As seen on ERE Media (May 2, 2017).
Contrasting the Factors That CEOs Focus On, With Those That Garner Little Interest
One of the reasons why talent managers continually strive to become more strategic is that they want their ideas and problems to be noticed by their CEO. Because executives have a strategic focus, being viewed by executives as having a strategic impact helps individual talent functions gain more support and critical budget dollars. However, a majority of talent managers simply don’t know or use the factors that CEOs care about the most. And that lack of understanding results in presentations to executives and metrics reports that fail to excite. As part of my continuing research on building successful business cases, I’ve been able to identify the factors that most CEOs and executive teams immediately embrace, as well as those factors that garner little or no executive interest.
The Top CEO Influence Factors
If you want to WOW your CEO and immediately get their attention and support, here are the top seven influence factors that are most likely to perk their interest. After each factor, you will find an example of the “The best” and “The less effective” ways to successfully influence executives. These “influence factors” are listed with the highest impact factors appearing first.
- Impacts on strategic goals gain more attention than functional impacts — corporate strategic goals are the No. 1 focus area of CEOs, primarily because CEOs are usually measured and rewarded for meeting them. Typical strategic goals include increasing: revenue, profit, market share, innovation, and stock price. If you ask CEOs “what keeps them up at night,” their answer almost always relates directly to one of these strategic goals. Rather than merely trying to align with strategic goals, functional leaders must learn to show that their actions, programs, and the results metrics directly impact those goals. Unfortunately, many talent managers instead report lower-level functional impacts like improving recruiting, retention, development, or engagement. The most effective approach is to start with the strategic goal and then show how the talent results directly impacted that goal. (The best way starts with the impact on a strategic goal — sales increased by $14 million as a direct result of the 12 percent improvement in retention as a result of our “stay interview program.” The less effective way only mentions the functional impact — salesperson retention improved).
- Dollars win out over numbers — the indisputable language of business is dollars, but most talent managers report the results using mostly numbers and words. Converting your numerical results into their dollar impact immediately allows CEOs to quickly see their relative impact on the firm’s overall revenue, profit, and costs. And because other functions report the results in dollars, executives can quickly compare the impact of your programs with the dollar impact produced by programs in other business functions. Talent managers have fallen into the habit of reporting only numbers (e.g. 12 percent employee turnover). While numbers are clearly superior to words (e.g. turnover went up dramatically), neither of them has the same WOW impact on executives as dollars (e.g. employee turnover cost us $12.1 million). The key to success in converting your results to dollars is working with the CFO’s office. Ask them to guide you on how to convert your improved results in recruiting, retention, and development into their dollar impact on revenue. (The best way converts results to $ — revenue increased by $8.2 million as a result of our actions that resulted in a 3 percent reduction in sales manager turnover. The less effective way omits $s — sales manager turnover went down 3 percent last year).
- Increasing revenue trumps cost-cutting — when CEOs are given a choice, they would much rather see an increase in revenue, as opposed to simply cutting costs. That is because in order to increase revenue you must be doing something that impresses our customers and the marketplace. Positive efforts that increase revenue are also likely to have a continuing impact. Cutting costs are, obviously, important, but less so because it is something that can be easily done internally by any accountant. In addition, cutting costs might have some hidden unintended consequences that might even reduce revenue. CEOs are often less concerned with cost-cutting because they justifiably expect professional managers to reach efficiency goals without involving executives. Most CEOs realize that once revenue increases are obtained, profit will eventually follow. (The best way reveals revenue increases — our new VR sales training directly increased the sales revenue of those that were trained by $6 million. The less effective way focuses on costs alone – we cut training costs by 3 percent, which saved us $609,000).
- A focus on innovation is far superior to the lower impacts from improving productivity — CEOs are constantly comparing their firm’s performance to that of the most valuable firms by market cap. And currently, each of the top five most valuable global firms are all serial innovation firms (Apple, Google, Microsoft, Amazon, and Facebook). As a result, almost every CEO now realizes that if they are to have rapid growth, first-mover advantage, and market dominance, their firm must also become a serial innovation firm. And that means that they are laser focused on increasing innovation. Obviously, because talent managers are responsible for workforce productivity, it must remain one of their goals. However, data reveals that innovation may have 10 to 25 times the business impact from increasing workforce productivity. And as result, CEOs are beginning to expect talent managers to focus and prioritize their talent actions so that the firm is continually producing more implemented innovations. (The best way focuses on innovation — as a result of our effort to hire and retain innovators, the percentage of our revenue generated by product innovations that were introduced in the last 18 months have raised from 22 percent to 27 percent, a $30 million gain. The less effective way focuses on productivity — by reducing labor costs, we have increased workers productivity by 3 percent).
