How Smart CEOs Tie Business Outcomes to Metrics, Transparency

By Aliah D. Wright Jan 20, 2015
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When it comes to improving a business, savvy chief executives link business outcomes to metrics, make sure employees know how their individual jobs lead to the organization’s success, and are transparent with their employees—especially during troubling times, said Joel Trammell, philanthropist and author of The CEO Tightrope: How to Master the Balancing Act of a Successful CEO (Greenleaf Book Group Press, 2014). Trammell also is CEO of Khorus, a business management software provider.

SHRM Online asked Trammell what it takes to be a successful CEO in today’s business climate.

How does one create a culture in which goals and metrics are linked to business success and progress is consistently measured?

CEOs set the standard for performance in any organization. To deliver performance, they need to create a set of three to five goals every quarter tied to business outcomes. Next, they need to ensure that everyone in the company understands those goals and then creates their own set of goals that support them. Finally, having each employee use this system to update the status of his or her goals each week keeps everyone on track. Using predictive measures, the system also alerts the CEO and other leaders to any issues that may prevent achievement of the goals.

What is the ideal metric that can help CEOs achieve the right level of performance?

The ideal metric is easily measurable, directly correlated to business performance, predictive of future business performance, isolated to factors controlled by the group it is measuring, and comparable to competitors’ metrics. Not many fit all five of these criteria, but they should meet as many as possible. Each metric should be tied directly to individual, departmental and/or corporate goals. Only when you consistently measure your progress on goals using relevant metrics will you understand whether you are achieving the right level of performance or not.

How do CEOs arrive at easily measurable metrics and how can they make them correlate with business performance, and why this is important?

Here is an example from a recent experience I had helping a product management executive develop his goals. Because we had not worked together before, I asked him to think about the key responsibilities of his job. He told me that his No.1 priority was to deliver an exceptional product (he works for an early-stage software company). I agreed. But then I asked, “How would we know if it was an exceptional product?” He said he thought an exceptional product would be easy and quick to implement. I suggested that an exceptional product would also have a high conversion rate from demo to purchase. We also agreed that the better the product, the fewer support calls the company would receive, and the higher the renewal rate would be. We then set metrics for each of these areas. For this startup we went from a high-level corporate or departmental goal to specific, measurable, individual goals that highlighted the fundamentals for this area of the business.

How can CEOs predict future business performance? What steps should they take to outperform the competition and keep those ‘isolated factors’ under their control?

Most metrics reflect past performance. This is particularly true of financials. For instance, revenue tells you how many deals your sales team closed or how well your frontline staff pitched a new service—last quarter. It doesn’t tell you anything about what might happen in the coming quarter. The best metrics don’t tell you just how well you’ve done (your financials tell you that), they tell you how well you’re going to do—in the next month, quarter or year.

While it’s difficult to isolate a metric only to those factors pertaining to a particular group, identifying those fundamentals will tell you much more about the strength and performance of that group.

Regarding the competition, it’s helpful to track your progress against your competitors’ so that you can judge how well you’re building or maintaining an advantage in terms of operations, holding on to top talent, and retaining top customers.

How can this approach improve employee morale and keep employees engaged?

Employees who understand exactly how their day-to-day jobs contribute to the success of the organization will be much more engaged and motivated.

What is the one thing CEOs should do to make their companies thrive after a layoff?

Be clear about the plan. If a CEO has been doing his or her job correctly, a layoff should not come as a surprise to employees. Transparency is key to maintaining credibility, which (along with competence and caring) is one of the three pillars of CEO success. CEOs need to be clear about what is happening and how the company will move forward after any setback.

Aliah D. Wright is an online editor/manager for SHRM.
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