Across the last few years, organizations have increasingly integrated their talent management processes to ensure better business alignment and facilitate talent mobility.  In new (and forthcoming) research on High-Impact Leadership Development, we found that organizations that effectively integrate leadership development and performance management have better business results¹.  In this blog, I will share more about these findings and also provide some suggestions on how to effectively integrate these two talent management processes in your organization.   

Pairing the Couple:  The Results of Integrating Leadership Development and Performance Management
In our research, we asked organizations to indicate the degree of integration between leadership development and performance management (on a five-point scale).  We then correlated that information to organizations’ effectiveness at six key business measures (see Figure 1).  The results were remarkable.  On average, organizations with the highest degrees of integration were 55 percent more effective at the business measures we assessed than organizations with low or no integration.

Figure 1:  Impact of Leadership Development/Performance Management Integration on Six Key Business Measures 

 
As you can see from the above, the business measure most affected by performance management/leadership development integration is implementing a performance-based culture.  Creating a performance-based culture is consistently one of the top three talent management challenges organizations face².  Therefore, many companies have a real opportunity to address one of their major talent management hurdles by integrating performance management and leadership development. 

The second biggest impact was on improving business results.  When organizations integrate performance management and leaders’ development, there is clear alignment between current performance and the skills necessary to achieve business goals.  This alignment is also likely responsible for the third most affected business measure – increasing overall employee retention.  If the business’s strategy and its leaders are all in alignment about where the organization is going and how to get there, then leaders can more effectively articulate that to employees.  Helping employees understand where they fit within the organization and the value of their contribution is a large factor in retaining employees. 

Supporting the Dance:  HR’s First Steps Toward Integration
So how do you integrate performance management and leadership development effectively?  It’s a good question.  Only 54% of organizations are effective at integrating the two – meaning nearly half of all organizations are not reaping the rewards of integration.  What steps should these organizations take?  There are two areas of focus:  the activities and processes HR controls and those that managers own.  Let’s first look within HR’s sphere of influence – and then we’ll look at how to support managers.

There are three primary things HR can do to enhance integration between performance management and leadership development:

1. Use Leadership Competencies in Performance Management—Defining tailored leadership competencies establishes the leadership behaviors the organization values – doing this is so important that it is one of the six best practices of leadership development.  However, it is not enough to define the competencies – they also need to be integrated into the performance management process.  Leaders should both give feedback on and be assessed against leadership competencies.  See our case study on Whirlpool, “Leadership Competencies as the Foundation for Talent Management,” for more information on how to do this at your organization.
2. Link Succession Management to Performance Management—Organizations should use appraisals – especially feedback on employees’ effectiveness at leadership competencies – as one of the inputs into the succession management process.  Importantly, succession management information should also flow back into development planning (a critical part of performance management).  For example, if an employee is identified as appropriate for a particular role, then development activities that prepare the employee should be included in the development plan and supported on an ongoing basis.
3. Leverage an Integrated Talent Management Platform—Organizations increasingly use technology to enable more simple and effective integration between performance management and development.  For example, development needs identified in the performance appraisal can be immediately integrated into the employee’s development plan, which is then linked to available development experiences – all within the same system.  See our Solution Provider Library to learn more about vendors that provide these platforms.

Guiding Our Partner:  Helping Managers do Development-Driven Performance Management
We also need to help managers integrate leadership development and performance management.  In our recent report on Development-Driven Performance Management, we identified critical HR activities to support development-driven performance management:

1. Create and Support High-Quality Development Plans for All Employees—Development plans enable employees and managers to bridge employee skill or behavior gaps that are identified through the performance appraisal process. Organizations need to ensure employees have high-quality development plans and then support them throughout the year in achieving them.  Kelly Services does this by requiring employees to enter development plans into an online system, and then allowing managers, employees and HR to track completion against development plans.  Further, development opportunities are linked directly to the development planning tool so employees can immediately access experiences that will address their needs.
2. Enable Managers to Coach—Managers need to support employee development through coaching in addition to development plans.  HR should help managers understand the return on the time invested in coaching and also develop the skills to coach well.  ADM has done this by creating a very popular process-based coaching program that helps managers understand why and how they should coach employees (click here to register for our upcoming webcast with ADM).
3. Create Frequent Occasions for Reflecting on Performance—When employees and managers discuss performance frequently, overall performance improves. HR has a role in making these conversations happen.  Travelex does this by providing an online system that helps employees develop detailed plans for reaching quarterly and monthly goals, and then sending reminders to managers and employees to engage in monthly conversations about performance. 

Integrating performance management and leadership development creates consistency throughout the organization and helps drive critical business results.  By first setting up processes that promote integration, and then supporting managers in executing it, you can help raise organizational performance – and that’s a dance we can all get into. 

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¹Interestingly, we found that organizations effective at integrating leadership development and a number of other talent management processes (e.g., succession management, recruiting) all have better business results than those organizations that are ineffective at integration.

² For more information, see TalentWatch First Half 2010:  Entering the Recovery, Bersin & Associates / Josh Bersin, May 2010.  Available to research members at www.bersin.com/library.