The Case for Executive Metrics at Mature Companies
Martin Babinec, Founder, President and CEO, TriNet
At early-stage companies, the executive team comes to work dressed in battle fatigues, prepared to fight guerilla warfare. The founder selects the platoon based on each individual's specific skills in functional areas, such as sales and finance, and the group understands that the mission is to grow. If the company and its executives are still standing at the end of the day, they know they've succeeded.
Take TriNet Group, Inc., the company I founded in 1988 with a single employee: my wife. Subsequently, I hired top talent in human resources, operations and finance. For a long time, my small band wore multiple hats: they were employees and managers as well as executives, and their battle plan to was find customers, keep them happy, and prevent as many baths in red ink as possible.
Cut to fast growth: In the late 1990s, TriNet ballooned to 350 from 100 employees and scored five consecutive placements on Inc. magazine's list of the country's fastest growing private companies. It was then that I realized that my executive team needed to change as well. As our company became financially stable, the "fight hard, survive another day" mentality could give way to problems of another sort: complacency, departmental infighting, and executives who might no longer be able to perform at the required level.
Those, of course, are the classic problems besetting mature companies. Unchecked, they could cause a once-nimble entity to be overtaken by more agile competitors. It was that scenario that I wanted to avoid. In short, I wanted TriNet's executives to be as fast, fresh and alert as they were during our early stage. And to assure that, I turned to a specific tool: metrics.
Although creating an executive "dream team" is more of an art than a science, we have learned that metrics can help quantify the results as a company matures. At TriNet, we establish metrics for each member of our executive team, a process to which the entire group contributes. Individual executives take complete ownership of the numbers for which they will be accountable, using them to evaluate members of their own staffs. In addition, the executive group uses the metrics to establish goals and make decisions about how best to achieve critical results.
Metrics, in other words, enable executives in a mature company to be proactive about creating and communicating shared goals. No longer do executives have the luxury of relying on free-form management to help employees avoid complacency, infighting, and becoming victims of the Peter Principle - being shunted into jobs for which they are ill suited.
Metrics help combat complacency by keeping the focus on constant improvement. At financially stable companies with no threats on the horizon, guerilla outfits get stowed away, and it's all too easy for executives to succumb to inertia. Look for the warning signs: meetings following routines with no significant outcome, a focus on appearance rather than substance, and form and process valued more than results.
With a shared set of relevant metrics, leaders cannot simply relax into their titles and roles, coasting on momentum. At each reporting period, they must answer for the numbers they've agreed to achieve. These include not only the company's overall results, but also those pertaining to their own departments and functions.
At TriNet, for example, sales and marketing directors watch leading indicators, such as the number of raw leads coming in, the flow of "Requests for Proposals" through the Web site, and the number of meetings scheduled by the sales people. Sales forecasts are adjusted to reflect those numbers, and each executive attends to activities that drive those indicators.
The pressure that is put upon the executives spreads quickly throughout the company. During our recent fourth quarter, our top team created a campaign called "Autumn Leads," which tracked customers and prospect referrals and rewarded the internal employees who helped solicit them. Although sales executives were ultimately responsible for meeting their metrics, the energy generated by their efforts was detectable at every level of the company. The result? TriNet had its best sales month ever.
Walking the Talk
A set measuring system helps break down the interdepartmental friction that takes hold at mature companies. When TriNet's staff more than tripled in the late 1990s, turf battles increased. The goal became getting employees to communicate and work together.
The metrics we established enabled our leaders to act as if our large company was still a small one. The bigger the company, the harder it is for employees to see the connection between their efforts and top-level goals, such as increasing profit. Establishing a link between job-related expectations and executive-level metrics helps make that connection abundantly clear.
Excising the Peter Principle
Another plus is that metrics helps guard against executives being moved into jobs for which they aren't suited, the so-called Peter Principle. As a company matures, certain executives who rose quickly and served admirably during the early days won't have the skills necessary for the next stage.
Having a loyal yet no-longer-effective executive on staff poses a gut-wrenching dilemma for the entrepreneur. It is important to do right by a long-term employee who has shown great value in the past, but it is also important to act in the best interests of the organization. A measurement system assures that the focus is on results when evaluating executive team members, thus reducing the need to rely on personal feelings. When the numbers are in black and white, I have found that some executives often elect on their own to leave.
The guerilla approach to a company works when the agenda for business each day is pure survival, and executives are picked solely for their skill as individual contributors. As the business grows larger, that kind of spontaneity needs to be exchanged for a formal system of building, maintaining, and communicating the company's goals. It's not possible to eliminate growing pains completely, but moving from free-form chaos to shared executive metrics will go a long way towards ensuring a company's continued vitality.