The Best CEOs

The best CEOs define a mother mission. It is ideal if the mission is quantifiable. For example, defining Revenue and EBITDA targets for the current year and future periods is a quantifiable target that leaves no ambiguity and is well-defined such that employees may rally around the mission.

The best CEOs create incentive-based systems. Variable compensation programs ensure that all employees drive toward the mother mission. Employee performance can be measured by well-defined output-based operating targets. Rewarding desired operating performance and outcomes with variable compensation is an effective tool for achieving desired results across all levels of the organization across all disciplines.

I would like to see more Technology companies wrap incentive systems around qualitative elements that are important to long-term company success. One such element is “innovation”. To drive innovation across a Software company for example it would first be important for the CEO and CTO to define “innovation”. The definition will differ across companies. Some Technology companies may consider “innovation” to include all R&D expense for example, while other companies may include only new product initiatives in their “innovation” equation. That’s Ok. What is important is to have measurable targets to help define whether a particular “innovation” has been a “success.” This requires that success also be defined at project onset. “Success” may include a series of financial targets; it may include a series of operating targets (such as getting the new product or product enhancements out the door on time and on budget); it may include operating data such as the number of sales calls and product demos scheduled once the product is released; it may include other operating metrics such as the percentage of the installed customer base that has tried the product, adopted the product, etc. Employees can be rewarded against the achievement of these and other KPIs.