If we are to focus the work of management on a higher purpose, I contend that we need to begin by adjusting our reward systems. To obtain the highest leverage on this lofty goal, companies should devote part of their compensation structure to how well a manager develops new leaders.
Current corporate incentive programs have led to some of the most turbulent and destructive forces to interrupt our financial system and business environment in a generation. A singular focus on shareholder and personal wealth maximization as the purpose of executives and first-line employees alike will never bring out the best in people. In order to ask people to be innovative we need to have them focused on more lofty goals.
We can compel effort and adherence to the firm’s operating system, but in order to tease out passion and innovation from every employee we need to focus on building leaders. Firms should actively reward the coaches within their organizations that produce leaders.
The operating area I work in recently had one of its vice presidents promoted to a top management position at our company’s headquarters. The person selected to replace his vacant position at the area level was prepared and developed internally. He was able to step in and facilitate a seamless transition. This provided an excellent example of the leadership incubation that needs to take place within our organizations. The vice president of my operating area should not just be compensated on the bottom line results he achieves, although that is important. It’s clear that he is developing leaders within the organization and the firm needs to reward this type of management behavior.
Developing leaders creates a virtuous cycle within management. If our best, most innovative leaders are focused on the higher purpose of developing others they will infuse the organization with other leaders who will have been groomed with this sense of higher purpose in their management efforts. They in turn will go about the business of developing others, and so the cycle has begun.
The first step would be to implement the leadership training recognition. This recognition should be public within the company and administered by the highest levels of management. This will put the organization on notice that there has been a shift in how people are recognized and rewarded.
The second step should be introducing the concept of rewarding leadership development in each review session. Adding a small percentage of compensation at first to let the new indoctrination take hold.