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The difference between leadership development and performance management

The average tenure for a modern worker is 4.4 years, but for workers under 40, that number is less than three years. The vast majority of this workforce is mobile and not only expect to change jobs frequently, but actively seek it out.

For this reason, companies with high acquisition costs and competitive job markets are investing more than ever in retention strategies including more targeted performance management processes and leadership development programs.

Even though these terms are frequently referred to in the workplace, you might be wondering exactly what performance management and leadership development entail. Let’s take a closer look at their role in a fast-moving startup and how to leverage these resources to improve your own retention rates.

What Is Performance Management?

Performance management is about building a supportive work environment for your top performers. It involves goal setting, evaluating an employee’s progress, and rewarding them based on the results they’ve achieved. Many companies also provide coaching and feedback sessions in order to help their employees improve.

Well-executed performance management provides a framework for employee interactions from hire to departure, with milestones at every major life cycle stage. It includes not just regular performance reviews, but a system of regular meetings, training catered to their specific needs, ongoing education opportunities, regular coaching and feedback sessions, and an award system to recognize and incentivize exceptional work.

Through performance management, companies work closely with employees in several ways. This not only helps the company to develop a strong core of reliable employees, but it guides those employees in achieving their career goals – ideally with your company.

What Is Leadership Development?

The biggest potential blow to a small but quickly growing company is turnover in management, and yet 55% of company leaders are actively looking for outside opportunities according to a recent Gallup poll. It’s no wonder when you consider that more than half of managers feel disconnected or out of touch with their company’s values and goals. This is where leadership development can provide added value in the performance cycle for both current managers and employees you’ve identified for future opportunities.

Studies show that companies with mature leadership development programs experience improved business results as opposed to companies without these programs. Companies with mature leadership development programs also display a greater ability to respond to changing market conditions.

These programs start by outlining the qualities and skills of the leadership positions within your organization and mapping the attributes you would measure in each of those skills. This helps to better define competency in soft skills that are traditionally difficult to measure. For example, change management or having challenging conversations are both difficult skills to quantify. By mapping out the attributes that contribute to competency, you can build a targeted leadership development program that focuses on these skills.

By understanding and communicating the skills needed in your company’s leadership, you lay a framework for improvement that supplements and enhances your performance management efforts. Layering regular meetings, an improvement plan and ongoing training sessions on top of this can be even more helpful in preparing your leaders for success and keeping them on board longer.

The Difference Between Performance Management and Leadership Development

A well-structured performance management system addresses all the employees in the company. It is designed to guide an employee throughout their time with your company, and ideally identify those individuals who may excel in a leadership position.

Leadership development is the next step. This is the stage in which you take those individuals you’ve identified and nurture their innate leadership potential, guiding them in taking charge in your organization. It tends to focus more on soft skills related to managing people, interpersonal communication, delegation, and all the hard steps in between.

Performance management has many roles, but you’re providing your employees with the training and support they need to get better at their jobs. This might include sending your developers to a local technology conference or holding an in-house workshop to discuss the impact of a new security patch. You can even create different types of performance management strategies for different departments, for example, a specific sales performance management strategy for your revenue generating employees. 

Leadership development programs in contrast are designed to help participants pick up the soft skills that will help them inspire, motivate and lead a team.

How Should Your Company Structure Its Development Programs?

Performance management is the foundation upon which you build a company. The goal is to assemble a team of top performers. Fine-tuning a performance management strategy will help you do that. Your performance cycle doesn’t change, but in parallel you can inject leadership development training, coaching, and mentorship with these high potential employees.

This ensures that you have a pipeline of leaders that you can promote from within, and you won’t need to scramble to find a new hire should someone senior leave the company. This also reduces the chances of your employees churning. Statistics show that 70% percent of high-retention-risk employees will leave their company to advance their career, and promoting from within is a great way to retain talent.

To bring more leadership development opportunities to your organization, request a demo below.