Cool day in the ATX and I like it. So, we are back to talking to and about CEOs. One of the most important elements of a successful company derives from the CEO’s creation of an environment of accountability.
Accountability is a two way street — the accountability of those from on high to those they serve and those served to those on high. Let me translate that: accountability goes up, down, and sideways.
Accountability? I’m confused, Big Red Car
OK, we have different levels of accountability:
1. The bosses are accountable to the workers.
2. The workers are accountable to the bosses for doing their jobs and accomplishing their objectives.
3. Everyone is accountable to their peers.
4. The CEO is uniquely accountable to the Board of Directors.
5. The Board of Directors is accountable to the shareholders and the CEO.
One point that is essential — it takes a long time to develop an all-encompassing environment of accountability, but there are elements of it that should be in place from the beginning. Let’s break it down.
The bosses (founders, CEO, entrepreneurs) are responsible for putting together a coherent plan — Vision, Mission, Strategy, Tactics, Objectives, Values, Culture.
Remember that Strategy is the company viewed from 30,000 feet.
Tactics is the departments, the disciplines viewed from 10,000 feet.
Objectives is boots on the ground — what individuals are going to do over the next six months.
All of this is driven by values that come from the top and all of this is subsumed into the company culture. It is fair to say you are creating a culture of accountability.
So, the bosses have to lay out the plans that set the framework for accountability. No framework? Very unlikely a culture of accountability will take root.
The workers take their first step guided by the road map that is set by their objectives. Objectives should be SMART — Specific, Measurable, Achievable, Realistic, Time constrained.
Bad objectives? Bad culture of accountability.
It is the bosses’ job to lay out the objectives, but it is the workers’ job to understand them.
You keep score on the attainment of objectives through the company performance appraisal system.
No company appraisal system? Lack of timely appraisal? You got it — no culture of accountability.
A company is built a single action at a time. It does not spring to life in a single instant. Even God took seven days to create the world and one day He went to the beach.
It similarly takes time to create a culture of accountability. Remember this?
Please note how far Performance Appraisal is from Vision. It happens late in the scheme of things, but it is equally important.
One of the elements of accountability is that departments are accountable to each other. Marketing has to work with tech to ensure that the website is saying what marketing is saying to the customers. Marketing has to work with finance such that pricing and sales are in step with the financial plan. HR has to work with marketing to ensure hiring plans support sales plans.
The CEO has to referee these relationships and it has to be part of the performance appraisal of the incumbents in these positions. Note that the CEO is the creator of the culture of accountability and the primary operator of it when up and running.
The Chief Executive Officer and the Board of Directors
The CEO is responsible for reporting to the Board. This is an exercise in accountability as the CEO should be reporting progress versus an approved plan.
Boards need to demand this type of reporting — reality v plan. Boards need to approve plans.
Everything takes twice as long as planned and costs twice as much. The nature of the dialogue between CEOs and Boards has to embrace this reality.
When a company exceeds plan, the Board moves the goal posts and revises the plan. This, too, is normal.
When a CEO fails to make plan, the Board has to ask the tough question, “What do you intend to do to get back on plan?”
Sometimes, the answer is, “Revise the plan?” A Board has to know and approve the revision plan.
Boardmembers serve the shareholders of the company — all of them, not just their own personal shares. This is a formal, legal duty spelled out in places like the Delaware Corporate Code. The first duty of a board member is to know this, to understand their duties of care and loyalty, to be “prudent” men and women.
Boardmembers have to extract formal plans from the management (CEO) and consider them. They have to approve them in a timely manner — this is their burden in a culture of accountability. A good CEO makes the board do their job.
[Stop for a second — this is a huge failure of boards, not having approved plans prior to each new year. Do your job, please. Also, make damn sure the CEO knows where the lines are and what side of the line he/she is on. Define things and avoid future problems.]
A great board recognizes its primary job is to coax a fabulous performance from their Chief Executive Officer. A board is not a taskmaster, a judge — though they deal with tasks and must make judgments.
A great board assigns a single person — its “gray haired eminence” — to work with the CEO to help him find his footing and from that sound footing to excel.
Accountability, bottom line it, Big Red Car
OK, accountability can be shallow or deep. You can have great accountability between the bosses and the workers and be MIA as it relates to peers.
Will this work? Yes, but it is not a full culture of accountability.
Can the board be mediocre? Yes, boards can go MIA when the CEO is crushing it. Squeaky penny and all that. Busy people trying to keep the fires down to ankle height in other companies.
A real culture of accountability is complex, exists at different levels, and requires maintenance.