Why leadership evaluations should be a go-to HR tactic: A guide

TL;DR: While company leaders may debate what a great leader looks like, they all agree that strong leadership is essential to company success. In fact, managers account for 70% of the variance in employee engagement, which is why a leadership evaluation is an HR and business strategy no organization should go without. With the right leadership evaluation processes, companies can better measure and develop managerial and coaching competencies, which are critical for driving your business forward in a dynamic economy.
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What is a leadership evaluation?

A leadership evaluation is an assessment that organizations use to get a better understanding of how their managers, department heads, and even executives are performing. It also allows them to determine whether their current leadership programs are making the intended impact with leaders looking to improve their skills and move forward within the company.

Why are leadership evaluations important?

It’s hard to overstate the impact that effective leadership can have on business success. That’s why so many organizations are willing to invest their company capital in upskilling their leaders. In fact, the leadership development industry is projected to grow by US$21.81 billion by 2027. 

Today’s leadership development experts are focusing on helping executives articulate “proof of impact” to the C-suite more effectively. “Leadership development professionals see the writing on the wall,” writes LEADx CEO Kevin Kruse in an article for Forbes. “If they can’t prove their value, they’re going to lose even more budget and resources. While this has always been true, it became a reality in 2023 due to tougher economic conditions.”

This prompts the question: What tangible benefits can the right leadership evaluations bring to your business? According to Kevin Kruse, a solid leadership evaluation strategy leads to:

  • Higher employee engagement
  • Better retention rates and decreased turnover
  • More effective managers
  • Increased performance and productivity

However, finding and developing leaders is no small feat — a Gallup report shows that companies fail to choose the right leadership talent 82% of the time.

Why? It’s likely due to the fact that everyone has a different idea of what they think a strong leader looks like. In addition, different businesses prioritize different leadership styles. According to the International Institute for Management Development, there are actually five key leadership styles — authoritarian, participative, delegative, transactional, and transformational. This illustrates just how far-reaching the impact of a lack of leadership philosophy alignment could be.

However, it also highlights just how crucial a clear leadership evaluation process is for fostering cross-departmental alignment, enabling you to build the leadership skills that make the most sense for your business.

Bear in mind: Leadership evaluations may differ from individual contributor reviews. For one thing, leaders are often more accustomed to giving feedback than receiving it. They might be wary of the process if they feel like they’re being scrutinized. To build a people-focused culture, make it clear that performance reviews are an essential learning and development tool for managers and employees alike.

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Wann Sie dieses Playbook verwenden sollten

When to use
this playbook

This leadership evaluation playbook is geared toward HR and people ops professionals who are looking to evaluate leadership competencies as part of a more comprehensive 360-degree review, a mid-year review, or as a standalone practice. It might also be helpful for other stakeholders who are involved in leadership performance reviews. In some companies, for instance, the board of directors is responsible for executive reviews.

Individual contributors can also read this playbook for insights into how leadership skills are assessed and what they should focus on if they’re interested in moving into a leadership role in the future.

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Was Sie für dieses Playbook benötigen

What you’ll need for
this playbook

A definition of leadership success

You’ll need to map out the attributes leaders will need to be successful within your company.

Leaders are usually judged on their impact on business growth and on team members. Company culture starts from the top, so a leader’s behavior plays a key role in the organization’s overall direction.

A culture of growth-based performance management

Today, many companies are taking a more growth-based approach to performance management. People-centered organizations use reviews to deliver constructive feedback, find learning opportunities, and identify employees with leadership potential.

Hinweise & Tipps
  • Keep leadership expectations realistic: “Business strategy isn’t just about ambitious targets,” write communications experts Jeremie Kubicek and Steve Cockram in an article for Fast Company. “It’s about marrying aspirations with ground realities. High aspirations are commendable, but the groundwork should be robust enough to support these dreams. This equilibrium helps safeguard employee well-being, optimize productivity, and bolster stakeholder trust.”
  • Don’t underestimate soft leadership skills like emotional intelligence: “​​Emphasizing the significance of emotional intelligence (EI) has become increasingly crucial in modern leadership and organizational settings,” says Kevin Kruse. “Leaders who can effectively understand and manage their emotions are better positioned to foster positive team dynamics, promote collaboration, and navigate complex interpersonal relationships.”
  • Make evaluations adaptable to different roles and levels: Leadership evaluations often look different across diverse parts of an organization. While executives may spend much of their time focused on business strategy, mid-level managers usually prioritize communication and managing teams. Consider offering different growth path options within your company to accommodate different skill sets. For example, a software developer could choose to advance to either senior developer — requiring advanced development skills — or team lead — requiring people management skills.

