If your 2024 performance didn’t meet expectations, now is the time to act. Many companies focus on operational improvements but overlook a big question—are your leaders in the right places.
As we make our way through another planning season, working with companies to review their results and identify areas for improvement, we continue to hear a common refrain that shows many have considerable room to get better: ‘We didn’t do poorly, but we didn’t do as well as we had expected.’ Not exactly a glowing appraisal, but these companies can change the script by putting more people-focused issues through an annual review process, for example regularly measuring the overall performance of senior leadership and their teams.
Why Mindsets Need to Change, Now
Most firms spend the bulk of their planning time on the process-oriented elements of their businesses, analyzing operational, supply chain, and vendor performance, and then making adjustments from there. In sticking to this template, however, many lose sight of the important role people play in driving success, specifically senior leaders and managers. These are the most talented, highly compensated individuals in your organization, all in charge of leading others in executing the plan.
If they want business performance to improve in the next 12 months, CEO’s need to prioritize putting as much time into analyzing the performance of their leadership teams as they do their external vendors, including their overall efficacy, contributions to results, and, importantly, whether their skill sets still align with those required for the roles they are in.
This is about tweaking the roster to get better results, and it is a process that can and should be as simple as evaluating from afar the performance of the business, the leaders and their teams to determine the right path next year.
The clients we work with are often pleasantly surprised by the results this informal feedback loop can yield. Simply taking the time to ask leaders about the challenges they’re seeing, what they see as obstacles to successful execution, and whether there are any internal factors – people or processes – holding them back or creating stress. When this type of two-way communication is not happening on a regular basis, bad patterns develop that can be difficult to turn around.
Added Incentive: Growing Job/Skills Gaps
Companies tend to wait to do this until they absolutely have to, for instance in the event of M&A activity that directly affects the leadership team and forces changes. But they have an extra motivation to shift from reactive to proactive gear, and quickly, to match the speed at which workforce skill sets are changing.
For context, the skill sets necessary for today’s workforce have changed by approximately 25% since 2015 and will have changed by 50% by 2027. At the same time, the data shows that more and more companies have job/skills gap issues that have gone overlooked for too long. In one recent survey, 70% of companies reported significant job/skills gaps, 40% said these gaps were worsening, and 30% felt these mismatches were hindering their firm’s innovation and growth potential.
It is important to note that these are not job performance issues. This is most often a ‘not keeping up with training and development’ issue that comes back to bite, and the time has come to bite back if companies want to improve.
Define Goals, Simplify Plan of Attack
Companies with high average tenure often overlook the importance of this exercise and the fact that skill sets can and are getting stale. Many companies dread the process of going through the onboarding and training process necessary to get new workers up to speed. Ultimately, most end up doing nothing, employees and leaders grow increasingly frustrated, and strong talent walks out the door.
If you are a CEO reading this, here is what we would say to that mentality – and credit here to hockey legend Wayne Gretzky – you miss 100% of the shots you don’t take. If you believe your team can be strengthened, you owe it to every stakeholder involved – including those leaders themselves – to institute a new review process, one that doesn’t need to be complex, rigid, or robotic.
Companies can develop a repeatable, value-add process by asking and providing candid answers to three key questions:
- How do my leaders communicate with their teams?
The companies that do these evaluations best communicate frequently — daily or weekly face-to-face interactions, not planned Zoom meetings. One study shows that 35% of the variation in a team’s performance can be accounted for just by having regular in-person interaction. - Do we have an accountability problem?
High tenure companies can fall into the complacency trap — job descriptions change, teams grow unwieldy, and people are reluctant to ask for help. Ignoring these patterns causes people to row in different directions, accountability evaporates, and ultimately they leave. CEOs need direct conversations with leaders about why performance is slipping and what can be done differently. - What feedback am I getting on my own performance?
Humility and self-introspection go a long way in building trust. CEOs should put themselves in the evaluation seat and regularly seek feedback on their own performance from their senior teams.
Leadership Team Evaluations: A Business Imperative, Not a Nice-to-Have
If companies are being honest with themselves, all evidence points to these evaluations being more mandatory than optional. The costs of waiting may not appear on a balance sheet, but they are adding up below the surface and beginning to inflict real damage. Skills sets are evolving quickly, and companies must go beyond the traditional financial and operational metrics to study their human capital assets. As the head coach, your job is to have the best possible lineup ready to take the field on January 1, and this process, done well, should not be overly resource or time-consuming. This is a straightforward, impersonal process aimed solely at driving better results – for employees, employers, and importantly, clients – and one we find many companies wish they had begun a lot sooner.
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