What CEOs Should Measure for Strategic Success
CEOs are responsible for the company’s overall decisions and performance. Knowing what CEOs should measure for strategic success is crucial for making informed decisions and steering the company to where it wants to go in a way that makes sense. While the specific strategy success metrics vary across different industries and different strategies, metrics tend to fall into four overall buckets: Financial, Customer, Employee, and Other.
The Top 13 Metrics that CEOs Should Measure for Strategic Success
Done right, CEOs should measure strategic success in a way that provides a holistic view of their organization’s performance by combining different leading and lagging metrics tied to short- and long-term strategic priorities. Here is a list of the top thirteen metrics that CEOs should measure for strategic success.
The Top 4 Financial Performance Metrics for CEOs to Consider
We know from action learning leadership development programs that every company must create financial strength to succeed in the short-term and thrive in the long-term. While financial metrics vary across industries and strategies, here are four key areas for CEOs to consider:
- Revenue Growth
Revenue growth is a fundamental indicator of overall company health. When considering what CEOs should measure for strategic success, our sales solution selling training data tells us that CEOs should track both top-line revenue and revenue growth rate to understand key areas of strength and opportunities for growth.
- Profitability
Profitability metrics, including gross profit margin, operating profit margin, and net profit margin, offer a clear picture of the company’s efficiency and financial stability. Profitability metrics help CEOs assess whether the company is generating sufficient profits from its operations and identify areas where cost control measures or pricing changes might be necessary.
- Cash Flow
Cash flow management is crucial for meeting day-to-day operational needs and setting the company up to invest in growth. Monitoring operating cash flow, free cash flow, and cash conversion cycle helps CEOs understand the company’s cash-generating capabilities and its ability to invest in growth opportunities.
- Market Share
Market share can be a crucial indicator of competitive positioning. CEOs should track changes in market share over time to understand how well the company is performing relative to competitors. Gaining or maintaining market share can be a sign of winning sales strategies and a strong market presence.
The Top 2 Customer-Centric Metrics for CEOs to Consider
Without loyal and repeat customers, most companies cannot survive. Knowing what matters most to your ideal target clients and how well you are meeting their needs over time can make or break your growth strategy. While customer metrics vary across industries and strategies, here are two key areas for CEOs to consider:
- Customer Satisfaction and Loyalty
Customer satisfaction and loyalty metrics provide insights into how customers perceive the company’s unique value proposition, products, and services. High levels of customer satisfaction and loyalty can lead to repeat business, positive word-of-mouth, and a strong brand reputation.
- Customer Acquisition and Retention
Understanding customer acquisition and retention is essential for sustainable growth. CEOs should consider tracking metrics like Customer Acquisition Cost, Customer Lifetime Value, and Customer Churn Rate to evaluate the effectiveness of their sales, marketing, and customer success efforts.
The Top 4 Employee Metrics for CEOs to Consider
Without high performing, loyal, and engaged employees, most companies cannot perform at their peak. Knowing what matters most to your high performing, difficult to replace, and strategically critical employees matters. How well you transform those insights into actions that engage and retain top talent can make or break your ability to execute your strategy.
- Ability to Attract Top Talent
A recent McKinsey study estimated that high performers are 400% more productive than average ones. And as the job’s complexity increases, so does the productivity gap. If you need more or different people to drive your growth strategy, how well and how often you identify and hire top talent that possess the skills, experience, and motivation necessary to drive business growth matters.
- Ability to Develop Top Talent
When properly trained, supported, and motivated, employees typically represent a company’s most important asset. Top companies identify the key skill, motivation, and value gaps for key roles using training needs assessments, people manager assessment centers, and leadership simulation assessments. Then they invest heavily in customized training programs to close the key gaps required to get the people AND the business where it needs to go.
- Ability to Engage Top Talent
Highly engaged workers are more likely to stick around and be high performers. Use organizational culture assessments to measure organizational health and employee engagement. Just make sure that you take meaningful employee engagement actions after the survey. Our employee engagement survey data found that when employees see action taken after an engagement survey, they are twelve times more likely to be engaged the following year.
- Ability to Retain Top Talent
The investments required to keep top performers are worth it. The same McKinsey study found that individuals who are top performers in highly critical roles deliver eight times more productivity than average performers in the same role. Make sure that you measure overall employee retention rates and costs and then analyze areas by voluntary, involuntary, performance, manager, function, and location to go deeper.
The Top 3 Other Metrics for CEOs to Consider
While financial, customer, and employee-based metrics typically cover most key strategic plans, we know from strategy retreat facilitation that other areas frequently come up. Here are three other areas to consider:
- Operational Performance Metrics
Strategies often require specific operational metrics. The right operational efficiency metrics (e.g., cycle time, quality, quantity, throughput, and defect rates) can help CEOs assess the real-time effectiveness of the company’s processes and resource allocation. Done right, they help to identify areas to reduce waste, enhance productivity, and improve profitability.
- Risk Management Metrics
Some strategies require CEOs to monitor metrics related to risk exposure, such as the frequency and severity of incidents, compliance rates, and the effectiveness of risk mitigation strategies. Some strategies require CEOs to proactively manage risks to protect the company from potential disruptions.
- Regulatory Compliance Metrics
For many companies, compliance with industry regulations and standards is paramount to strategic success. Some CEOs should track key compliance metrics to mitigate potential legal issues, financial penalties, or reputational damages.
The Bottom Line
Successful CEOs measure a balanced set of strategy metrics to track how well the company is executing against its short- and long-term strategic plans. The right set of metrics enable CEOs to make informed decisions that drive accountability for sustainable growth and success. Monitoring these key areas provides a comprehensive view of the company’s health and helps CEOs to successfully steer their organizations.
To learn more about how to get your strategy right, download How Strategic Clarity Distinguishes High Performing Leaders – The Elite 6%
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