What One Question Does Every CEO Need to Answer?

No CEO has a crystal ball, but all need some insight into how their companies are likely to perform in the short term. Without this visibility, CEOs are flying blind, with little information to determine if the company is on course or way off track. They cannot prepare adequately for what’s coming next, whether it is a setback requiring some belt tightening or success that allows for more spending on marketing, for example. That is why the one question every CEO needs to answer is: How is my company tracking on its goals?

The question confounds CEOs, because it’s difficult to get the information needed to answer it. Most progress reports from departments and employees are historical, tactical, and not relevant to business outcomes. Updates consisting of “Here’s what we accomplished last week or last quarter” can be useful, especially to celebrate successes or learn from failures, but they don’t help the CEO understand where to take action.

Even basic status updates into ongoing work don’t help the CEO much. For instance, if the software development group says it is 60 percent done with a product, this is of little value to the CEO without more context. Will the other 40 percent be completed on time? Will the quality be up to company standards? What additional resources does the group need to finish?

In addition, metrics from each company department are mostly isolated to each function and not relevant to the company’s broader objectives. The CEO becomes conditioned to measuring the HR team with HR stats, the product development team with product output, the marketing department with marketing ROI, and so on.

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While this is important information, it does not capture the interdependency of department objectives towards specific corporate goals. And unless the CEO is an expert in a specific area, he or she may not know how to make sense of the data.

Consequently, department objectives can become elevated over corporate goals. As this cycle perpetuates, each department becomes more insulated, resulting in silos of thought and action that may be completely detached from the CEO’s corporate strategy. No wonder the information and metrics CEOs receive have little bearing on the corporate objectives and are no help for future planning!

What’s the solution? CEOs need a process that lets them systematically collect the right data from across the organization. The first step is to ensure that everyone in the company is aligned and contributing to the organization’s overall goals.

The CEO should have a clear vision and a set of five to eight corporate goals that he or she owns and manages every quarter. Quarterly goals (such as “Generate $5 million in revenue during the quarter,” “Launch new product X,” or “Complete headquarters move”) enable the CEO to drive company priorities, adapt to changing business dynamics, and engage employees.

Then, each of the CEO’s direct reports needs to develop departmental goals that are typically tied to the corporate goals. Next, managers work with each employee to develop supporting goals. This cascading goals system helps employees understand how their daily work contributes to the overall success of the company.

The final piece of the puzzle – and this is key to obtaining predictive insights – is to implement a process for employees to update the status of their goals each week. Instead of asking for static “percentage complete” updates, CEOs should ask employees to rate the likelihood of achieving each goal during the quarter and the quality of work done so far.

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With employees consistently alerting others to when goal achievement become less likely or when quality is declining, CEOs and leaders get an early-warning system showing when they need to adjust and adapt to keep the company on track to meet its goals. In addition, everyone in the company should have visibility into everyone else’s individual and departmental goals to foster understanding and collaboration.

Ensuring that employees know 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. Knowledge workers who understand how their individual jobs support the company’s goals will be more productive and engaged. Engaged employees will in turn communicate timely, relevant information about how they are actively contributing to the company’s success.

CEOs with a system to collect and analyze this information gain insight into the expected future of the organization, enabling them to make course corrections and address issues before they escalate. They’ll have an educated answer to the question that vexes them: How is my company tracking on its goals?

Joel Trammell is author of the bookThe CEO Tightrope,” and CEO of Khorus, which provides business management software for CEOs and other leaders. His leadership as a CEO has resulted in successful nine-figure acquisitions by two Fortune 500 companies. Joel blogs at The American CEO.

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