of things we can control in our company, employee engagement may be the most powerful indicator of success. Leaders directly affect employee engagement every single day, and it’s a much more direct result than sales. There are a lot of factors that muddy the waters between how a leader behaves and how much product a business sells, but find a business with great leaders and you will always find a higher level of engagement. The good news is we have gotten much better at measuring employee engagement over the past several years, and it’s a key part of how we help companies take stock of their leadership capabilities and their organizational health. The right survey process also allows us to look at engagement levels on specific teams or within specific functions so we can even more effectively evaluate individual leaders. I’ve seen companies partially tie compensation to employee engagement. For many companies that’s a great idea, as long as we truly measure employee engagement and not just employee satisfaction because those are two very different things.
Cultural surveys are another good way to explore the capabilities of current leaders. Leaders directly affect the culture of their team and senior leaders are completely responsible for the culture of the entire organization. Culture surveys, when done well, give you clarity about how employees view the company and for the most part, your boss represents the company if you are an employee. Culture surveys can evaluate things like sense of urgency, innovation, communication, the amount of fear present in the hierarchy, and even how ethical the business is viewed to be. Of course these things are linked to engagement, but it can be important to look at them separately because they are often leading indicators of where a company is headed and what behaviors may need to change to have an impact on engagement if we are in a leadership role.
360 Degree Feedback
The 360 degree process, where feedback is gathered from peers, direct reports, and managers, is a popular and beneficial tool for providing a holistic view of how a leader or manager is perceived in the business. It is critical if we are using a 360 degree process to ask the right questions, the right way, and link them to the stated expectations for how leaders behave in the business. If not already done, it is critical that we clearly define how we expect leaders to behave, before we can measure anyone against those expectations. I prefer to use the 360 degree process as a development tool, rather than an evaluative tool, but the collective data does give an organization great insights into how leaders are acting throughout the business.
Additional People P&L Metrics
There are many other metrics we can use to evaluate and track the effectiveness of leaders. We can use the retention of high performers, successful promotions from a leader’s team, or other talent planning metrics such as a growth index that looks at the improvement of performance across individuals on a leader’s team or function. If we evaluate our HR data with an eye toward how well a leader develops and improves their team, then we can create even more ways to evaluate an individual leader.
The key is to push ourselves to evaluate leadership as we have defined it within the organization. If all we expect of leaders is to improve the bottom line, then that’s all we have to measure. If we expect them to coach, mentor, develop, inspire, and lead others, as a way to improve the bottom line, then we can measure those things, too. Otherwise, a good bottom line will be a very fleeting thing if we do happen to experience it.