CEOs: Manage the future, not the past
If the company is the bus and its leader is the driver, as Jim Collins’ famous analogy states, then it stands to reason that when the bus is moving, the driver should mostly be looking out the windshield (toward the future) rather than consulting the rear-view mirror.
Yet I still see many CEOs who attempt rear-view leadership. They collect historical business intelligence, sometimes very sophisticated, from across the organization and try to glimpse the road ahead by examining what’s already happened.
Despite these data-interpretation efforts, rear-view leaders are frequently blindsided by new developments from inside their own companies. Sales, marketing, finance, IT and other departments produce more and more information, but the CEO struggles to separate the signal from the noise. He or she sees plenty of numbers, but what they mean about future performance remains cloudy.
Becoming a full-time Chief Executive Data Analyzer isn’t the solution. Looking to historical information for insight has its place, but those insights are best mined by the functional leaders with fitting expertise and perspective -- not the CEO. Instead of squinting into the rear-view mirror, the CEO has to look up and ahead.
Turning to the future
How does the CEO do that, you may ask? We begin to see the answer when we look at the forecasting discipline that’s been part of great sales organizations for decades.
In 1978, Jacob Gonik published a piece in Harvard Business Review (“Tie Salesmen’s Bonuses to Their Forecasts”) proposing that salespeoples’ bonuses reflect not just the revenue brought in but also how accurately they forecast their own performance. The system is built to reward accurate prediction: reps got the largest bonuses for meeting their projected results precisely. Fall under your forecast -- or go over it -- and your bonus is reduced.
Nearly any chief executive will tell you that such reliable sales forecasts are like the Holy Grail. When you can trust your team’s predictions of how the quarter will play out -- and trust them to alert you when they become inaccurate -- you have the closest thing to a crystal ball that any of us have in business.
Building forecasting skills across the company
For today’s CEOs, the real breakthrough comes when you extend this quarter-by-quarter forecasting from the sales group to the entire organization. When you ask all groups in the organization to set clear performance goals -- tied to the company’s broader priorities -- and then have employees regularly predict whether those goals will be met, you get an evolving view of how the next 90 days are likely to play out.
It’s a discipline that most knowledge workers are currently unaccustomed to. But as work becomes more complex and interdependent, it’s imperative that CEOs encourage the consistent sharing of predictive insight.
In my work with CEOs, I recommend the following process: The CEO checks in weekly with each member of the leadership team, asks for insight on whether the respective group will achieve its goals for the quarter, and stops the leader if he or she gets too far into the details.
Using this system, you get insight about the future, not just statistics about the past.
- If your head of marketing feels halfway through the quarter that her team won’t bring in the number of leads it hoped to, you’ll know about it early. Based on her revised prediction, you’ll see the road ahead changing, and you’ll have a chance to help get the goal back on track.
- If your product team commits to launching two new products in the quarter but then unforeseen circumstances derail one of the launches, you’ll find out about the situation as soon as the head of product’s weekly prediction starts faltering, and not a few days before the launch date.
Such companywide forecasting helps CEOs manage the future, not the past. It allows them to make strategic decisions with certainty and jump in to address fresh problems as they arise (instead of long after the damage is done).
This approach helps your people win, too. When employees are asked to consistently predict their own outcomes, they start thinking about cause and effect more closely. What levers can they pull to make sure they stay on track to hit their goals? The emphasis shifts from work for work’s sake to purposeful communication and collaboration on hitting the right priorities.
Your employees may be as surprised as you are by their forecasting ability. I know of one CEO who asked his finance team for a weekly forecast of EBITDA for the quarter. At first, the CFO and team pushed back: There were too many variables, they said. Their forecasts would never be accurate. The CEO said, “Give it to me anyway.”
So they did. Within two to three quarters, the team was forecasting EBITDA with a high degree of accuracy. When they would forecast a miss, they had a good feel for exactly variables they could change to stay on target. This CEO advocated for what the team thought was impossible, but it’s a good thing he did: he ended up building a critical competency into the organization.
A cultural shift
To be sure, implementing such a system requires strong leadership from the CEO and an established culture of trust. Employees must be willing to honestly predict what they expect to achieve and acknowledge when their predictions are off.
At Khorus, we offer an enterprise platform that helps CEOs scale forecasting throughout the entire company. But even if you’re not using such a platform, you can benefit from a shift toward future-focused insight. Next time you find out at the last minute that a goal will be missed, explore why the issue didn’t surface earlier. What systems can you set up to collect future-focused insight so the situation doesn’t repeat itself?
As your teams learn to accurately forecast their own performance, they will find deeper engagement and focus, even as the resulting predictability frees CEOs to make decisions with confidence and react more nimbly when the truly unpredictable happens.
Joel Trammell is founder and CEO of Khorus, co-founder and managing partner of Lone Rock Technology Group, and author of "The CEO Tightrope" (Greenleaf Book Group Press, 2014). Contact him at @TheAmericanCEO or firstname.lastname@example.org.
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