As I’ve written about before on this blog, one of the five responsibilities of a CEO is to deliver performance. However, some CEOs focus solely on this, to the detriment of everyone in the organization. They approach performance like a football coach who just says, “Go win.” The problem with this is that good performance is a goal, not a behavior that can be taught. Great CEOs – like great coaches – break down the fundamentals that are necessary to performing well and train their employees to execute these fundamentals at the highest possible level. The best way for CEOs to do this is with an effective goals management system.
The right goals management system helps the CEO ensure that what individual employees and departments are doing aligns and contributes to the organization’s overall goals. It also warns the CEO if the goals are slipping in time to do something about it. Breaking down the business to the fundamental behaviors necessary for employees in each department enables the company to be successful in the market. I am not saying that the CEO has to personally teach everyone how to do his or her job.
What I am saying is that the CEO is often the only person in a position to fully understand the big picture strategy, while only the lower level employees have the expertise to complete the necessary individual tasks. The key for the CEO is to make sure that he or she is leveraging that expertise at the individual level and harnessing it for the bigger purpose of the organization. If not, the disconnect results in inefficiency, with each individual and/or department beginning to act in ways that they think are best but are totally detached from the direction the CEO is trying to set. How many times have you seen an employee do something that you know is bad for the company, but they don’t realize the harm they are doing?
To create alignment in all the companies that I run, we created a hierarchical goals system called Khorus. The purpose of Khorus is to clearly show each employee how what they do is tied to the goals of the organization, while letting the CEO ensure that each group is working on the right fundamentals. This type of system may sound familiar to you, but instead of typical corporate systems that only provide backwards-looking, tactical information from departmental silos, this system gives the CEO valuable foresight that can allow him or her to take action to solve issues before deliverables slip and goals are missed.
Here’s how it works: Each quarter the CEO enters a set of corporate goals for the company. Most of the businesses I have operated work best on a quarterly timeframe, but some businesses might be better suited to a monthly tempo.
These goals would be, for example, “Generate $20 million in revenue in the quarter,” “Launch new product Cosmo,” or “Complete headquarters move.” Typically there are five to eight corporate goals each quarter including a couple of catch-all goals like “Improving operational efficiency” or “Driving continuous improvement.”
Once all of the corporate goals are in the system, then each of the CEO’s direct reports enter departmental goals that are typically tied to those corporate goals. Each lower level employee in the organization works with his or her manager to develop goals that support their manager’s goals. The system allows for each employee in the organization to see everyone else’s goals. This helps employees understand not only how their efforts contribute directly to the success of the company, but also what other groups are doing to contribute to the same corporate goals.
The final piece of the puzzle – and what is incredibly valuable for the CEO – is that each employee receives an email at the end of each week asking them to update the status of each of their goals. Instead of being some complex “TPS” reports, the employee only has to answer two questions about each of their goals.
The first question is: “On a scale of 1 to 5, how likely is it that you will complete this goal in the quarter?” The second question is: “On a scale of 1 to 5, how do you feel about the quality of the work you have completed toward this goal in the quarter?” In just a couple of minutes, the employee can update their status. When combined with everyone else’s updates, this gives the CEO valuable insight into what goals are in danger of not being completed.
Ensuring that every employee knows what business fundamentals they are responsible for and how they align with the corporate direction is a critical role for the CEO and the only way to deliver consistent performance. While the cascading goals approach is not unique, using the goals as a management system that helps a CEO look into the future is unique as far as I know.
In a future post, I’ll cover how to set the right goals. I’ll be talking more about Khorus in the future as well. Any CEOs who are interested in learning more can reach me directly.
The chief executive officer (CEO) is the leading executive officer of a corporation charged with principal responsibility of the organization and accountable only to the owners, directors, and/or stockholders. As the principal corporate officer, the CEO's basic function is to provide overall leadership to a corporation by establishing direction and tone, overseeing internal management, and functioning as the company's primary representative with outside groups and organizations. The emergence of the CEO is closely related to the growth of businesses during the Industrial Age. As businesses became too large to be managed by individual owners, professional managers slowly assumed responsibility for the company's operations. In addition, the development of public companies with thousands of stockholders has made the likelihood of a primary owner nearly impossible. Although the stockholders are represented by a board of directors, the board cannot oversee the daily operations of the organization, thus requiring a CEO. In fact, the cumulative responsibilities of the CEO have become so immense that many corporations have established chief executive offices, in which responsibilities are divided among a chairperson of the board, a CEO, and a president.
In providing direction for the company, the CEO will set important goals and objectives, formulate corporate strategy, and establish standards and guidelines by which the company will conduct its business. Although a CEO may require approval from the board of directors to do so, the CEO is primarily responsible for the formulation of the company's overall direction. In order to communicate the direction of the company to employees, the CEO will set goals and objectives. While employees might well understand these goals, they are typically unable to achieve them of their own accord. To provide a means toward reaching these goals, the CEO must formulate strategies providing short- and long-term plans. Furthermore, in implementing these plans and strategies, the CEO must function as a salesperson and cheerleader. Plans and strategies must not only be understood, but accepted. A successful CEO will instill enthusiasm for his or her plans among employees. In addition, a CEO will define the character of the company by establishing and employing acceptable standards of behavior in conducting business. Finally, based on the direction and priorities of the company, a CEO must allocate the resources of the company in a manner that will maximize its ability to reach its goals.
As primary manager of the corporation, the CEO is charged with the creation of an organizational structure, the management of business units and divisions, the development of executive personnel, overseeing mergers and acquisitions, and the responsibility for any decisions that will have a major impact on the company's welfare. By creating an organizational structure, the CEO establishes an internal management structure in which major functions and responsibilities are defined in order to establish a clear mission for each unit, as well as provide accountability among these units. In reaching long-term corporate strategies and goals, a CEO will direct individual business units toward these goals by establishing short-term objectives and strategies for each unit. Finally, the CEO will continually review the status of each unit to ensure that goals are being met and that the company's financial outlook is favorable.
As the principal executive, the CEO is responsible to the corporation's board of directors and acts as the primary interface between the board and the corporation. The CEO continually reports to the board on the company's activities and situation; gains approval for any major goals, policies, or strategies; and executes any mandates of the board. In addition, the CEO participates in the board's activities by being involved in the selection of new directors.
Finally, the CEO is the primary external interface for the corporation, acting as its primary representative with outside individuals, groups, and organizations by monitoring outside conditions, improving public relations, and acting as a personal liaison. In order to understand and anticipate the effects of outside factors, the CEO must monitor social, political, and economic conditions as they relate to the corporation. As the company's primary agent, the CEO must work to maintain and improve public relations by effectively communicating the company's desires and strategies to the outside public. Finally, the CEO must maintain individual relationships with important business and civic leaders on behalf of the company. As corporations struggle to maintain their position in an increasingly competitive and global market, the ability of a corporation to change will be fundamental to its success, and such change must begin with its leaders. If that is the case, the role of the CEO will continue to grow and change, taking on new responsibilities and initiatives as the marketplace evolves.
SEE ALSO : Chief Financial Officer (CFO)
Hampton, John J., ed. AMA Management Handbook. 3rd ed. New York: AMACOM, 1994.
Stieglitz, Harold. Chief Executives View Their Jobs: Today and Tomorrow. New York: Conference Board, 1985.