Topic 430 Topic 9: Measuring leadership performance

Defining leadership success

As with many leadership concepts, the term success can be interpreted in many different ways. How it is interpreted depends on several factors including perspective, context, extenuating circumstances, and an analysis of alternative solutions and scenarios. At its most basic level, success can be defined in terms of the achievement and accomplishment of predetermined goals and objectives.

If a distinction between managers and leaders exists, then a leader's success should be measured by those skills that differentiate a leader from a manager, namely his or her ability to: innovate and initiate., drive change in pursuit of a vision., challenge the status quo., inspire and motivate., align staff to the organisation's goals and objectives.

In addition, we should consider a leader's success in terms of the roles we have assigned to them: strategists., motivators., communicators., decision makers., ethical agents., change drivers.

The challenge is to make success criteria realistic, observable, measurable and attainable. They should reflect the leader's level of knowledge, skills and abilities. As obvious as this may sound, success criteria need to be designed to facilitate success, not disable it.

Success criteria should reflect the knowledge, skills and abilities of the individual. In other words, developing success criteria for leaders is contingent upon identifying the appropriate competencies.

According to Weiler and Schoonover (2001), competencies can be classed into three categories:
1. Technical
2. Core Non-Technical ("People skills")
3. Leadership

Nicholas Weiler identifies 12 core competencies that are considered relevant for leaders at all levels of the organisation.

* Personal (Continious Learning, Intuition and Risk Taking, Honesty and Integrity, Flexibility, Self-Confidence)
* Team (Judgment and Problem Solving, Teamwork, Creativity/innovation/change, Communication and Influence)
* Operational (Responsiveness, Planning and Organising, Quality Results Orientation).

Based on this hierarchical approach, some would argue that the required leadership competencies should change as an individual progresses through the three domains. The progression from bottom to top is categorised by an increase in 'cognitive complexity'.

For now, we will restrict our focus to higher-level leadership competencies (Conceptual Abilities, Interpersonal Abilities, Personal Attributes)

Performance measurement

Typically, a performance management process or system is designed to monitor, manage and improve an employee's performance or level of effectiveness within the organisation. It will entail creating a series of processes that aim to assess and evaluate issues relating to the
organisation's human resources such as:
* new employee selection criteria
* job design
* how people get their work done
* reward and other incentive structures
* whether work practices are effective.

Financial measures of performance are often preferred by boards of directors because they are perceived as being unambiguous, tangible and based on tried and tested accounting and finance principles. In addition, most organisations are equipped (structurally and procedurally) to gather the information needed for such measures.

For the purposes here, 'financial performance measures' refer to those objective measures that appear in the organisation's monthly, quarterly or end-of-year financial reports. In other words, they are accounting-based. In contrast, the term 'non-financial performance measures' is used to encompass both quantitative and qualitative performance measures that move beyond dollars and cents.

Non-financial measures are vital for the evaluation of a leader's performance because they attempt to capture more than just the dollar value. These measures recognise the impact on performance of quality initiatives, customer expectations, flexibility, relations with staff etc. The issue with non-financial measures of performance is that many view these indices as being:
* difficult to measure accurately
* susceptible to potential evaluation biases
* time-consuming to measure.

In leadership, due to the nature of senior positions it is common to measure performance using broad measures. As discussed, performance measures such as organisational profitability and share price can lead to problems associated with 'controllability'. Whilst narrow measures of performance mitigate the problem of 'uncontrollability' by targeting individual performance, they can also activate the 'interdependency' and 'alignment'

Rather than looking at the issues of measurement as an either/or choice, many researchers now believe the challenge should be to select the optimal combination of measures across the different types. In other words, select a combination of financial, non-financial, broad and narrow measures on a job-by-job basis. Irrespective of which measures are adopted, a sound performance measurement system should possess three qualities:
* It must be technically valid.
* It must be functional.
* It must be legitimate (i.e. accepted by those affected within the organisation).

Performance appraisals

Gathering both objective and subjective non-financial data on leaders can sometimes be problematic. One reason for this is that established performance management systems tend to be based on the superior-subordinate relationship. We have emphasised the relationship that exists between the leader and his or her followers. Therefore, the way to judge a leader's success is through the followers' ratings of effectiveness. Followers are asked to rate their level of effectiveness of the leader in terms of their own feelings or levels of satisfaction, motivation, and commitment towards the organisation and the leader (Hughes et al., 2006: 89).

Typically, performance appraisals serve two purposes: developmental and evaluative. The evaluative purposes of performance appraisal will generally encompass decisions associated with pay, promotion (or demotion), retrenchment and/or termination. From a developmental perspective, the results of a well-designed performance appraisal can provide organisations with insights into where to and how to:
* improve performance
* identify and develop potential
* provide feedback
* communicate
* identify management and leader development opportunities. (Kramar et al., 1997: 357–358)

For high-level leaders, the challenge of the performance management system is to ensure that:
1. Key leadership skills are included in the appraisal process.
2. Opportunities to practice leadership skills are presented.
3. Leadership development opportunities are identified and actioned.
4. The correct motivational goals and rewards are noted for the individual.

Performance-related issues

Kramar et al. (1997: 431) suggest that organisations generally seek four outcomes from performance-based reward structures:

1. A clear focus and direction for employees.
2. A mechanism to provide high performing employees with recognition for their contributions.
3. Processes to enable employees to identify with, and share in, the success of the organisation.
4. An ability to control fixed remuneration costs by linking variable payments with performance.

In essence, succession planning is about grooming the next generation of leaders within an organisation. It is inextricably linked with leadership development because it prompts current leaders to provide learning and development opportunities for themselves and for their successors. This means that succession planning is now a desired skill for a leader to have, and a success criteria or competency that they are measured against. A leader's ability to delegate leadership tasks, provide opportunities to practice leadership skills, and coach and mentor inexperienced but talented potential leaders, contributes to his or her personal success as a leader.