Are you lagging or leading? How successful CFOs do it

What are your numbers?

At the beginning of every quarterly?Boardroom mastermind session?we ask the members the following four questions:

1. On a scale of 0 – 10, how much time have you spent outside your comfort zone?

2. On a scale of 0 – 10, how happy are you that you invested your time in the right places?

3. On a scale of 0% - 100%, how energised are you right now?

4. On a scale of 0 – 10, how satisfied are you with your job?

We ask members to rate themselves on these scales. We do this for 2 reasons:

1. To gauge what mindset and energy they are bringing to the session, based on the achievements and challenges they’ve experienced over the previous quarter. As their mentor and facilitator, my job is to meet them where they’re at, so that they are able to learn and get the value they need from the session.
2. So we have an accumulation of data that tells us if they are on track to meet their prospective goals they’ve set for themselves in the program.

So although they’re lag indicators, they provide insight into the behavioural changes we may need to to help with future performance. That is, they are also lead indicators.

What are your dreams?

Two months ago, I had the privilege of spending some time with?Jim Hagemann Snabe, Chairman, Siemens & Maersk and former co-CEO of SAP. Jim has had a very impressive corporate history but what struck me most was his humility, generosity and his leadership philosophy. As part of our conversations, we talked about the importance of focusing on the right details.

In his book,?Dreams and Details, the leadership philosophy he presents with his co-author is that when companies create a big enough dream for the business, this allows them to do two things:

1. Unleash the power of human potential
2. Be freed up to allow them to focus on the very few details needed to achieve the dream

He said, "I have this belief, that if people are put in the right context and share a common, very ambitious, inspiring goal, there is no limit to what can be achieved… It’s kind of the opposite that we’ve tried to lead through the entire industrialisation, which was about: how do we make detailed plans so that we know people will execute on the plan?"

In our conversation, he basically told me to stop being so detailed in my planning, which was pretty confronting as an avid planner. However, his point was, don’t stop planning, but make sure you're focusing on the right details that support your dream. In his book, he goes on to say that managing based on outcomes can be counterproductive.

"In other words, we are not against measurements, but we must measure the right things: the improvements in performance of the crucial details, the leading indicators."

Metrics that matter

Financial performance is a lag indicator. It shows up?after?you’ve done the work, after you’ve made your impact. No matter how you tug and pull on this indicator, it’s not going to significantly change your performance. You need to identify the right lead indicators of performance to measure. Only by doing this can you help the business identify levers which will actually change performance.

A zero-carbon ship...is that even possible?

As an example, Jim shared with me what they did at Maersk, when they launched their sustainability agenda in 2018. They said, "we're going to be?zero-carbon shipping?by 2050". And for that, we need the first vessels to sail in 2030, and then we need to replace 750 vessels. He admitted putting this out there was a daunting task and there was definite fear in the boardroom. They had no idea ‘how’ they were going to do it. And yet, because of their inspired dream, they committed to that. It was a delight to hear him say to me that three years later, they’ve actually mastered the details and had just ordered the first eight vessels that will sail carbon neutral...seven years ahead of the original plan!

The key, again, is to be focusing on the right details.

However, in order to identify the right lead indicators of performance, you to have clarity over the following:

What does good look like?

This is where CFOs need to be clear on their intention - at a macro level, this is their vision, or dream. This determines what good performance looks like.

In order to understand what details, and therefore metrics, matter, you need an intimate understanding of what good looks like at:

• the customer level
• the organisational level
• the business level
• the finance level

And to Jim’s point - it’s not the 100 line list of all possible details. It’s the handful of most important details that will shift the dial significantly to help you achieve your goal. What you’ll likely find, if you’ve identified your lead indicators correctly, is that they are often the behaviours you and your team repeats day after day. And once you boil it down to this, you can see how simple (though still hard!) it is to start to modify these behaviours.

Which is exactly how we do it in the?Boardroom. As you’d expect, we’re highly data driven and are clear on the ROI or the value we want to get from the work we do. In order to do this, each member is tasked with identifying their own lead indicator of performance for the 12 months of the program. That is - based on the outcome or result they’re looking to achieve at the end of the 12 months, what is the indicator that will tell them whether or not they’re on track?

For one of our Boardroom members, his goal is to be the 2IC to the CEO around the executive table. In order to do this, he needs to be obsessive around where he spends his time. So his lead indicator is around being intentional with his calendar management and how well he’s sticking to what’s in his calendar. He knows that if this gets off track with this, he’s not on track to meeting his goal and tells him he needs to take remedial action.

What’s your lead performance indicator?

What’s the lead performance indicator for your team?

What support do you have with respect to fulfilling your lead indicator of success?

Love to hear your thoughts...