One of the first things I realized after becoming a CEO, was that I had been elevated to a level where performance reviews become somewhat superficial. I was expected to deliver certain financial outcomes and as long as I did not steer too far away from these and maintained a general sense of order, it would be acceptable and I would end up with a decent increment and a bonus every year.
There was an uncomfortable feeling when the board sat down to review my performance. It was like everyone had to get it over with as soon as possible and I remember it was always a short and pleasant conversation! This may be due to our culture – we are generally averse to having difficult discussions (I will come back to this point in a bit).
This was far different from my days of climbing the corporate ladder (thankfully, in a well-managed organization) and being rigorously assessed; first, as a junior manager and then as I progressed to a functional head position.
However, there was a rather drastic fall in the quality of performance evaluations once I had passed that level. Initially, I felt that I was the beneficiary of this experience and I did not mind the outcome even though it seemed to leave things incomplete.
But after a while, I realized that this shallow process does more damage than good.
Organizations are hierarchical and the top-down nature of things will make senior management overlook aspects which they are not be held accountable for. They would also tend to be lax on evaluating their own direct reports and so on down the line.
This may mean that certain important areas may never be focused upon for the entire organization.
To take a simple example, one of the key responsibilities for a CEO is to build a high-quality management team, but if she is never held responsible for this, I can guarantee that the organization will not be able to build a good team.
In addition, I also felt that I suffered personally in that my own development as a leader was curtailed. If there is no performance review, how will I understand and improve on my weak areas? Just because I am a CEO should not mean I should not continue to learn and develop!
While many corporate governance and certification training programs exist in the country, I am not sure if any of these pay particular attention to this most crucial aspect in determining success or failure of organizations. The issue is even more critical for minority shareholders and corporate governance requirements. While the SECP code of governance requires listed companies to share information on the compensation packages of senior managers – it does not ask for minority shareholders to be made aware of their performance levels.
Having been in a few board rooms on either side of the equation, I have seen firsthand the weak process or even a complete lack of process for top management evaluations. Most of the times leadership teams are not assessed against clearly defined objectives – in fact, in many cases they don’t even have annual or long-term objectives.
Many organizations claim to have robust performance management systems. Human Resource functions provide the processes and design performance scales to make sure that people throughout the organization are assessed objectively.
But, as it transpired in my own case, this works well only up till a level, since no one within the organization dares to ask about the performance of CEOs or C-suite leaders, who are considered untouchables.
These ‘leaders’ may then become dinosaurs whose interests are vested in status quo and in keeping their positions secure. They operate from a position of fear of losing their status and are reluctant to take risks which is very much a part of being a leader.
Family firms have a bigger problem when they have one of the family members as CEO or in the leadership team. How does one make themselves or their own children accountable and run a performance evaluation process? This is an extremely difficult exercise and one which may be fruitless to pursue.
Medium and large-scale family firms are therefore advised to develop children and family members as becoming good owners instead of managers within an operating entity, unless it is for an emergency period and hence time bound.
I have been pushing companies where I have worked, or boards of which I have been part of, to develop goals and accountabilities for leadership teams and apply a thorough evaluation process via the board human resource committee or independent directors. Not only will this make the organization more professional and transparent, it will also build trust of investors – if you are ever seeking outside funding from private or public sector.
I understand the discomfort of boards to hold top management teams accountable and to be able to have somewhat unpleasant conversations. It is perhaps also something cultural with us – we do not like to challenge people in positions of authority. But it is a process which can be learned and developed and ought to be a key driver of business performance.
Forward looking organizations can also ensure, through this process, that leaders do not hold on to their positions as ‘lesser evils’ and ‘safe bets’ instead of their ability to build strong cultures and teams and delivering great long-term results in all aspects.
Good article Asif! Must chat soon.