Getting To Grips With Leadership Metrics To Improve Your Business
September 16, 2014
What constitutes good leadership? Management literature offers a wide variety of answers ranging from the attributes and characteristics of good leaders to the achievement orientation for leaders to be considered successful. But what do most organisations use?
With metrics dominating in most aspects of business, organisations will do well to have some metrics that measure the current leadership as well as the leadership potential in the organisation. However we need to be aware that successful leadership is considered successful in comparative terms and not absolute terms. It’s also important to keep in mind, while doing a comparison that the conditions and situations under which people operate vary significantly. Though it may be tempting to focus on the qualities and attributes of a good leader, at the organisational level it will be more advantageous to measure leadership success based on some results. Here’s a look at some the leadership metrics organisations can evaluate:
One of the most common measures of leadership success is the top line and bottom line of the business. The senior leadership team and the CEO of the organisation are considered successful if they manage to meet the bottom line targets as decided. This is however a metric that has to be considered both in absolute and relative terms. For example: If the earning per share increased only by 1% instead of the targeted 4%, it cannot be considered a failure of the leadership team. What needs to be considered is the % increase in the EPS that competitors had during a similar period to determine success.
Internal perception of leadership
The internal perception of the leadership team can be measured through 360 degree assessments and the annual employee survey. The organisation may itself set some threshold scores that they expect the leadership team to achieve. An inability to meet these threshold scores could be the indication of a training requirement or an area that the leader needs to work on. These scores also aid the executive coaching initiatives that help improve the leadership style for maximum organisational and personal benefit.
External perception of leadership
The industry’s perception of the leadership team goes a long way to help build the organisation’s employer brand. To this effect the awards that the organisation or individual leaders win at industry forums will be a good measure for. The senior leaders may also be provided a target of the number industry forums they need to attend and address every year. Another metric for external perception could be the number of industry awards that the leader ensures that his/her team applies for. Again all these could be pre-determined metrics against which the leaders are measured every year so as to maintain focus.
One of the critical functions’ of leaders is to ensure that they are creating future leaders for the organisation. Thus succession planning efforts taken, form an important aspect of the performance of a leader. The number of positions where the incumbent has been promoted from within the team or organisation is a metric that shows the leaders orientation towards talent development and succession planning. Another metric is a tally of the number of team members for whom the leader has brokered a move into another department or area in the organisation.
A good leader is also expected to create an environment that fosters innovation. One way to look at this metric will be the percentage of time spent by the leader himself in strategic innovation vis-à-vis day to day operational activities. While this is more related to the innovation orientation of the leader herself, another aspect is the encouragement and focus on innovation taken by the team. This can be measured by the total number of ideas or strategic innovation projects with executive sponsors generated by the team. The element of the executive sponsors shows that it’s not just enough to generate ideas, but rather have ideas which are actionable and are in the process of being executed. For an organisation that’s just beginning its focus on innovation even a simple metric like the percentage of team members in the leader’s team with training in the concepts and tools of innovation will be a good starting point.
The above are some of the leadership metrics that organisations can customise to their situation and expectations. The organisation will need to define these metrics in the realm of its own business and culture and then create a standard against which the leadership success can be measured. However it’s also important to keep in mind that metrics by themselves mean nothing and serve little purpose unless they are used to access, interpret and provide actionable solutions. Finally no metric will perfectly measure what is expected but this quote by Warren Buffet sums the need and accuracy of metrics perfectly.
“It is better to be approximately right than precisely wrong” – Warren Buffet