Now you’re set: You have a flexible plan for creating value. You’re selecting the projects that fit that plan and focusing on interests that unite all your stakeholders. You have everyone talking the talk. You’re giving investors reasons to believe that your future is bright. And, the market is beginning to respond. Can you keep it up? Can you deliver on that promise? No, you can’t. Now it’s up to your employees. They’re the ones who must carry out your strategy in the long run. Only they can do that. So how do you get your employees to do it? How can you even tell whether or not they’re doing it—before it’s too late? In short, how do you get—and keep—every employee working on value creation? The obvious place to begin is with performance management. And that’s fine—as far as it goes. Trouble is, performance management tends to focus narrowly on individual roles and short-term goals. Result? A mish-mash of performance measures that obscures your key objectives. Sometimes it’s even counterproductive. People often focus on hitting their numbers and screen out everything else. They compete for resources to the detriment of others. Knowing they’ll hang if the team fails, leaders tend to do a lot of the work themselves—defeating the purpose of teamwork. Is it possible that something like that may be happening at your company? Could it be that some of your people believe that’s all you expect of them? And, most horrible of all, is it possible that you may be the one who is unwittingly giving them that impression? Value-inhibiting behavior #7: You rely on performance management processes that don’t connect individual contribution with the creation of value. You can’t have that. If you want to create value in the long run, you need to integrate strategy with performance targets and to orchestrate and reward all your employees for truly value-creating behavior. In short, you need a value-sensitive approach to manage, evaluate and reward your people at every level. How do you do that? Treat your people like other stakeholders: link the value they create to the way they’re valued. And not just in a narrow sense, but in a way that takes into account the broadest range of value creation. Value-creating behavior #7: Make value creation central to how you evaluate and manage your people and how you reward their performance. Begin by translating your high-level goals and strategies into specific performance measures for each job. Take care to choose measures that employees can understand—and control. Net cash flow, for instance, might be a telling measure for a CEO, but not for clerks in accounts receivable. What they need to know is what they can do to improve net cash flow, such as keeping down the percentage of receivables more than 30, 60 and 90 days past due. Don’t neglect the softer measures of performance. For example, gushy letters from delighted customers may signal value creation even if they don’t translate into immediate sales. Next, link each performance measure to incentives. And, take care to choose the carrots and sticks most consistent with your value strategy. Say, for instance, your strategy is to increase sales by fostering customer loyalty. That won’t be very effective if your sales force is on straight commission. Sure they may increase sales, but they’ll do it by bringing in the biggest deal they can swing each time, rather than trying to keep clients happy. To make your customer-loyalty strategy work, you might need to hold back part of the commission to see if the customer sticks around. Of course, the right measures and incentives vary with the job, the value strategy, and all the other circumstances. But, the basic principle is always the same: to link the value that employees create to the way they are valued. And, don’t just compensate value creation; celebrate it, with awards and other forms of recognition, as well as bonuses, raises, trips and perks. Talk with members of your HR team. They may have their own creative ideas for tying performance management and personal behavior to your value creation strategy. Steps: Pinpoint ways employees in each job can foster your value-creation strategy in the long run. Tell them how those behaviors—quantitative as well as qualitative—fit the strategy. Always consider those behaviors when you evaluate employees. Celebrate and reward behavior consistent with your value-creating strategy.
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