I often lament the state of people management and leadership in the world today, and note how important it is to the future of business for executives to be better at leading and managing. And you may have heard me opine that poor management and leadership are a key factor in both the exodus of top talent and the failure to build successful companies.
And I often wonder aloud why executives aren’t better managers and leaders, given all the data that shows the connection between engaged employees and great business results.
This morning I got some insight. A post here on Forbes by Susan Adams discusses a new study, conducted by two groups at Stanford Graduate School and the Miles Group, a New York-based consulting company. I was so fascinated by the results that I went to the study itself to investigate further.
The study polled over 160 CEOs and directors of North American public and private companies, focusing on what they saw as the CEOs’ strengths and weaknesses, and asking what measures and weighting the boards used in evaluating the CEOs.
I wasn’t at all surprised by the strengths and weaknesses. Boards (and the CEOs themselves) say that the CEOs are excellent at “decision-making” and “planning,” for instance, and not so good at things like “mentoring and development skills,” “board engagement,” “listening,” and “conflict management.” Sadly, that’s what I would have expected.
As I read further, however, I had my ‘ah-ha.’ It turns out that there’s a big gap between what boards are actually requiring of their CEOS, and what they think they’re requiring.
That is, while a large majority of board members believe their evaluation of their CEO is balanced between financial and non-financial metrics, it’s simply not true. For example, the survey found that, on average, a CEO’s performance in the areas of talent development and succession planning was given only a 5% weighting, and only a 2.5% weighting was given to employee satisfaction/turnover. The most heavily weighted metrics were in accounting, operating, and stock price. The study also found that supposedly important measures like product service and quality, customer service, workplace safety, and innovation aren’t included in more than 95% of CEO evaluations.
Something I’ve learned over the years about us human beings: if you want people to behave in certain ways, you have to make them feel those behaviors are easy, rewarding, and normal. That is, they have to believe they know how to do the behavior and nothing will get in the way of them doing it (easy), that it will give them something they value (rewarding), and that their peers and/or people they admire do it (normal).
Given this, it makes sense that CEOs don’t focus enough on building a committed, engaged workforce, on creating great customer service, or on innovation: their boards are making it not-easy, not-normal, and definitely not-rewarding to do so.
If boards are giving lip service to the importance of leading and managing well – but are actually only holding CEOs accountable for stock price and growth metrics, then most CEOs will continue to drive financial value for the short-term, in ways that may not be sustainable. They will read all the data that shows how employee engagement is a key (perhaps the key) driver of performance – nod sagely and agree…and then continue to behave as they’re being required and rewarded to behave by their boards.
Here’s one thing we can do to change this: if you’re a stockholder in a public company, write to your board and let them know how you’d like them to evaluate the CEO: that you’d like that person – and his or her team – held accountable for both great financial results, and how they achieve them.
I’d love any other ideas you have about how to change this state of affairs…
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Check out Erika Andersen’s latest book, Leading So People Will Follow, and discover how to be a followable leader. Booklist called it “a book to read more than once and to consult many times.”
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