An overwhelming number of companies use annual or semi-annualperformance appraisals that focus on ratings and employeeweaknesses, without commensurate tools to engage or develop theiremployees. Furthermore, too many managers believe that compensationis all that matters, and if the pay and benefits are good, peopleshould be motivated. Numerous studies, however, show that once acertain level of compensation is attained, feelings of empowerment,purpose and achievement are what really matter. Employees need toknow they are valued, valuable and trusted with the organization'scustomers and assets. All too often, however, performancemanagement systems, which are usually tied to compensation, sendthe opposite signal.

Engagement and employee development are especially crucial withtoday's multi-generational, technology savvy workforce. Whenorganizations worry less about rating, ranking and trackingemployees, and focus more on inspiring employees to stretch theirskills and expand their leadership capacity, they are betterprepared to meet today's challenging new business situations.Leaders must appreciate that the technological revolution meansemployees can create value in ways that were never contemplated bytraditional performance-management systems. Today, they interactwith customers and each other in new, innovative and creative waysto produce economic benefit.

In this environment, leaders should shift their thinking from“managing talent” to creating an optimal culture where talent canthrive. This means developing a workforce with more independentjudgment, ability to deploy technology, higher levels of expertise,ability to collaborate and better problem-solving skills. Leadersmust have the courage to transform performance management systemsinto new employee development systems that work for modernbusiness, especially for those businesses emerging in the newmillennium.

Traditional appraisal systems have been backward looking, andoften focused on what was wrong, usually without giving theemployee the needed tools to improve. For decades, under the theoryof “you get more of what you measure,” quantifiable metricslike Key Performance Indicators have been employed to track howwell an individual is achieving stated goals, which were generallytied to the organizational objectives. These historical systems,however, consume management and employee time, often withoutproviding a commensurate payoff. In fact, they can undermineperformance as people focus on their ratings over personal growthand organizational mission.

The best current systems are forward looking. Feedback isgathered to identify areas where a person's skills need to bestrengthened, and the organization provides the person withresources to develop those skills. For example, Google utilizes asystem that collects developmental feedback, which is decoupledfrom compensation, in order to uncover areas where managers canstrengthen their leadership skills. Google provides themanager with resources like coaching, and in-person and onlinelearning, to strengthen those areas. Feedback systems are in placeto track the progress and identify areas for moreattention.

When organizations as a whole commit to learn and improve, theculture shifts. This starts with formal and informal systems togive employees the skills they will need to develop themselves, andhelp to develop others. For example, with one of our healthinsurance clients, we assisted their leaders with theimplementation of an educational program that helped employeesacquire new feedback and coaching tools. This program taught theindividuals to use feedback from others to identify areas of focusfor their personal growth and to give feedback to support thegrowth of others. They learned coaching skills for mentorship andpeer-to-peer coaching. They saw that a great coach leads with theexpectation of greatness from their team, and generates energy,trust and confidence. These employees prepared themselves for therapidly changing environment of health care reform. Theorganization 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” feedbackcan provide real-time insights to employees and their teams. Thisdata can rapidly be employed as a basis for customized learning andindividualized coaching. Feedback can be most effective when it istimely.

Today's environment demands that organizations focus ondevelopment and learning, and create a culture where feedback is apositive force for improvement. This is an environment where peoplesupport each other. They identify, plan and envision expandingbehaviors 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 andtrusted. Take a hard look at your performance evaluation systems.Ask yourself, “Do they support and create an organizational culturewhere people feel heard, constantly learn and improve?”

Stuart Levine is chairman and CEO, Stuart Levine& Associates, EduLeader LLC. He can be reachedat 516-465-0800 or [email protected].