Have you ever worked for an organization where you doubted the leadership capability of your CEO, managing director, division president or head of your agency? Have you ever been disturbed that your organization is not living up to its full potential, in terms of its enterprise-wide performance management? Imagine that I am a journalist. How would you enjoy working for an organization whose leader answered my interview questions as follows?
Gary Cokins: How does your organization view quality and waste?
The CEO: The quality community often provides lists of the five or so quality problems, such as nonconformance to product design specifications or insufficient focus on customer service. These lists tend to omit a much more critical deficiency: the inability to enable employees to achieve their full potential to contribute toward the organizations strategic goals. This is a huge waste but also an opportunity. My position is that our managers main function is to unleash the power and intellect of our employees.
GC: How have you created a work environment that makes this possible?
CEO: I set the tone at the top, as a role model, by placing a high priority on three character traits: trust, a high tolerance for dissent and innovation. Their combination is potent in a positive way. Without trust, employees do not feel they are adequately involved in decision making. Without allowing a time period for dissent, employees will not feel there is an opportunity for their opinions to be considered. Without innovation, others will leave us behind.
GC: This sounds like you are a big advocate of employee empowerment, but cant it lead to chaos from employee teams exhibiting departmental self-interests rather than a unified interest in your organization as a whole?
CEO: Conflict and tension is natural in all organizations. There are always trade-offs, and as a leader, I struggle to properly balance multiple dimensions such as how to improve customer service levels and cost-saving process efficiencies while restricted to financial budget constraints and profit targets. I constantly assess our risk management with our risk appetite. My belief is that the primary role of my executive team is to set direction, and secondarily to hire, grow and retain excellent employees. Empowered and involved, then our employees are tasked to determine how we best follow our strategic direction. An autocratic command-and-control style of management no longer works. My managers and employee teams decide which initiatives are required and which processes we must excel at. I then assure protected financial funding of their projects and process improvements regardless of a temporary dip in our short-term financial results. We must put our money where our strategy is.
GC: You sidestepped my question. How do you unify your organization?
CEO: Its basic. My executive team communicates our strategy with a strategy map, then our workforce constructs and continuously modifies our balanced scorecard of initiatives, key processes and associated performance measures derived from our strategy map. This aligns our employees priorities, plans and actions with our strategy. With the cascading cause-and-effect linkage of strategic objectives from our strategy map, the tension and conflict I mentioned becomes self-balancing. Our measurements are critical. You get what you measure.
GC: How do you motivate employees?
CEO: Leaders like me must motivate through communicating vision and providing inspiration. Not all executives do this well. Many do it poorly. But, to get true organizational traction, we link financial bonuses for all employees in a large part to the performance indicators against targets from their cascaded scorecards. Their financial bonuses are also augmented by traditional soft and subjective assessments, such as their personal growth and attitude toward working together cohesively.
GC: How are you compensated? Are you the typical CEO rewarded handsomely sometimes despite a waning enterprise financial performance and associated shareholder wealth destruction?
CEO: The controversial and inflationary run up of CEO financial rewards is disheartening to employees everywhere, and some blame goes to the guilt-creating executive compensation consultants who circulate the same PowerPoint presentation to boards of directors that conclude with, Do you want your CEO to be paid in the bottom half of CEOs in your industry? There must always be a bottom half. My compensation is radically different by being directly based on the performance of my direct reports in marketing, sales, production, service delivery and administration. Its straightforward. My reward entirely depends on their performance. My executive teams bonuses are tied to their balanced scorecard key performance indicators (KPIs), and my bonus is a weighted formula from their bonuses. That motivates me to remove obstacles that prevent them from achieving their objectives and to facilitate the conflicts among them. It is a closed loop.
GC: OK. So, monitoring the KPI dials of your balanced scorecard is obviously important, but how do you move the financial and nonfinancial dials to achieve or surpass your organizational targets that in turn ideally realize your strategy, vision and mission?
CEO: That is where business intelligence (BI) and performance management fit in. Over a decade ago, we implemented the compulsory transaction-based systems like enterprise resource planning (ERP) and customer relationship management (CRM) software. But we realized that type of software does not fulfill its promise of performance lift and ROI. It merely kept us at parity with our competitors. We rocketed beyond by implementing and integrating the decision support methodologies with modeling techniques and their supporting technologies. We view employee competency with analytics of all flavors and particularly predictive analytics as our means to a sustainable competitive advantage. We have shifted from focusing on control to anticipatory planning so we can be proactive, not reactive.
GC: One final question. Are you winning?
CEO: Organizational performance improvement is a marathon with no finish line. Pulling ahead and staying strong may ultimately be more important than winning. Where we are winning is with the hearts, minds and loyalty of our customers, our employees, our suppliers and our governance boards. There is a bigger stakeholder. Where we all need to win, which includes all organizations, is with our planet. My organization takes being green and behaving with environmental and community responsibility very seriously. We all need to.
What would such an interview be like with members of your executive team? How would their answers be different? Are there next steps that your organization can take toward realizing the full vision of performance management? The CEO I interviewed above is, of course, an imaginary one. However, in my business travels, where I am fortunate to meet with many executive teams, I have met men and women who exhibit some of the traits in the interview. My major conclusion is there is a difference between being a manager and a leader. Leaders are not just about dictating instructions but much more about providing vision, setting direction and inspiring employees and all stakeholders of their organization.