Stephen McCafferty told a Headteachers' Association of Scotland conference in Perth that the trend in business was towards what employees could contribute to the company and what the company could contribute to personal development.
"There are clear connections between employee satisfaction and customer satisfaction," Mr McCafferty said. "Look after the people and they will look after the customer and profits will follow. Pay is of course important for employees but what makes the difference is how you look after people, how you treat them and how you develop them."
Standard Life had abandoned a three-scale appraisal system linked to pay after it "became a game" for employees. "They were focusing on 'what do I need to do to get more money'. It took the whole conversation in the review away from 'what do I need to do to improve'," Mr McCafferty said.
Angela Maguire, a Glasgow stress consultant, found that teachers under pressure feared appraisal and scrutiny and the expectation that there was "a right way to be".
Employers should concentrate on personal development. Teachers needed encouragement to open up and face challenges, Mrs Maguire stated.