Beyond Share Price: The Importance of Measuring Executive Performance
We all know how important it is to measure employee performance and hold employees accountable. Yet so many companies lack a similar review for their executive leadership teams. Why wouldn’t it be equally or even more important to measure executive performance in a similar way?
Ultimately, it is the role of every executive to contribute positively to increase a company’s revenue and/or profitability. But how can performance be tracked in process to ensure steps are being taken toward this goal? In addition, so many factors impact a company’s top and bottom line, it is difficult to determine which, if any, executive leaders at an organization are providing that value or if external factors, like a changing market, are responsible.
The first step is to expand how your organization views executive performance. Top executives are excellent leaders, driving excellence from their teams, hiring people smarter than themselves, and building strength at every level of the company. Performance needs to be tied to these initiatives instead of simply a matter of top and bottom monetary metrics. For example, team member feedback can help to judge the executive’s ability to build an intentional culture of excellence and performance. ‘A’ player retention rates would provide a strong team-building ability metric that can be used to judge executive performance.
The second step is to create a structured feedback loop. An executive assessment process that includes self-assessments, team reviews, and action-oriented development plans is essential. The traditional top-down review process can also be implemented utilizing your Board of Directors to ensure that all positions, even the chief executive, are receiving objective, critical, constructive feedback.
Lastly, executives must be held accountable for their performance. In the same way we hold employees accountable and provide monetary, benefit-based, and culture-based rewards for outstanding performance, so should we also consider executive compensation as performance-based. When performance is considered more holistically than a single monetary metric of profit margin or stock price, this becomes a more realistic effort.
Considering the executive leadership team’s impact on the overall health of your company’s growth and culture, measuring executive performance is essential to ensure continued success.
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