What are the key performance indicators for a Chief Executive Officer (CEO)?
- Startup Company & Beyond
- CEO Key Accountabilities
Posted by: Mansour Baker
A start-up company's strategic objectives are to successfully implement strategy, build a strong human capital and design effective organization and operations which are then translated to CEO Key Performance Indicators (KPIs).
Successfully Implement Strategy
Agreed overall KPIs
- Return on Investment vs. overall benchmark return
- Adherence to budget
- Total cost ratio
Expectations
- Return on Investment greater than overall benchmark return over 3 years
- Actual portfolio always within bands agreed by board
- Remain within 5% of overall budget agreed by board
Build Strong Human Capital
Agreed overall KPIs
- People development (based on CEO's upward feedback and the upward feedback scores across the organization)
- Turnover/retention rates
- Employee engagement survey result
Expectations
- Hire from top universities
- Improvement in average upward feedback score across the company
- Launch and implement new people development policy together with Head of HR
- Refresh compensation structure to ensure competitiveness with market
Design Effective Organization and Operations
Agreed overall KPIs
- On-time set-up of company
- Adherence to company policies
- Adherence to governance policies
Expectations
- Execute set-up activities on-time against implementation plan agreed with the board
- Complete compliance with Board resolutions
KPIs developed for CEO is based on best-practice principles
- Must track progress toward mission/goals of company (e.g., skill set development and culture)
- No more than 7-9 KPIs, to allow & actively manage performance
- Must include quantitative & qualitative metrics around performance, people development and collaboration
- Must not incentivize short term gains, but reward long term value creation
- Measure team contribution, not only individual performance
Longer-term: KPIs will need to evolve as the organization matures. KPIs will need to change with objectives
- Priority shift from setup to continuous improvement
- Launching internal management will shift some priorities + require KPI focus in new areas
- Other priorities may emerge – e.g., in-house talent capabilities/cost focus required
Board Questionnaire
The questionnaire is designed to draw out each individual board member’s judgment on the issues that are key to the CEO’s success.
Company Performance
- Did the company achieve its financial targets for the year?
- Do you expect the company to perform better financially in the next year?
- Are you comfortable that the company’s financial statements are accurate?
- Does the company have an annual budget planning process in place which is monitored and reported to the Board throughout the year?
- Are you comfortable with the financial controls, systems and information processes currently in place?
Leadership
- The company has in place a business plan approved by the Board?
- There is a process in place for communicating, identifying and measuring progress of the business plan.
Team Building
- The CEO has built a capable team of senior managers.
- The CEO motivates and inspires employees to realize the company’s goals and visions.
- There is an appropriate level of staff turnover.
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CEO Key Accountabilities
What is the role of a CEO?
CEO key accountabilities are to lead a company, ensuring the effective implementation of strategic and growth plans to achieve or exceed targeted profitability, business development and enhancement of the brand image aligned with the company vision, mission and culture.
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Key Accountabilities
Strategic Direction
- Provide the board of directors with input in the formulation and implementation of overall business strategies and long-term plans which enable the achievement of vision and mission.
Company Governance
- Contribute to the development of sound corporate governance practices and mechanisms to drive the growth and development of the company.
Policies, Processes & Procedures
- Direct the development and oversee the implementation of company policices, processes, procedures and controls covering all functional areas so that all relevant procedural & legislative requirements are fulfilled while delivering a quality & cost-effective service.
Leadership
- Direct the design of an optimum organization structure so that resources are optimally utilized, and communication can take place in an efficient manner.
- Provide leadership and directions so that the appropriate caliber of human resources is attracted, motivated, engaged, developed, and retained so that the best possible productivity can be obtained from this critical resource to meet the business objectives.
- Set performance targets for direct reports and monitor performance to meet business targets.
- Provide professional direction, advice and support to all levels of the business on the full range of business to ensure that the operational capability of the business is optimized.
Business Plans
- Direct the development, obtain approval from the board of directors, and ensure the implementation of the long-term (five year) business plan and review the estimated required capital and operating costs.
- Direct the preparation of annual operational plans to accomplish the structured delivery of the five-year plans.
