Five Critical Determinants of CEO Performance

Posted on October 15, 2011

After five years as a top-level consultant, here are my top five questions for a CEO. But the path to answering “yes” to all five questions can be a long and winding one.

My five-year anniversary as a consultant is right around the corner. I’ve worked with many companies over that time frame, and I’m doing some deep thinking about what I have seen and how I’ve helped my CEOs increase their performance as leaders. Since for most of my career I’ve been the CEO, my approach is always pragmatic: I start by becoming clear about where my client’s business is, and where they want to take it.

As I question my client in an effort to understand, we often discover issues around whether the team, the CEO, the board and the investors are working toward the same goals, and functioning as a well-coordinated team. As we examine the progress each member of the leadership team has made, we learn about the clarity of the plan and the quality of the leadership team. As we drill into the obstacles holding the team back, we uncover resource challenges and critical aspects of the firm’s culture/ performance environment. Increasingly, I find myself helping CEOs gain clarity on the five most critical determinants of CEO performance.

Do you have the right leadership team? Beyond the smallest entrepreneurial stage, we rely upon the leaders we bring into the organization. The requirements of a changing organization mean that different leaders are required at different stages. Those CEOs who actively manage their lead¬ership team—keeping the right leaders in the right positions at all times—routinely see much better performance. A sub-standard team makes life hard for even the most talented CEO. I saw one client CEO keep a burnt-out VP Marketing for two years out of a sense of loyalty while the growth of the firm slowed from 60% per year to 15%. Finally the change was made to someone with the right skill set and fresh enthusiasm and within a year, the results began to improve.

Is there alignment between your Board, your investors, your leadership team and your personal objectives? Opposition from within is a recipe for failure. Too many management teams are executing on plans that don’t represent what the investors want. For example, management wants to grow fast, but the VC has no dry powder and wants a fast exit. Great leadership teams become frustrated if there is not clear direction or goals that the board, investors and management are all passionate about. In one case, a founder who took private equity grew concerned that the fast growth and leverage the PE group demanded was too risky, which could leave him without his nest egg should things go poorly. The parties worked out a deal in which the PE group bought in more deeply, allowing the founder to keep several million outside the business to reduce his risk.

Is there a clear, detailed and concise plan that everyone in the organization knows, and against which they are judged? Great teams demand a clear roadmap against which they pace themselves. This must include vision, mission, strategies, measurable objectives, and specific projects. Too many firms rush through planning and jump into execution. Unless they give the planning process all due diligence and methodically refine it until it is their best work, the organization will lurch forward with mistakes, lack of coordination and other problems. People become distracted and feel like failures, so morale and productivity drop. One high growth client with an innovative CEO was starting too many projects and initiatives. They called it “death by a thousand initiatives”. I pushed the CEO and his team to write down their plan, and to scale it back to what the team agreed was achievable. Greater progress was made on the critical product launches which three years later became the core of the company, increasing enterprise value nearly five-fold.

Do you have a high performance environment? Even with good planning and an excellent, aligned team, the overall work environment can slide downhill. Bureaucracy, politics, or other bad behavior is always present, affecting the culture and the performance environment. Making regular adjustments to keep the environment primed is one of the most important tasks for a CEO. This includes: culling the poor performers; assuring that performance measurements are accepted and fair; making poor performers uncomfortable and high performers emotionally satisfied with their success; and putting the right amount of performance pressure on the team. Imagine if you could create an Olympics-like atmosphere around the achievement of your company’s objectives! One such company that took their performance environment seriously was able to launch a groundbreaking medical device seven months ahead of plan, getting marquis customers and revenue into Q4 2011 rather than mid-2012.

Do you have sufficient resources and competencies? Having enough money, knowledge and talent is critical. While resource constraints can often bring out innovation in great teams, scaling most companies requires a minimum of resources. It is a waste to starve a great opportunity—and usually increases the risk of failure. For example, a dozen Angel investors were backing a health-related consumer product that was fantastic. But getting it to market took so long that the money ran low. There wasn’t nearly enough to make a successful launch. This reality was allowed to fester for so long that any chance for resolution faded. Everyone ultimately walked away empty handed and angry, and the product stayed in the drawer.

Answering five questions sounds so easy. But the path to answering “yes” to all five questions can be a long and winding one. I’m always honored to be chosen to assist.