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Why Performance Management Deserves CEOs' Attention?

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"Selling shovels in the gold rush" is one of those aphorisms that applies in general but has recently been adopted by the innovation economy and especially by startups. That usually means there's money to be made in creating and monetizing an ecosystem around tools that enable and empower. Companies creating tools in a variety of areas, such as data analytics, user engagement and artificial intelligence, readily embrace this analogy and the promise of gold-edged gains.

But what if everyone, as the saying goes, doesn't see the forest for the trees? The real driving force behind innovation and prosperity in our knowledge-based age is human capital, and across sectors, the lack of skilled workers is seen as the biggest bottleneck to growth. For CEOs and senior managers, attracting, upgrading and retaining talent is therefore becoming an important KPI in line with traditional business goals. The background for this is the recognition that an organization's ability to attract and retain skilled employees is an important indicator for growth and innovation.

What is it then that makes performance management a core task for a CEO?

  • Culture

There is a strong connection between achievements and a culture characterized by independence and trust, and it starts at the top. How the CEO lays out the list for his closest employees is the yardstick to which the rest of the organization must strive. CEOs have a dual responsibility in this context - they must assess and guide their employees in the management team based on their individual performance, while at the same time ensuring that the managers adopt the same values and pass them on.

  • Communication

The ability to clearly communicate where the organization is headed, and put it in context with the growth ambitions for both teams and individuals, is the key to getting the whole organization to buy into the bold vision that the CEO is trying to rally everyone around. When the goals are to be set, this context can make the difference between committed and energetic employees and a group that just does enough. However, communication goes both ways, and it is equally important for an organization to remove barriers to providing feedback from the bottom up. Here, too, the CEO sets the standard both by his own openness to feedback and criticism and by his ability to promote this throughout the organization.

  • Ambitions

The modern workforce, especially the millennial generation, mixes professional and personal ambitions. In other words, the workplace is now a place where they want to write and convey their personal stories about growth and satisfaction. Performance management that does not take these aspects into account is incomplete and potentially ineffective. CEOs, especially in start-ups and small organizations, must take this to heart and set the standard for the rest of the organization. By breaking out of the straitjacket of a traditional CEO who is only concerned with business targets, and taking on a broader role that encompasses the employees' well-being and growth, they give the employees the freedom to bring their whole selves and their creativity to work.

  • Coaching

Modern organizational psychology has proven that coaching and mentoring are the most important factors that separate high-performing teams from the rest. Although CEOs need coaches and mentors to help them navigate the troubled waters of modern business, they themselves are entrusted with the role of the organization's last resort coach and mentor. The ability to lead high-performing employees in a way that means that the individual ego must give way in favor of a greater goal, applies at all levels in the hierarchy, and the CEO sets the conditions for this through the way she leads her direct subordinates.

  • Vision

Last but not least, the organization's vision is an important factor in attracting and retaining employees. The employees are willing to disregard fluctuations in the results in the short term if the organization's vision and the way to get there are clearly described and arouse inspiration and drive. Managers must convey this in a convincing way in every single conversation about performance management. It is the CEO who sets the vision and the narrative around it:

  • Why is this important?
  • What meaningful change does it bring about if we realize this vision?
  • How are we best positioned to realize the vision?

By clarifying these markers and bringing them up again at regular intervals, the CEO ensures that the team's and individual conversations about performance do not take place in a vacuum, but around a larger, overarching theme.

The modern CEO is basically also to a certain extent Chief People Officer, with the employees as equal stakeholders on a par with investors, customers and other external stakeholders. While this leads to empowerment and innovation, it is the hard, business truths that make it necessary. If the CEO cannot ensure that the employees give their best and adapt to the organization's narrative, there will soon be consequences for the business and the organization. Embracing this part of one's role is not just a nice to have, but a core trait now.

In conclusion, CEOs should prioritize performance management as it plays a pivotal role in shaping organizational culture, communication, ambitions, coaching, and vision.

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