“People are our greatest asset. That is why they are the focus of our efforts.” We often read this or something similar on company websites and in the guidelines or established management principles. But is this really true? Are all efforts really being made to do justice to the people in the company? In this article, these questions lead us to take a look at the management practices used today.
Leading means steering
Leadership in the context of entrepreneurial success orientation does not only mean coordinating and delegating work, making decisions or dealing with the hierarchies within an organization and the personnel responsibilities assigned to it in the best possible way. Leadership is not an end in itself; rather, goals should be pursued and achieved. To this end, people should be consciously steered in a certain direction or made to behave in a certain way. Much has already been written about how managers implement this in detail and the different leadership styles that have developed over time. Here, we want to look in particular at the question of which management systems should be used in companies and to what extent these are suitable for ensuring that managers achieve performance and employee-oriented goals.
Leading with goals
In order to achieve goals, goals must first be set. As banal as this may sound, this is the first stumbling block, especially for many SMEs. However, companies need to position themselves, they need a direction. Employees want to know where the journey is going. Setting goals puts everyday tasks into a context that helps to understand why what needs to be done and with what priority. Without goals, everyone chooses a direction that they think should be the right one. The dispersion is inevitably so great that it is a challenge to “catch” the employees again.
So success-oriented companies don’t let it get that far and set targets from the top of the company to which all areas can align themselves. The targets are then passed through the various hierarchical levels and finally broken down to individual personal targets. After all, everyone has the right to know their contribution to the overall goal and to be measured against it.
Leading with objectives is not exactly new; “MbO” (Management by Objectives) has been around since the 1950s. On the one hand, what is modern about it is that the approach is still justified today and is therefore an integral part of successful management systems. On the other hand, success depends – as is so often the case – on dealing with the “how”. For example, managers who do not impose targets but agree them with their employees, who set realistically achievable targets, formulate them clearly and make them measurable, who evaluate the achievement of targets fairly and also link them to financial incentives are more successful.
Employee appraisal
In practice, being measured means nothing more than undergoing an assessment. Even if for some it is too much like the term “meritocracy”: Work performance, if it is not to become occupational therapy, must be regularly reviewed in terms of its effectiveness, efficiency and compatibility with the goals set. This “must” from the company’s point of view is also offset by the “want” from the employee’s point of view. Yes, you heard right, it is a misconception that most employees find appraisals fundamentally unpleasant. You quickly realize this when people do not receive feedback on their performance over a longer period of time. The desire arises to receive feedback: Where do I stand? How is my performance seen and how am I contributing to the success of the company? Behind this is also, and this is very human, the need for praise, recognition, confirmation and appreciation. Let’s go one step further here and define it as the right of every employee to receive well-founded, objective and honest feedback on their performance at least once a year, after all, we are evaluating one of a person’s greatest assets, the manpower they bring to the company. Anyone who, as a manager, now criticizes that all this takes up too much time and only distracts from operational business, should be told that assessment and feedback are central elements of leadership, i.e. the raison d’être of a manager in the first place.
Performance and potential
The management systems discussed so far become even more effective as soon as we leave the one-dimensional level of pure performance assessment and add a consideration of potential. With this combination of performance and potential assessment, you create a very meaningful system with which you can successfully shape leadership.
As the term “potential” is also used in the natural sciences, there are numerous definitions. A soft definition that fits the context of personnel management is the description as “an opportunity to develop strength that has not (yet) been exhausted”. The late Latin root of the word means “capacity”, so it is about ability.
In practice, competencies are often defined and classified in order to be able to analyze and describe the relevant skills of people in companies in a well-founded manner. The planned use of these components, which we will call “competence management” here, deals with an extensive topic in itself, which we will discuss in detail elsewhere.
In the context of the “potential analysis” management system, the following applies in simplified terms: for each defined area of competence, a comparison is made and evaluated between a (target) requirement and an (actual) characteristic. For example, a strong performance within a competence indicates a correspondingly high potential, if the observed performance exceeds the requirement, it can be concluded that the employee is capable of more advanced tasks, low performance should be improved through training, etc.
The results of performance and potential assessments presented in a combined overview are far more meaningful than those of a pure performance assessment. As part of regular appraisals, potential analyses are therefore well suited as a control element for personnel management decisions, for example in the context of personnel and succession planning. Despite the advantages mentioned, the consideration of potential is unfortunately not (yet) as widespread in companies as management by objectives or the implementation of regular performance appraisals.
Final chapter
Management by objectives and regular performance and potential analyses are important systems in a company’s management culture. Of course, they alone do not guarantee success, but they do form an important basis for performance and employee-related management. They must also be in harmony with other management systems in the company, such as personnel and management skills development. They are also part of the currently discussed HR topics, such as talent management or employee retention and employer branding. We will discuss these instruments in more detail in the continuation of this article.
by Uwe Conradi, trainer at Lorenz-Seminare