- CEOs are more interested in future projections than in backward-looking metrics — because CEOs are strategic, they must be future focused. And that means that if you want to impress them, talent managers have to show them future trends and the likely dollar impact of these trends. Talent managers report 100 percent historical metrics, which simply remind them about what happened last year. So if you want to impress and influence your CEO, forecast the impacts that talent-management-based problems and opportunities will have on the likelihood of meeting strategic goals 6 to 18 months down the road. (The best way is to project — turnover last year in critical jobs was 12 percent, but with rising employment rates of employment we project that turnover rate to double by December. Our data shows that if we invest $2.1 million in personalized retention plans, we can cut the anticipated increase in turnover in half, preventing the loss of revenue of up to $34 million. The less effective way is to report historical metrics — the turnover rate two years ago was 11 percent and last year it was 12 percent).
- OMG metrics cause CEOs to act immediately, while “so-what” metrics do not — most talent-management metrics are tactical, so when they are presented to CEOs, they failed to spur any action (e.g. cost per hire). However, there are some metrics that I call “Oh My God” or OMG metrics, that when viewed cause executives to take immediate action. OMG metrics reveal dollar impacts that exceed 1 percent of corporate revenue. Common elements of OMG metrics include $ impacts on strategic goals, the cost of inaction, the fact that the impacts will increase exponentially and comparison numbers to show the extent of the problem compared to last year or the industry average. (The best way is attention-getting — our lack of STEM women engineers is reducing the use of our product by women by 31 percent, and that is costing us $92 million annually. Unfortunately, without immediate action, we project our percentage of women engineers to go from 18 percent to 9 percent, compared to an industry average of 24 percent. And the costs will increase exponentially to $300 million. The less effective way — our percentage of women engineers two years ago was 19 percent and last year it was 18 percent).
- You’ll get the attention of a CEO faster when you use their strategic language — I have written previously about how CEOs speak a different language than most of those who work in overhead functions. If you read their writings or listen to CEO speeches, you’ll immediately find that executives use words and phrases that are seldom used by tactical employees. For example, because CEOs operate in a highly competitive world, they often use words and phrases related to competition. Other favored words include competitive advantage, winners and losers, and sports and military analogies. CEOs are also results-oriented, so they instantly listen up when you use phrases like increasing shareholder value, customer delight, improving earnings per share, and appearing at the top of industry results rankings. They also emphasize the need to be focused and to prioritize. And finally, they often love individuals and functions that embrace technology, take risks, act globally, go first, move fast, and innovate. And although they are aware of them, they are generally not overly interested in the details of cost-cutting, process efficiency, and incremental improvement. (The best way is to use their language — in order to provide a competitive advantage, our proposal to increase sales through VR training was developed in house, rather than using a vendor approach that is available to everyone. The less effective way uses tactical language — we benchmarked the training cost-cutting practices of other firms and we adopted the industry best practice).
Most in talent management have finally realized the importance of metrics, data, and analytics. Many talent leaders have also failed to realize that when you present new program proposals to executives, the content of the proposal must be permeated with dollar impacts on strategic goals and the language that CEOs favor. My research has found that the proposals from other business functions are accepted much more readily, not because they have a higher ROI. But instead, because their proposals are dominated by dollars, numbers, trend lines, proposed innovations, and strategic impacts. In my view, the time is right for talent managers to shift to a more business-like approach.
Once they realize that part of the reason that they lack the influence and the financial support of other more prominent functions like finance, marketing, supply chain, and sales, is because they all too frequently focus on things that CEOs care little about. The most important first step is to work with the CFO’s office to learn how to convert talent management’s numerical results into their dollar impact. The next step is to raise their focus away from simply aligning with strategic goals to directly impacting them. And finally, managers need to increase their focus on prioritization, providing a competitive advantage, being forward-looking, and increasing innovation throughout the firm.
As a result of these changes, talent-management leaders can expect quicker action on their proposals and larger budgets. So, that in addition to having a seat at the table, everyone will listen to them whenever they speak from that seat.
If you enjoyed this article, please follow me on LinkedIn