This speech proposes an approach to evaluating principals that incorporates strategies for motivating principals to improve. The first step is to abandon the "middle management mentality" by granting full decision-making authority to principals over matters directly pertaining to their schools, such as teacher employment, use of allocated funds, and problem-solving in consultation--on an equal basis--with top-level management. In addition, principals and central office staff should decide on, and participate in, a leadership development program. A system for recognizing performance is mandatory, whether it is in the form of incentive pay, achievement awards, or other imaginative approaches. Administrative evaluation should begin with a broad school board policy calling for supervision and periodic appraisal of employees, with improvement of performance as a top priority. Continuous appraisal of performance in terms of district philosophy and objectives, job descriptions, and performance objectives by leadership personnel will provide the most improvement of instructional and management programs, and will foster development, coordination, and evaluation of learning activities throughout the district. (TE)