How to run this People Ops Playbook:

Wie Sie dieses People Ops Playbook durchführen:

1. Get clear on your leadership evaluation objectives

If you don’t want to end up in a position where your C-suite and department heads are constantly debating which leadership skills matter most, get specific at the outset. That way, all stakeholders will clearly understand the capabilities that’ll best enable your organization to achieve its short and long-term objectives.

To start, all leaders should be comfortable sharing their perspectives in an open, honest conversation. “To gain support for your change ideas, it’s essential to be candid about your intentions and the challenges you anticipate,” write leadership experts Brenda Steinberg and Michael D. Watkins in an article for the Harvard Business Review. “The idea isn’t just to inform them and eliminate any preconceived notions they might have; it’s also to involve them in specific areas of transformation.”

Here are some steps you might consider taking in the first part of the process:

  • Brainstorm a list of qualities that are essential for leadership success and make sure they also communicate your company’s values.
  • Decide which skills are most important for your leaders and which benchmarks they should be meeting. You can later use these benchmarks to develop the questions that will make up your performance review.
  • Build your objectives around the two dimensions of leadership success we mentioned before — business performance and relationships. A successful leader should proactively steer the business in the right direction. They should also be able to navigate stressful situations, balance long-term strategy with quick thinking when needed, and bring out the best in others.

Remember, you can always amend and tweak your evaluation process later if you decide that it’s time to approach leadership in a different way. However, it’s important to create a detailed objective-setting process first so it’s easier to make future changes.

2. Define your questions

The qualities defined in step one will be the basis of your performance review form.

We recommend using a five-point scoring scale for reviews. Instead of simply evaluating skill levels as “good” or “bad,” these can give a more nuanced indicator of company expectations. Here’s an example of what this type of scale might look like:

1 = Needs Strong Improvement
2 = Needs Improvement
3 = Meets Expectations
4 = Exceeds Expectations
5 = Superb

Quantitative data like the above can be very useful for understanding performance trends over time and across different departments. However, qualitative data is also a must for leadership performance reviews, which comes from open-ended questions and provides a deeper insight into performance.

We recommend using “what” questions to gather qualitative data during your performance reviews. For example: What should [employee] keep doing? What should they change?

3. Get specific about the stakeholders involved in the review

To get the most valuable information from a performance evaluation, you should ideally use a 360° review process to enable you to collect feedback from more than one person, like board members, other managers, and direct reports.

When feedback comes from more than one person, you’re more likely to prevent dyadic conflict, which is when two team members disagree and take sides on a particular issue.

“Believe it or not, the most common pattern of conflict in teams is when two people within a team disagree, comprising approximately 35% of team conflict,” write management professors Randall S. Peterson, Priti Pradhan Shah, Amanda J. Ferguson, and Stephen L. Jones for HBR

“You may assume that this pattern will escalate to include others over time, but the evidence suggests otherwise. Most people tend to avoid taking sides when there is a dyadic conflict embedded within a group, making it most likely that the duo will continue to box until one is knocked out, or a referee steps in to mediate.”

Best of all, by using a 360° process, you’ll be able to get a more in-depth picture of leadership performance across your company and learn how team members across the organization feel about leadership’s current impact.

4. Determine how often reviews should take place

HR leaders are becoming even more hyper-focused on continuous performance management than in the past, and for good reason. According to Gallup research, only 2% of CHROs think that their performance management system works, and only 47% of employees strongly agree that they know what’s expected of them at work — a number that’s slowly trending downward since the pandemic. 

That’s why, today, companies have shifted towards offering feedback more than once a year. We recommend at least bi-annual formal reviews, while informal feedback can — and should — be offered even more frequently. Why? Research has shown that employees appreciate frequent feedback. In addition, although leadership roles offer a lot more autonomy, executives often want feedback as well.

Frequent performance reviews help reviewers avoid “digging up the past” or setting long-term goals that’ll inevitably be forgotten by the following year. Instead, employees and leaders can receive time-sensitive feedback and quickly act on it.

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5. Gather relevant data

A screenshot of a competency visualization interface within Leapsome Reviews.
Leapsome Reviews shows you how leaders are performing across the set of competencies that you pre-configure

Once you’ve put together a plan for your review process, it’s time to kickstart these reviews. During each leadership evaluation, you’ll need to gather feedback from employees, managers, peers, and via self-assessment.

You’ll want to make sure this information is kept in one place, clearly recorded, and that reviews are conducted regularly. Keeping performance reviews on record is very important for legal accountability and company culture.

