Ram Charan
Do you have the psychological fortitude to be a great leader? To find out, ask yourself this simple question: Would you be comfortable making your personal performance evaluation known to peers and subordinates?
It might be awkward at first. But after a while, open communication about your performance criteria can lead your team in the right direction, strengthen it, and inspire its members to strive for similar goals.
Transparency's Rewards
This transparency starts right at the top of the company with the CEO. Case in point: More and more boards of directors are detailing the criteria behind their chief execs' compensation in terms that go beyond traditional financial figures, using such measures as customer satisfaction, employee engagement, brand equity, or leadership development.
The trend toward more transparency in executive pay -- not only of the bottom line but also of specific evaluation criteria -- is unmistakable. Shareholders and policymakers are demanding it, and boards increasingly recognize that transparency has its rewards.
In this age of shareholder activism and outrage about improper CEO compensation, one hope among proponents of more transparency is to coax profligate spenders into bringing pay in line with performance and to keep practices on the up and up by clearing up some of the fine print. But another impact is to put more focus on the performance criteria -- so that everyone can see what boards want their CEOs to focus on operationally and strategically.
Smart leaders in those companies can then follow their CEOs' leads, not only by building their corporate chiefs' goals into their own practices, but also by doing the same with their own teams.
Looking Out for Satisfaction
The CEO's goals, of course, should influence every other manager's own priorities. Take Bank of America (BAC), for example. Its most recent proxy included a statement on measuring performance for its CEO, Kenneth Lewis, with a reference to "quantifiable goals in three areas of achievement: Customer satisfaction, associate satisfaction, and stockholder satisfaction."
If a piece of the CEO's bonus rides on customer satisfaction, what does that tell the customer-service manager -- or the branch managers and tellers who are the real points of contact with customers? You better believe smart managers are out on the floor engaging associates and figuring out how to keep customers happy.
It's no secret that employees who interact with the public have a huge effect on customer satisfaction. A conscientious branch manager would work to make sure bank tellers are getting their needs met. After all, it's the tellers who create the customer experience. If the tellers have the information they need to answer customers' questions and feel appreciated by their boss, they're happier and more confident -- and customers sense it. These are the kinds of things, large and small, that managers at all levels can do to align their own practices and initiatives with those of the CEO -- when they know their CEO's goals.
Support -- and Resistance -- Out in the Open
In a similar fashion, you can make your own evaluation known to your co-workers and direct reports. It sounds outrageous at first, and it certainly takes a lot of self-confidence. But it can be a real positive. Imagine when your team knows what organizational goals you're working toward, what personal areas you've been asked to achieve, and how your own supervisors think you've performed.
The reality is that people around you already have their own opinions about your performance. They also think they know how your supervisor is evaluating you. But those views are almost always cloudy and distorted. Why not clear the fog to make for a healthier relationship? Keeping no secrets builds trust among peers and subordinates.
"Will they support me?" a nervous manager might wonder. And that's partly the point. Executives who make such disclosures find out quickly where their sources of support and resistance are. Transparency brings discussions out into the open (rather than leaving them to the water cooler) while there's time to process input and get everyone on board. When this happens on a broad scale, a corporation synchronizes its people.
Inspiring Courage
Johnson & Johnson's (JNJ) proxy statement reveals that CEO William Weldon will earn his bonus depending on the company's performance against not only financial measures, but also non-financial measures, including "managing Credo responsibilities." So Johnson's & Johnson's famous Credo, which details the firm's accountability to customers, employees, the community, and stockholders alike, is an integral part of its CEO's evaluation, as it has been for many years. No doubt Johnson & Johnson's board wants all employees to take that to heart.
Sharing your personal performance against the goals set for you will engage associates to help you become a better leader. They'll know what your strengths are and where you might need help. The practice creates energy and builds trust. The transparency also keeps you sharply focused. If you miss your targets, you'll drill down to find the cause and effect and improve next time around. If you hit your goals, you'll gain confidence.
Just as important, it will spur subordinates to muster the courage for implementing a similar process to improve their own leadership effectiveness. That's how making performance evaluations transparent strengthens leaders and entire organizations. It's a practice that helps many CEOs -- and it can help you, too.
Where to Find Out About CEO Evaluations
Public companies are required to file proxy statements with the Securities and Exchange Commission whenever they solicit shareholder votes. Thus, firms file their proxy statements in the spring, in preparation for their annual meetings when shareholders vote for a board of directors, the selection of auditors, and other matters.
This statement is where details of executive compensation and performance evaluations can be found. You can search for proxy statements, known as DEF 14A filings, from the SEC's EDGAR database Web site.
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