Most of my clients are chief executives, managing directors or senior managers. Without exception, as far as I can tell, they are measured on the standard business outcomes linked to growth, market share and profit.
These are often described as “Lag” indicators, which tell us whether or not a particular outcome has been attained and they’re important to ensure our leader is delivering results. Nothing wrong with that.
Lag indicators, on their own, are however rarely enough to measure all of the right things. Adding some “Lead” indicators will provide early signs of whether the outcomes will be achieved. These link to activities rather than outcomes – numbers of 121 meetings held with heads of department, projects initiated, networking events attended and so on. It’s worth checking if you have the right blend of both lead and lag.
Secondly, I advocate measuring the leader on outcomes that aren’t directly linked to financial results. These are slightly harder to measure, but well designed surveys and similar methods will usually do the trick. Here are some of the more important examples:
- Employee delight/excitement. Mere “satisfaction” is not enough to recruit and retain the best people
- Customer delight. Again, referrals are more likely to materialise if customers have an experience that exceeds their expectations
- Increasing the average quality of employees. This can be done several ways:
- Retention of the best people
- Robust recruitment procedures to a) attract and b) select the best people
- Letting some of the negative people go (a clearly implemented strategy should deliver this)
- Developing existing personnel (moving from modular training to teaching people critical thinking and problem-solving skills, so they can learn for themselves)
- Continuous improvement of processes, possibly through rolling project teams
- Value to the community
- Innovation of new products and ideas
There is much more to a business than simply making acceptable financial returns. Focusing on the real reasons why an organisation exists, linked to employees, customers and the wider community, will build a far stronger and sustainable organisation. Unfortunately, whilst few would probably disagree with the sentiment, rarely do I see the key metrics built into a leader’s performance management process.
I should say that a likely by-product of getting these drivers right will be strong financial performance in the form of profit, growth and balance sheet value.