A platform like Leapsome Reviews can help you organize your entire leadership evaluation process — from setting up the questions and respondents to analyzing performance changes in different areas over time. With visibility over the whole process in one digital tool, you’ll be able to keep tabs on what’s happening, increase peer participation, and quickly pinpoint any problems and areas for development.

6. Analyze the data

Performance reviews can help you understand an individual’s performance — but what about performance trends across your company?

That’s where people analytics comes in. People analytics is about using data to gain insights into your HR function. Companies are becoming increasingly interested in people analytics, with CHROs citing people analytics as the top area where they need to increase their knowledge. 

When looking for a performance management HR platform, make sure you find one that uses analytics to comb through your performance data and offers AI-powered insights to help you understand leadership potential.

7. Act on the results

At the individual level, leadership evaluations can be used to guide leaders’ learning and development.

Once you’ve conducted an evaluation, schedule a development talk between the person being reviewed and their manager to offer immediate feedback on leadership skills. This should be presented as a constructive talk, with both parties given the opportunity to offer their opinions.

Then, create development goals to build on strengths and solve any problems identified during the review. Like individual contributors, leaders can benefit from learning programs and development modules, especially if they’re new to managing people. 

With higher-level executives, feedback should be more generalized and designed to point them in the right direction; the executive will ultimately be responsible for changing course.

Additionally, if someone is performing well, the results of their evaluation can be used to determine whether they’re ready for a promotion or raise.

Follow-up best practices for leadership evaluations

Integrate the performance review process with your other HR initiatives

Ideally, HR functions shouldn’t live in silos. The leadership evaluation process can be integrated into your other HR initiatives, like succession planning and training programs.

Although leadership evaluations can be linked to financial incentives or promotions, we recommend keeping salary talks separate from a performance review discussion. This will allow the performance review to stay focused on progress and development.

Ensure everyone understands what’s expected of them

It’s always good to set clear standards for leadership success. You should also let leaders and employees give feedback on the review process, as they may have insights into what is and isn’t working well.

🌟 When in doubt, try the expectations exercise recommended by communication experts Jeremie Kubicek and Steve Cockram:

-Write down your current professional expectations.
What do you want to experience in your current role or with your boss

-Recall a past instance when misaligned expectations led to challenges. How did that feel? What were the ramifications of that?

-Analyze — What could have been communicated better? What could you have done better?

-Project — Where would you like to see your current expectations in the next quarter, year, and five years?

-Align — Discuss these expectations with your team, ensuring alignment and clarity.

Turn managers into leaders with Leapsome

If we expect organizations to be adaptable in the face of change, then we should support our managers and leaders in building the skills and strategies they need to move businesses forward. To make leadership growth a long-term priority, companies need the right people, tools, and technology on their side. That’s the secret to staying agile, creative, and resilient as a business, come what may.

Another key to success? The fact that Leapsome gives users the tools they need to develop leaders, with templates for 360-degree reviews, project reviews, and anonymous leadership evaluations. Our Reviews module also allows you to identify the leadership skills all team members need to build. Check out the video below to learn more about how you can develop and retain top talent with Leapsome.

🌟 Ready to see how Leapsome can help you build a culture of leadership? 

Leapsome has the templates, workflows, and AI-powered analytics managers need to help reports build their skill sets and feel fulfilled at work.

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Frequently Asked Questions

How does a leadership performance review differ from an individual contributor performance review?

Individual contributors are mainly judged on how well they meet their day-to-day objectives. They need to produce quality work, incorporate feedback, meet deadlines, and help the company reach goals.

On the other hand, leadership performance appraisals focus more on soft skills to enable and coach reports, as well as goal-setting. Managers must point their team in the right direction and be a touchpoint for help and support.

Since leaders typically have more autonomy within the company, they may be expected to put performance recommendations in place independently. Junior contributors may need more hands-on guidance with their professional development.

What are some indicators that an individual has leadership potential?

When choosing a future leader, look for:

  • Consistently high scores on performance reviews
  • Positive feedback from peers, and a collaborative attitude
  • A self-starter with fresh ideas, who can help and inspire a team 
  • A demonstrated commitment to professional growth
  • A combination of soft and hard skills. Leadership candidates should know their field of expertise well, but they should also be enthusiastic about passing on this knowledge to others.

How can you prevent bias in leadership performance reviews?

It’s important to prevent bias in leadership performance reviews. Employees expect — and deserve — a fair and bias-free environment and perceived bias lowers employee engagement and may constitute discrimination.

Using a tool like Leapsome, you can standardize performance reviews to ensure the process is fair. What’s more, you can set clear metrics and goals for leaders and individual contributors by creating a competency framework.

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