If you’ve promoted certain team members, you may be keenly aware that they need to develop to be high-performing. If you’ve selected others from the outside or you were hired to lead the company with certain leaders already in place, you might think those leaders should be excellent because they earned their seat. But this is often not the case. New leaders are rarely fully prepared to meet the demands of such leadership roles, much less be high-performing. And leaders hired from elsewhere or who’ve been in such a role for some time have often never been adequately prepared either.
So how does one know what high performance should look like for each executive team leader? The job scorecard for a role captures high performance. It goes beyond a traditional job description to outline all the expectations of a role, including results, metrics and targets, areas of accountability and responsibilities, authority and behavioural competencies. We also encourage our clients to include their core values in each job scorecard, as well as the specific behaviours that show those core values are being lived. See our earlier 5 Minute Growth Tip for how to create a job scorecard. With the job scorecard for each leader as a definition for high performance, how does a CEO go about ensuring their leaders develop to that level? There are four key elements:
Quarterly Coaching Reviews The starting point for developing a leader is for them and the CEO to get in the habit of conducting a Quarterly Coaching Review. At the end of each quarter, usually after your executive team quarterly planning, have each leader assess themselves against their job scorecard in order to identify the areas where they are strong and the areas they need to develop in. This involves simply rating themselves using a five point scale on each core value, metric, responsibility and competency in their job scorecard. The CEO does the same. They then get together and review their ratings. They note where there are similar ratings, but focus more on where there are differences and why they each view those items differently. This often exposes a blindspot for the leader. They thought they were doing fine in a certain area, until the CEO shares their perspective. They quickly become aware that something is missing. This open conversation helps the leader buy into the need to develop in that area. Personal Assessments Sometimes, certain areas requiring development are stuck-points: areas the leader has been struggling with for some time. It can be helpful to have the leader complete one or more personal assessments to determine why they might be struggling. Such assessments can help pinpoint an underlying root cause a leader needs to work on or how they might be able to go about the work in a different way to be more successful. Or it might reveal that the leader simply won’t be able to, or enjoy, excelling in that area. In the later situation, moving them to another role or out of the organization may be needed. A qualified business growth executive team coach can help determine which personal assessment is best for the situation, provide access to the assessment, help interpret the results and help determine what actions could be taken. Quarterly Development Plans Once areas for development have been identified, it’s helpful for the leader, with the CEO’s support, to create a brief development plan for the quarter. This involves first narrowing down the areas for development to a manageable number, say the top one or two, as agreed to between the leader and the CEO. Then, the leader identifies what methods will work best for them to learn in those areas and successfully turn that learning into sustained skills. One leader may find that their learning needs are best served by taking a course. Another leader may find that they are best to lead a project that will stretch their skills. It’s important to document the development plan for the leader and CEO to be able to revisit throughout the quarter, as well as at the next Quarterly Coaching Review, when they’ll check in on completion. An individual development planning tool can be helpful for considering and evaluating the various types of learning and skill development options available for the leader, as well as documenting the plan. Weekly One-On-Ones The purpose of a CEO’s one-on-ones with their executive team members is to create a space where leaders can discuss their progress, receive relevant feedback (both appreciative and constructive feedback), discuss alternative approaches, ask for meaningful guidance, and access resources. They also create a space for the CEO to really get to know and appreciate the leader, both as a leader and as a person, which strengthens the relationship, contributing to the leader’s engagement, loyalty and retention.
If you are a prairie CEO who wants to grow a thriving company, team and life more quickly, more easily and with less stress and headache, please contact me here.
The following video builds on my earlier videos: “Is your executive team aligned”, "Is your executive team executing efficiently?" and “How to create your CEO job scorecard”
I'll discuss what the best selling business book The Strength of Talent says about these practices in the next 5 Minute Growth Tip.
If you are a prairie CEO who wants to grow a thriving company, team and life more quickly, more easily and with less stress and headache, please contact me here.
