There are many roads to Rio, so they say. But there is one overwhelming method of appraising the effectiveness of a business leader.
We can invent lots of metrics to measure progress for a leader, including revenue, profit, employee satisfaction, cost containment, percentage of available market, and more. But these are all individual roads to Rio—which is the stated goal for the organization.
For many early stage companies with outside investors, the goal is to ultimately sell the company or even go public, always at a significant increase in valuation over time. For larger or later stage companies, it could be to increase market share through acquisitions with the attendant elimination of competition or increase in a company’s reach.
I prefer a financial goal, such as “achieve $20 million in revenue within five years.” That requires real thought and strategies.
More importantly, what if you as a leader haven’t a stated goal for your enterprise? How do you begin to measure your effectiveness if you lead without corporate purpose?
So if you find yourself unable to answer the headline question, it is time to regroup with your senior leaders, board members and investors—and look for consensus upon a goal. With that in hand, short term or long term, you should then be able to plot a course of strategies and tactics for you, each of your direct reports, and the entity as a whole to focus resources upon and to progress through the steps to achieve that goal.
Yes, if you are a bad leader of people, you will lose human resources and frustrate your attempt to reach to goal. And if you rough ride through your human resources just to achieve the goal and somehow achieve just that, does that achievement make you a good or great leader? Perhaps your investors would think ‘yes’ while your entire staff would be in the opposite camp.
So, outcome measurement is a more nuanced art—involving goal achievement for the entity while being sensitive to and an enabling resource in the achievement of goals for your human resources as well. And that’s not as easy as “simply” selling the company or achieving a financial goal over time.
So, how would you measure your effectiveness as a leader?