Cokins: This sounds like you are big advocate of employee empowerment, but can’t this lead to chaos from employee teams promoting departmental self-interests rather than the unified interest of your organization as a whole?
Cokins: OK. 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?
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 evolve to for realizing the full vision of Performance Management embedded with business analytics? ###
Cokins: How are you compensated? Are you the typical CEO who is rewarded handsomely, sometimes despite a waning enterprise financial performance and associated shareholder wealth destruction?
The CEO: Conflict and tension are 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 balancing our risk exposure with 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 at which processes we must excel. I then ensure protected financial funding of their projects and process improvements – regardless of a temporary dip in our short-term financial results. We must put our money where our strategy is.
The CEO: That is where Business Intelligence, Business Analytics, and Performance Management fit in. Over a decade ago, we implemented the compulsory transaction-based systems like enterprise resource planning (ERP) and customer relationship management (CRM) software. But we realized that this type of software does not fulfill its promise of performance lift and ROI. It merely kept us at parity with our competitors. We rocketed beyond by implementing and integrating the decision support methodologies with modeling techniques and their supporting technologies. We view employee competency with analytics of all flavors – and 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 not reactive.
The 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 conclude 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 compensation 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 – their KPIs – and my bonus is a weighted formula from their bonuses. This focuses me to remove obstacles that prevent them from achieving their objectives and to facilitate the conflicts amongst them. It is a closed loop.
Cokins: One final question. Are you winning?
Cokins: How do you motivate employees?
Have you ever worked for an organization where you doubted the leadership capability of your CEO, managing director, division president, or agency head? 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 media journalist. How would you like to work for an organization whose leader answered my interview questions as follows?
The CEO: I set the tone at the top as a role model by placing a high priority on three character traits: trust Economics, a high tolerance for dissent, and innovation. Their combination is potent in a positive way. Without trust, employees do not feel that they are adequately involved in decision-making. Without allowing a time period for dissent, employees will not feel that there was opportunity for their opinions to be considered. Without innovation, competitors will catch us and leave us chasing them.
The CEO: The quality community often provides lists about the five or so quality 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 opportunity. My position is that our managers’ main function is to unleash the power and intellect of our employees.
The CEO: Organizational performance improvement is a marathon where there is no finish line. “Being ahead” applies, rather than “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 this includes all organizations collectively – is with our planet. My organization takes being green and behaving with environmental and community responsibility very seriously. We all need to.
The CEO: Leaders like me must motivate through communicating vision and providing inspiration. Not all executives do this well – many do ir poorly. But to get true organizational traction, we link financial bonuses for all employees in large part to the performance indicators against targets from their cascaded scorecards. Their financial bonuses are also augmented by traditional soft and subjective assessments, such as their personal growth and attitude toward working together cohesively. Bonuses are not always motivational to some employees. I also try to allow them autonomy to pursue mastery and their self-purpose, taken right out of Daniel H. Pink’s book, Drive.
Cokins: You side-stepped my question. How do you unify your organization?
Cokins: How have you created a work environment that makes this possible?
Cokins: What is your position regarding how your organization views quality and waste?
The 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 Economics, KPIs, 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 become self-balancing. Our measurements are critical. You get what you measure.
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