A CM Tech You Would Want to Work For

Chapter 8

An Interview with a CEO You Might Want to Work For

Have you ever worked for an organization where you doubted the leadership capability of your chief executive officer (CEO), managing director, division president, or the head of your government 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 media journalist. How would you enjoy working for an organization whose leader answered my interview questions as follows?

A CEO YOU CAN DREAM ABOUT

Cokins: What is your position regarding how your organization views quality and waste?

CEO: The quality community often provides lists of the five or so quality-related problems, such as nonconformance to product design specifications or insufficient focus on customer service. My observation is that these lists always omit a much more critical deficiency: the inability to enable employees to achieve their full potential to contribute toward the organization’s strategic goals. This is a huge waste—and an opportunity. My position is that our managers’ main function is to unleash the power and intellect of our employees.

 

Cokins: 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. Failing to allow a time period for dissent will cause employees to feel there was not enough opportunity for their opinions to be considered. Without innovation, others will catch us and leave us chasing them.

 

Cokins: This sounds like you are big advocate of employee empowerment, but can’t this 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 from my view at the top 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 compared to 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. With empowerment and involvement, then, our employees are tasked to determine how we get there—to follow our strategic direction. An autocratic command-and-control style of management no longer works. My managers and employee teams decide on 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 any temporary dips in our short-term financial results. We must put our money where our strategy is.

 

Cokins: You sidestepped my question. How do you unify your organization?

CEO: It’s basic. My executive team communicates our strategy with a strategy map, and then afterward 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 performance measurements are critical. You get what you measure.

 

Cokins: How do you motivate employees?

CEO: Leaders like myself 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. The employees were involved in selecting the appropriate metrics, so they accept the accountability that is associated with them. Their financial bonuses are also augmented by traditional soft and subjective assessments, such as their personal growth and attitude toward working together cohesively.

 

Cokins: 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 concludes 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 personal compensation formula is radically different by being directly based on the performance of my direct reports in marketing, sales, production, service delivery, and administration. It’s straightforward. My reward entirely depends on their performance. My executive team’s bonuses are tied to their balanced scorecard key performance indicators (KPIs), and my bonus is a weighted formula based on 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.

 

Cokins: Okay. 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 and performance management fit in. More than a decade ago, we implemented compulsory transaction-based systems such as enterprise resource planning and customer relationship management software. But we realized that this type of software does not fulfill its promise of performance lift and return on investment. Those operational systems merely kept us at parity with our competitors. We rocketed beyond by implementing and integrating our decision support methodologies with modeling techniques and their supporting technologies. We view employee competency with analytics of all flavors—particularly predictive analytics—as our means to a sustainable competitive advantage. We have shifted from focusing on control to anticipatory planning so that we can be proactive instead of reactive.

 

Cokins: One final question: Are you winning?

CEO: Organizational performance improvement is a marathon where there is no finish line. It’s a matter of being and staying ahead, rather than of winning. Where we are winning is with the hearts, minds, and loyalty of our customers, our employees, our suppliers, and our governance boards. And there is a bigger stakeholder. Where we all need to win—and that includes all organizations collectively—is with our planet. My organization takes corporate social responsibility very seriously. All organizations need to embrace the green and sustainability movements.

 

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 progress to as it strives to realize the full vision of the performance management framework?

LACK OF LEADERSHIP?

One wonders why companies that were once very successful, such as Digital Equipment and Wang Laboratories, no longer exist or went bankrupt. One could make a case that their great success led them to be averse to taking risks—a case of reduced risk appetite. Are organizations today overmanaged but underled? Management and leadership are not the same thing. Management copes with complexity, relying on budgets, plans, targets, and organizational charts. Managers tend to follow rules and are risk averse. In contrast, leaders cope with change—change that is accelerating. Leadership requires vision, direction-setting, inspiring employees, and intelligent risk management.

Is it a problem that, where they should be exhibiting leadership, managers who are promoted into higher and more executive positions revert to just managing more intensively? Effective managing is the skill that helps managers get promoted to executive levels, but leadership is what is required for them to improve their organization’s overall performance.

Risk-based performance management will inevitably be the overarching integration of methodologies. Advances in information technologies, business intelligence, and analytical software will enable this vision.