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The Root Cause of the ‘Performance Review’ Problem

As far as can be told, no one has found the performance review useful.  Now GE, Accenture, Deloitte, Adobe, Gap and many others are changing their approaches to reviewing performance.  Changes include (among others): conducting them more often, bringing more dialogue into the process, using apps, and implementing software-based programs.

The ineffective performance review is a symptom of a deeper issue – our individual-centric mindset.  For several understandable reasons, we lead our enterprises while holding a belief that our individuals (singularly or in teams) are at the center of what we are striving to accomplish.  One of those reasons is our (and most western economies) strong societal value of individualism.  It is not that individuals themselves are the issue.  Individuals are important.  The issue is our mindset that individuals are the center of our endeavor. 

Every enterprise is a living people system and the three living elements of that system are its customers, employees and leaders.  It is the connections of our customer-employee-leader system that need to hold center stage.  The more complete these connections are, the more successful we will be.  Our central focus needs to be the quality and extent to which our leaders and employees are delivering on our enterprise’s customer promise.  Effective performance depends on how well we are working together as a system to deliver on our promise to our customers. 

Effective “performance reviewing” occurs when we set customer promise delivery goals, build plans and timelines to accomplish these goals, continually monitor our progress, treat problems and failures as our problems and failures, treat successes as our successes, give people feedback designed to help goal-attainment, help one another to succeed, stay focused on what is working and not working, and celebrate accomplishments all along the way.  

Culture is not a Compilation of Individual People’s Values

Equating the culture of an enterprise with a compilation of individual people’s values may have some limited application to a sorority or a fraternity, but that’s it.  Anyone who tries to sell you on such an idea is selling you snake oil.

Culture has to do with creating conditions for your people to fully deliver on your enterprise’s customer promise.  It is driven by the nature of your business and what it takes for you to succeed in your marketplace.  It is all about implementation and identity.

A rowing team’s culture is formed by what this collection of people must actually do in order to succeed.  This is true for every non-profit and for-profit enterprise.  A compilation of each of the rower’s personal values is not what leads to success.  

Our research over the past 35 years tells us that there are sixteen major drivers of culture and that each set of these drivers is practiced differently in each of four fundamental kinds of enterprises. 

Additionally, the kind of culture (and leadership) that is best for you is determined by your customer promise. Singling out culture and focusing just on it is informative, but of next-to-no value.  Culture has to be addressed only in the context of your customer promise and your approach to leadership.  All three need to be worked with simultaneously.

Equating culture with complied individual values is simplistic and has considerable potential to do more harm than good. 

System-centric Leadership Development

After all these years, CEOs remain dismayed about the low impact of leadership development.  Boston Consulting Group claims that their research conducted in 2015 with 1,500 global executives demonstrates that businesses worldwide have wasted $40 billion in leadership development initiatives.

While likely overstated, BCG’s conclusion does illustrate an important issue about how we have all historically approached leadership development.  The majority of initiatives designed to develop leaders come unconsciously from an individual-centric mindset.  There is nothing inherently wrong with this approach.  Helping individual leaders develop their personal and interpersonal leadership approach has definite benefit.  But, it puts the cart before the horse. 

Understanding your enterprise as a system needs to come first.  There are four fundamentally different customer promises and each one requires its own unique culture and leadership approach.  Each of the four is a unique system that links customer promise, culture and leadership.  One size does not fit all.  Take empowerment as an example.  In many respects, empowerment is what leadership is all about.  But, it is practiced in four fundamentally different ways.  How it is practiced depends upon your unique customer promise and what is required to fully deliver on your promise.  Not only does one size not fit all, when it is misapplied, it makes things worse.

If you want your leadership development initiatives to work and ‘payoff’ for you, take the system-centric approach.        

Your customers are not "outside" your enterprise

In a recent Lexington Herald Leader newspaper article, a professional PR executive wrote an article titled “In the New Year, Small Business Should Focus on the Customer.”  This executive proposes that “…focusing on the customer is the top trend for 2016.” 

Focusing on one’s customers is not a “trend.”  Without customers, your enterprise does not exist.  The same is true for leaders and employees.  Every non-profit and for-profit enterprise is a living people system – comprised of customers, leaders, and employees.  All three are the three living elements to your enterprise.  They are inextricably connected to one another.  They are interdependent.  Each depends upon the others. 

When we treat them as if they were separate from one another or when we (unconsciously) mechanize and/or commoditize one or more of these three elements, we create distortions, misconceptions and contradictions.  The major distortion is that we start treating one another as objects.  We label our customers as “ratepayers” or “consumers.”  We call employees “laborers” or “jobholders.”  We call leaders “officers” or “controllers.”  We call people "human capital." Or, we view customer focus as a “trend.”       

At its essence, your enterprise is biological, not mechanical. 

The Goal is Customer-Employee-Leader Connection, not Employee Engagement

The business press, books, and consultants’ websites are full of ideas for getting employees engaged.   But setting up ping pong tables, installing swings in conference rooms so employees can swing when they feel bored in meetings, providing free popcorn on Fridays, and the like don’t do much for the success of your enterprise.

A business enterprise exists to fully deliver on its promise to its customers.  Customers, employees and leaders who are connected is what counts.  The more these three are connected, the more employees (and customers and leaders) will be engaged.  Focusing on employee engagement per se actually subtly misconstrues the purpose of the enterprise.  It gets people focusing on a tangent.

Employees are motivated by making a recognized contribution to the progress of the enterprise.  Leaders are motivated by the same thing.  Customers are happy when those employees and leaders live up to their promise.  Mutual prosperity is the major motivator.