A Monthly Operating and Financial Forecast is a critical execution tool that allows an executive team to regularly check if the company is on or off course for their annual plan. By breaking down and tracking actual results against the expected monthly changes in volumes, revenues, costs, and cash, your team is enabled to make frequent, necessary decisions to keep things on track. This forecast, based on your annual targets, also enables your team to validate that your initial one-year targets are financially feasible given the plan's assumptions. A feasible plan is an executable plan. The forecast should also reflect any major planned investments, linking them to the annual priorities for change, improvement, and growth based on the company’s Number One Addressable Challenge for the year. So, how do you go about building a Monthly Operating and Financial Forecast? There are four key elements of an effective forecast:
Let’s go through each one. And feel free to contact me to access the Monthly Operating and Financial Forecast template I use with clients. Or complete the form in this article. Widget-based We call this a Monthly Operating and Financial Forecast because it forecasts more than just the monthly financial results. The financial projections are based on the expected monthly volume of business, which we call widgets. This is whatever unit of measure your company uses to track business flow. It might be the number of orders, customers, items, subscriptions, users, hours, square feet, etc. Whatever unit consistently drives both revenues and costs. A common, but problematic, approach to forecasting is to adjust last year's financial statements by a rough percentage reflecting expected growth. This is problematic because:
By basing revenue and cost forecasts on the number of widgets sold, produced, delivered, and supported, and using both a price per unit and cost per unit, the forecast enables the team to easily review whether pricing and costs per unit can be improved. Effective structure A Monthly Operating and Financial Forecast should present the key monthly numbers that empower the CEO and executive team to make timely decisions to improve financial results. This requires a specific structure for the financial statements, as suggested by financial management expert Greg Crabtree, author of Simple Numbers, Straight Talk, Big Profits. In the income statement, the structure includes: Gross Profit: Calculated from Revenue minus Cost of Good Sold, which are based on units sold, price per unit, and direct (outside) cost per unit. Gross Profit is a key number for assessing buying effectiveness. Gross Profit is more important than Revenue because, aside from telling you how effective your buying is, it tells you how much money the company has to work with internally to get to its Net Profit. Note that the number of units, price per unit and cost per unit are the real levers to improve gross profit. Contribution Margin: Calculated by subtracting Direct Labour (cost of employees who produce and/or deliver the good or service) from Gross Profit. This is a critical number that must cover all overhead and make a sufficient net profit. Direct Labour is a key lever for improving profitability through optimization and increased productivity. Operating Expenses (Overhead Costs): For clarity and ease of consumption, roll these up into big buckets, such as: Facilities, Marketing, Management and Administrative Labour, Payroll Taxes & Benefits, and Other Operating Expenses. Sales Labour may be another important big bucket for your company. The main levers here are those large cost categories, particularly management and admin labour. Net Operating Income (EBITDA): Subtracting total Overhead Costs from the Contribution Margin yields Net Operating Income, also called EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). This is the ultimate barometer of day-to-day profitability, setting aside debt servicing, taxes, and asset depreciation, which can vary widely depending on how assets and liabilities are managed. If your company has multiple products or product lines, then revenue and gross profit may need to be broken out for each, as well as direct labour and contribution margin if these vary by product or line. This structure provides the executive team with clear visibility into the key numbers and levers for financial optimization, and allows for the calculation of standard ratios like Gross Margin, Labour Efficiency Ratios, and Expense Ratio for external comparison. Forecasting cash As Greg Crabtree famously said, “Revenue is vanity, profit is sanity, but cash is king!” Cash is the oxygen that fuels a business. Maintaining a healthy cash balance is essential for survival and confidently making planned investments. And a clear monthly cash balance forecast verifies the true feasibility of your operating financial plan. Net Operating Profit is just a number on paper, but a company's actual cash situation is often very different, being heavily influenced by inventory, accounts receivable, accounts payable, and financing activities. Forecasting cash requires a keen eye on timing: the flow of sales, inventory purchases, production, delivery, and invoicing. For example, a sale might occur in month one, production in month two, delivery and invoicing in month three, and payment in month four. Understanding the timing of these outflows and inflows is crucial for maintaining a healthy cash position and finding ways to optimize cash flow by speeding up the cycle. A collaborative effort Many executive teams assume creating the Monthly Operating and Financial Forecast is Finance & Accounting’s job. While they lead the process, building a realistic and useful forecast requires collaboration across the entire executive team, guided by the annual company plan. Each leader must provide inputs on how expected volumes will drive revenues and costs, and the timing of those revenues and costs, on a month-by-month basis. Forecasted units impact various areas, from marketing spend to sales, production, delivery, and post-sale support, each with different timing. Only the respective leaders and their teams can provide these numbers, along with expected pricing improvements or efficiency gains aligned with the company’s annual priorities. Furthermore, each area needs to plan and estimate costs for their investments in various initiatives. When starting with a CEO and executive team and having them flesh out their One Page Strategic Plan and annual plan, we suggest beginning with a 12-month Monthly Operating and Financial Forecast prepared annually. After this is well-established (one or two years), we suggest progressing to a 36-month forecast prepared annually, and eventually to a 36-month rolling forecast (i.e., updated and extended monthly). This progression builds the team's ability to confidently predict results and optimize execution to hit their three-year targets.