Budgets
- Direct the preparation of the business budgets and monitor financial performance versus the budget so that the business is aware of anticipated costs/revenues, areas of unsatisfactory performance are identified, and potential performance improvement opportunities are capitalized upon.
Business Modelling
- Develop appropriate business models which provide direction to translate the company vision, mission, and strategy into effective business processes.
Marketing & Business Development
- Approve all Marketing and branding strategies in line with the approved business strategy in order to meet the business objectives.
- Direct the identification of opportunities within and beyond the current portfolio in order to drive the diversification strategy of the company.
Profit Center Management
- Manage the overall revenues and profits of the company in order to meet all budgeted revenues and profits.
Performance Measurement and Reporting
- Direct the institution of KPI’s performance standards and objectives to ensure that business performance can be measured against such standards and objectives.
- Direct the development of functional performance reports in line with international standards in order to be informed about business performance and the financial health of the company.
Relationships
- Manage external stakeholders and other relevant institutions and authorities and strategic partners and/or investors in order to ensure that the appropriate level of external services is obtained to the best advantage of the company.
Continuous Improvement
- Lead and direct the continuous review and improvement of functional practices taking into account changes in the business environment, feedback received or analysis of trends and behaviors of customers to improve delivery of customer satisfaction.
Technology
- Direct the introduction of key technology initiatives to enhance business productivity and accelerate decision making.
Management Reports
- Direct the preparation of periodical MIS and progress reports to keep the board of directors informed about the progress of various business initiatives and the financial health of the business.
Key Financial
Operating / Capital Budget
- Approves the company budget within delegated limits - in accordance with the approved authority matrix
Revenues
- Accountable for profitability & revenues
Communication and Working Relationship
Internal
- Interfaces & communicates company performance and key initiatives to the board of directors.
- Interfaces with all direct reports related to strategic and operational plans, monitors performance and implementation.
External
- Negotiate prices with strategically important clients / suppliers and maintain a good business relationship.
- Network and undertake strategic initiatives to maintain a positive company image with external entities.
How to define, measure and report a key performance indicator?
Introduction
Once an organization has analyzed its vision & mission, identified all its stakeholders, and defined its goals & objectives, it needs a way to measure progress toward those goals & objectives. Key Performance Indicators are those measurements.
Key Performance Indicators, also known as KPIs or Key Success Indicators (KSIs), help an organization define and measure progress toward organizational goals & objectives.
Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. They will differ depending on the organization.
Key Performance Indicators, also known as KPIs or Key Success Indicators (KSIs), help an organization define and measure progress toward organizational goals & objectives.
Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. They will differ depending on the organization.
What is a goal?
Goals are long-term aims that you want to accomplish or statements you make about the future for your business.
What is an objective?
Objectives are more specific and easier to measure than goals. They are written without emotion, and they are typically specific, measurable, achievable, and quantifiable. They are also realistic and have an associated timeline.
What is SMART?
SMART (specific - measurable - achievable - realistic - time related) is an acronym used in setting objectives.
What is a Key Performance Indicator (KPI)?
KPI is a way of measuring (performance) how well we as individuals or how well entire companies or business units are performing. A KPI should help us understand how well a company, business unit or individual is performing compared to their goals and objectives.
Goal versus Objective
- Goals are broad; Objectives are narrow
- Goals are general; Objectives are specific
- Goals are long term; Objectives are short term
- Goals cannot be measured; Objectives are measurable
Objectives map onto goals and once met, objectives contribute to the achievement of goals.
What are the reasons for objectives?
- Objectives helps the organization stay focus
- Objectives involves people on the same page
- Objectives defines what done looks like
Objective versus KPI
For example, your objective might be “preferred leader in market segment A by 4th quarter of 2024." The KPI might be "number of accounts converted to key accounts per quarter in segment A".
How to define, measure and report a KPI?
- Ask yourself how you are going to measure (KPI) your activities towards objective achievement and keep it simple.
- Define the unit of measurement ($, %, #, etc.). What unit of measurement will be used to measure a KPI?
- Where will the data source of the measurement come from (internal/external documents, budget, marketing campaigns, databases, reports, programs, transactions, project schedule, etc.)?
- How frequently will you report (monthly/quarterly/bi-annually/annually) on the selected KPI?
