Chapter 19
CEO Toolkit

This chapter is for the busy CEO who is looking to embed winning KPIs in his or her organization. I have been asked by a CEO to make it easier for fellow CEOs to keep on top of this project, so I have, in this edition, included this CEO tool kit.

I am hopeful that if you are a CEO and are reading this chapter, you may be sharing with me the opinion that performance management is well and truly broken down. The organizations that have moved from good to great have had to challenge the myths surrounding performance management and break in new ground. This process has been well documented by the paradigm shifters (such as Jack Welch, Jim Collins, Gary Hamel, Jeremy Hope, Tom Peters, Robert Waterman, and Peter Drucker) outlined in Chapter 4.

Letter to You, the Chief Executive Officer

Due to your workload as the chief executive officer (CEO), I doubt whether you will have time to read much of this book. That is not such a problem, as I explain in this letter.

Measurement Leadership Has to Come from the Chief Executive Officer

As Dean Spitzer argues, one of the fundamental issues of the implementation of performance measurement is measurement leadership. Only when the chief executive officer (CEO) is passionate and knowledgeable about measurement will you have the opportunity to get twenty-first-century measurement to work effectively and efficiently.

Barriers to Measurement Leadership

The CEO and senior management team need to minimize the barriers to measurement leadership, which include the following:

  • CEOs who lack the knowledge to have the requisite expertise to run the organization. As Dr. Scott Gardner, Associate Professor at Murdoch University (Perth, Western Australia), said to me one day: “Experience plus knowledge equals expertise.”
  • CEOs who are inadequately conversant with the latest management thinking.
  • CEOs who are motivated to retain the existing measurement system because they benefit from the flaws with a large year-end bonus.
  • CEOs who are addicted to action and quick fixes rather than well thought-out, slow, but effective implementations of change.
  • CEOs who are happy to run the business on intuition rather than on facts.
  • CEOs who have become immune to waste, who have worked with so many dysfunctional systems that they consider them part of the surroundings.
  • CEOs who have very narrow understanding of the work of leading leadership and management writers, such as Peter Drucker, Jim Collins, Peters and Waterman, Jeremy Hope, Gary Hamel, and Jack Welch.

The Top Ten Steps for a CEO

CEOs need to aware of the twenty-first-century management practices.

There are a number of major steps CEOs need to take to get performance measurement to work in their organizations. Let us call them the top 10:

  1. Disband any form of primitive performance-based pay mechanism that ties pay to either annual performance targets or performance measures and rebuild when a better understanding has been gained on the foundation stones of performance-related pay as set out in Appendix A.
  2. Realize that you have reached the highest echelon of achievement a CEO can reach without the requisite knowledge. Although your experience will obviously be sound, you need to avail yourself of the knowledge from the greatest thinkers of our time. There is plenty of time to rectify this. You can start by referring to the following reading list:
    • Jack Welch with Suzy Welch, Winning (HarperBusiness, 2005)
    • Take a crash course in Peter Drucker's wisdom by reading The Definitive Drucker: Challenges for Tomorrow's Executives—Final Advice from the Father of Modern Management by Elizabeth Haas Edersheim (McGraw-Hill, 2006)
    • Jeffrey K. Liker, The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer (McGraw-Hill, 2003)
    • Jeremy Hope and Robin Fraser, Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap (Harvard Business Press, 2003)
    • Jim Collins, Good to Great: Why Some Companies Make the Leap … and Others Don't (HarperBusiness, 2001) and How the Mighty Fall: And Why Some Companies Never Give In (HarperCollins, 2009)
    • Thomas J. Peters and Robert H. Waterman, In Search of Excellence: Lessons from America's Best Run Companies (Harper and Row, 1982)
    • The chapters in this book that have been highlighted in an earlier section of this chapter (see the letter addressed to the CEO)
  3. Apply the practices of winning leadership featured in my management book.1
  4. Abandon processes that are not working.
  5. Find your organization's critical success factors by following the steps in Chapter 10 and embed them in every team in the organization, for without them everything will drift from one crisis to another.
  6. Become a Toyota convert, embedding as many of its 14 management principles as possible. See Toyota's 14 management principles in Chapter 4 for more details.
  7. Commence the KPI project by using handpicked in-house resources and giving them time, resources, and support, so they will have a chance to succeed. It is important that you champion the KPI project 24/7 by having a direct reporting link from the KPI team to you.
  8. Appoint someone as the chief measurement officer, as outlined in Chapters 2 and 7 and in Appendix B. This person would:
    • Be knowledgeable in all the facets of performance management
    • Understand the psychology working behind performance measures
    • Have excellent communication skills, including the vital trait of management by walkabout
    • Be able to run workshops to train staff in finding performance measures
    • Exude passion for performance measurement
  9. Create a new vision, mission, and values statement that ensures only like-minded management and staff will join the organization in the future.
  10. Make the entire staff aware that all KPIs are entirely nonfinancial and are monitored 24/7, daily, or weekly (see “Seven Characteristics of KPIs,” in Chapter 1).

Armed with this knowledge, it will be logical for you to challenge the myths and establish a simple yet effective measurement system in your organization. You need to be the figurehead of this change process, like Jack Welch was in implementing Six Sigma and e-commerce within GE. You will need to select your most talented staff to lead this change to making measurement an activity that will lead to greater staff satisfaction. In other words, you will need to champion this process in the same way Jack Welch, former CEO, General Electric did.

Note