If you are a prairie CEO who wants to grow a thriving company, team and life more quickly, more easily and with less stress and headache, please contact me here.
The following video builds on my previous videos: "Is your executive team executing efficiently?", “A great book to fix execution drama: Metronomics,”, and “How a president and her team improved execution“.
To get a head-start on your Monthly Operating & Financial Forecast, contact me to get the template we use with clients. Or complete the form on this page. If you are a prairie CEO who wants to grow a thriving company, team and life more quickly, more easily and with less stress and headache, please contact me here.
The senior executive team soon began using it monthly to track results, immediately see where assumptions were or weren't being met, and understand the variance drivers. This helped them make frequent, necessary decisions to consistently meet or exceed targets.
The key operational shift was realizing we needed to adjust their annual planning to precede the financial forecast submission to the owners. This ensured the annual plan guided the financial forecast, not the reverse. Quarterly Targets and Priorities With a monthly operating and financial forecast established, the team could easily pull numbers to set clear monthly and quarterly volume and financial targets, essential for checking that results were on track. We also initiated the practice of setting 90-day priorities for change, improvement, and growth each quarter, drawing from their annual priorities in their One Page Strategic Plan. Initially, these priorities were 'rough'—ambiguous goals, a mix of company-wide and department-level focus, and a general feeling of overload. This is a common starting point. To address this, the team got more rigorous: they got clearer on their ultimate aim for each priority, created detailed action plans to understand scope and contribution, and distinguished true senior executive Company Priorities from department priorities and day-to-day work. This newfound clarity supported the senior executive team and their own team members in executing company-wide changes and departmental improvements with greater confidence and accountability. An Executive Team Meeting Rhythm The Senior Executive Team fully embraced quarterly planning, making these sessions a standard part of their operating rhythm. In the second year, we adjusted the quarterly planning to get more rigorous with quarterly priorities. The team also adopted a full communication rhythm to solve problems and keep their quarterly plans on track:
Initially, both the Senior Executive Team and the broader Leadership Team members attended the quarterly planning and monthly check-ins. This was because the initial annual planning session included a broad group of leaders from which the senior executive team was then selected. The joint group continued to meet for quarterly planning and monthly checkins to keep the newly formed leadership team bought into the change and to help inform the senior executive team, who were mostly newer to the company. However, over time this structure proved sub-optimal: it clouded accountability, muddied the planning, and hindered true senior executive team cohesion by making the group too large for focused debate.
If you are a prairie CEO who wants to grow a thriving company, team and life more quickly, more easily and with less stress and headache, please contact me here.
The following video builds on my previous videos: "Is your executive team executing efficiently?" and “A great book to fix execution drama: Metronomics”.
I’ll go over the Monthly Operating and Financial Forecast format I use with clients in the next 5 Minute Growth Tip.
If you are a prairie CEO who wants to grow a thriving company, team and life more quickly, more easily and with less stress and headache, please contact me here.
|
Archives
December 2029
Categories
All
|
RSS Feed
Copyright © 2018