One thing I learned about performance: hitting the target is not always the same as creating value

For years, organisations have invested enormous energy in pay for performance. Set the targets. Measure the results. Reward the outcome. On paper, it makes perfect sense.

And to be clear: I believe in performance management. People should know what is expected from them. Strong contribution should be recognised. Leaders should be held accountable for results.

But after many years working with performance, executive remuneration, succession and leadership, I increasingly think we need to ask a second question.

Not only: Did you deliver? But also: What did you leave behind?

Because performance and impact are not always the same thing. A leader can hit every target and still leave the organisation weaker We have all seen versions of it. A leader delivers the numbers. Costs come down. Revenue goes up. The annual targets are achieved. The bonus pays out. And yet, two years later, the organisation is dealing with the consequences.

The team is exhausted. Key people have left. There is no obvious successor. Important decisions were postponed. Capability was not built. Short-term results were delivered at the expense of long-term resilience. Technically, the leader performed. But did they create sustainable value? That is a different question.

Performance is what you deliver. Impact is what remains after you leave. For me, that distinction has become increasingly important.

Performance is often relatively easy to measure. Did we hit the revenue target? Did we deliver the cost reduction? Did we achieve the transformation milestone? Did we improve customer results?

Impact is harder. Did we build a stronger organisation? Did we develop people who can take over? Did we create better leadership capability? Did we simplify the organisation, or just move complexity somewhere else? Did we improve the culture in a way that supports performance after we are gone? Did we make decisions that will still look sensible three years from now?

Those questions are less tidy. They do not always fit neatly into an annual scorecard. But they matter.

The problem with annual performance cycles

One of the difficulties with performance systems is that they naturally create a time horizon. The year starts. Targets are set. Results are reviewed. Rewards are allocated. And then the process starts again. That rhythm is useful. But it can also encourage us to overvalue what can be achieved and measured within twelve months. Some of the most important things leaders do take longer.

Building a strong succession pipeline. Changing behaviours. Creating trust. Developing talent. Simplifying an operating model. Building capability. Making difficult decisions that may hurt short-term performance but protect the organisation in the long term.

These things do not always produce immediate applause. Sometimes they even make the numbers look worse before they make the organisation better. That is why leadership judgement still matters. Not everything of value can be reduced to a KPI.

Should we move from pay for performance to reward for impact?

I am not suggesting we abandon pay for performance. That would be unrealistic and, in many cases, unhelpful. But I do think we should become more sophisticated about what we reward.

If an executive receives significant financial reward for delivering a strong year, while leaving behind no successor, a depleted team or an unsustainable business model, we should at least question whether our reward system is reinforcing the right behaviour.

Perhaps we should spend less time perfecting the link between pay and short-term performance, and more time thinking about how we recognise sustainable impact. That does not necessarily mean adding more measures. In fact, one of the problems with executive scorecards is that we can keep adding criteria until everything is measured and nothing is clear.

It means using better judgement. t means looking beyond the result itself. How was the result achieved? What capability was created along the way? What risks were taken? What was sacrificed? What will still be there when this leader has moved on?

These are questions Boards and executive teams should be asking. Succession is one of the clearest measures of impact. One of the areas where this becomes very visible is succession.

I have worked with senior leaders who were considered indispensable. At first sight, that sounds like a compliment. I am no longer sure it is. If an organisation cannot function without you, have you really built something strong?

Great leaders should create capability around them. They should develop people. They should make themselves less essential over time, not more. A strong successor is not a threat to your leadership. It is evidence of it. And yet succession is often treated as something separate from performance. I think that is a mistake. If you leave behind stronger leaders, stronger teams and a stronger organisation, that is impact.

Culture matters too

The same applies to culture. A leader can deliver excellent results through fear, pressure or sheer force of personality. For a while, it may work. But the impact can be destructive.

People stop speaking up. Good people leave. Decision-making slows down because everything depends on one person. Bad news gets filtered. The organisation becomes less resilient. Again, the numbers may initially look good. But leadership impact is not only visible in the numbers. It is also visible in what happens when the leader is not in the room.

Do people still make good decisions? Do they challenge each other? Do they take ownership? Do they collaborate? Do they tell the truth?

That is where culture and performance meet.

What should Boards ask?

When assessing senior leaders, I think Boards should ask more than whether the targets were achieved. They should ask:

Did this leader leave the organisation stronger? Did they build talent and succession? Did they create sustainable performance? Did they improve the quality of leadership around them? Did they strengthen trust, accountability and decision-making? Did they create value that will outlast their own tenure?

Those questions are harder than reviewing a scorecard. But that is exactly why they matter. The leadership question that matters most

After 25 years in international executive HR, I have become less interested in whether a leader looks successful in a single year. I am much more interested in whether the organisation is stronger because they were there.

Performance still matters. Results still matter. Accountability still matters. But the strongest leaders do more than deliver. They build something that continues without them.

Performance is what you deliver. Impact is what remains after you leave. Perhaps that is what we should reward more deliberately.