There are many CEOs & business heads who articulate their vision or goals but woefully fall short of achieving them. The other day, I met a CEO and he said – “I had shared with my entire team that we want to double our turnover & profits in the next year. I did this at the start of the year. All of them were very enthusiastic about this and promised to make it happen. However, at the end of the year we barely did 15% more than what we did last year, both in turnover & profit. I am extremely frustrated with my team. They just don’t live up to their commitments.”
A discussion with his team revealed that most of them also believed that the set goals were doable. However, each one had a story to tell about how the other team member had not done what they expected of them. What it also revealed was that each one was focusing in their own way of achieving the goal. For example, the Sales head felt that a certain product would do very well in the market to generate revenue. The marketing person’s view was that focusing on a different product was important for profitability. He was supported by the Finance person in this view. Accordingly, they had asked the production team to gear up for production accordingly. So, the sales team often felt that the target was not achieved since there was short supply to the market. And the production team felt that the capacity was underutilized since there was not enough sales. Each one had the good of the company at heart & yet each felt that someone else was not aligned to what needed to be done.
The CEO had given out goals to the team members and at the year end review was frustrated with their performance. On asking him about how often they had reviewed the performance on various goals, he remarked – “Performance assessment is driven by HR in our company. They ensure that the year end review is completed. What I check with each member of my team is the monthly performance on sales. We fall short every month. Each one has their own reasons and promises to make it up in the next month. However, they fall short each time. I really think I have an incompetent team.”
This is the story of many a company. Such an approach creates all round frustration and demotivation of the team & the leader. Ultimately the company does not perform as well as it could have. And the unfortunate conclusion that many leaders draw is that the team is incompetent. The solution that quite a few CEOs then end up doing is replacing team members at a frequency that creates an impression of a hire & fire company. Over time, this reduces the chances of getting good people. This also puts the burden on the CEO/ owner to drive business. As a result they never grow themselves nor are they able to scale up the business. Some CEOs/ leaders do realize later that the issues are perhaps different than what they have believed in. Such leaders/ CEOs begin a different journey. Many others don’t.
So, what are the key issues that lead to such a scenario. From our perspective, the following are the gaps that happened in this company & similar such companies:
- They had operated on just two numbers without discussing the various elements that would contribute to those numbers
- Each team member had expectations from each other but that was never shared formally and the implications of each expectation was never discussed.
- They had not agreed on the critical parameters that need to be reviewed and who all would need to hold accountability to deliver on those parameters.
- The reviews focused on discussing the numbers and focusing on who had not delivered rather than discussions on what could have enabled a better delivery & then planning for it together
All these issues point to the importance of detailing out the roadmap of the vision or goals to ensure clarity of what will all is required to deliver the vision or goals, and then reviewing them to ensure execution. And building a shared understanding & agreement on the roadmap with all the key members of the team across levels appropriately. It also needs a clear understanding of who all will be accountable for what elements of the roadmap & how the accountability will be measured.
The process to do all of the above is as follows:
- At the start of the delivery period, collectively (with all relevant stakeholders) identify the critical parameters that contribute to the aspirations on turnover & profits & agree on what needs to be done on those parameters for that delivery period (goals that need to be set). For example, turnover may be driven by a mix of products & customers (old & new for both) that may need detailing. Similarly, profits may be driven by several cost efficiencies, managing margins etc. and may need to be detailed. Doing this step builds a shared clarity & focus on what needs to be delivered & how.
- Reflect on the challenges to grow/ deliver on the chosen parameters. The reflection can be based on past experiences in delivering on those parameters or through a proactive identification. For example, meeting the numbers of certain products may be constrained by delivery capacity for that product. Or growth in existing customers may be hindered by customer attrition on behalf of gaps in service to the customers. Doing this step builds clarity on what will enhance the chances of success in delivering the goals.
- Based on these, identify sub-goals/ parameters/ actions to deal with the identified challenges. For example, it may mean setting up new capacity, improving service levels to customers etc. At this stage, it will be important to assess the feasibility of overcoming the challenge in that delivery period and therefore, its impact on delivery of the main parameters. Based on that assessment, it may be important to modify the aspirations/ goals on some of the parameters suitably. Doing this step builds the confidence that what has been set looks doable.
- Having done that, there needs to be a collective agreement on the measures of success of each parameter or sub-parameter & also agree on who all will take accountability for the delivery on those parameters/ sub-parameters. For example, if there has been customer attrition on account of gaps in service, the measure be the number of existing customers who give repeat business or improvement in customer satisfaction scores. And both sales & supply chain (assuming they impact service) or post sales service (if they impact service) could be jointly accountable for delivery on that sub-parameter & measure of success. Doing this step builds clarity on how performance will be assessed.
- There also needs to be an agreement on which parameters will be reviewed by whom and with what frequency. For example, for the parameter related to cost efficiency, goals on efficiency improvement at plant level may be reviewed only at the functional level on a monthly basis while goals on large cost savings projects may be reviewed at leadership level once a quarter. Doing this step reinforces the sense of control & the belief that review is important for ensuring delivery.
- Use the reviews as per agreed frequency to reflect on enablers & hindrances to progress on the chosen parameters/ sub-parameters/ goals and to draw out learning to drive course corrections. For example, a particular product may be doing well. However, there were stock outs in several markets. The reflection in the review may suggest that stock outs happened since the demand was more than was estimated. And that the production planning was done on the basis of the estimated demand. That may provide the learning that the demand estimation process that was done for a quarter may have to be fine tuned every month. Doing this course correction will enable the company to leverage the demand better. The other situation could be where the production efficiency did not improve as planned. The reflection in the review may suggest that the team could not assess the root causes of inefficiency. This may throw up a learning that there are gaps in team capabilities to do root cause analysis. Course correction would lead to building those capabilities while modifying the efficiency expectations and finding alternate routes to cover up the required cost improvement. Doing this step enhances learning and builds the organization capability to course correct & improve on an ongoing basis.
The purpose of this article is to bring alive the importance & need to enhance performance & execution through detailing & review in order to achieve the desired goals. Doing this process well requires some of the other cultural elements to be strong. This process done well along with some the enabling cultural elements helps build a performance culture. A diagnostic called Performance Culture Diagnostic helps you assess the strength of this performance culture in your organization.