PwC’s report on its 22nd Annual Global CEO Survey is entitled: CEOs’ Curbed Confidence Spells Caution. The title is a near perfect way of framing the internal conflict and worry chief executives around the globe are experiencing. There are many business leaders who are still optimistic about global economic growth, but there is a rise in those who think it will decline. CEOs are excited about the prospects the growth in AI affords them but they do not have the right talent to capitalize on it. Similarly, there is more data available to mine that ever before, but there is a scarcity of skills in the labor market that can turn it into a strategic and competitive advantage.
All of this is playing itself out in an environment of exponential change. The conflicting signals business leaders are receiving about how stable the future is going to be is having a somewhat numbing effect on their growth ambitions; and it is happening at a time when they feel like they should be able to push the gas pedal of their growth engine to the floor. It is simply not in the DNA of most chief executives to tamp down expectations during a time of such unparalleled opportunity.
Therefore, what? Despite the uncertainties they face, what kind of performance structure should CEOs have in place to ensure they are able to minimize their downside exposure and leverage their opportunities? How do they immunize themselves against the doubts that emerge when their company's economic prospects are unclear?
A Three-Part Performance Framework
Immunization comes by staying focused on building a high-performance culture—always. This emphasis should not change because of market conditions, technology improvements or the vagaries of the global economic environment. Sustaining a high-performance culture is possible when a clear performance framework has been established for examining where the business stands currently and where it needs to go in the future. It provides a construct within which an organization can evaluate itself and where areas needing change or improvement can be identified and handled. The three parts of this framework are as follows:
This piece focuses on the underlying ingredients that make an enterprise work. A well-constructed business framework will identify—
Purpose and Mission—why the company exists and what or who is benefited by its work. In today’s business environment, organizations that are unclear about why what they do matters have little chance of navigating turbulent times that are sure to come.
Vision—where the company is headed and why it believes it can get there. An organization that does not have a clear picture of what it will be in the future will never arrive there—or know how far away it is from its targeted destination.
Business Model and Strategy—how the company drives and leverages revenue production and how it competes in the marketplace with that model. This part of the business framework requires strategic leaders to have a dual focus as they look to the future. They must have one eye on short-term performance with the other fixed on long-term growth. The latter ensures leadership does not sacrifice profit growth in its effort to achieve this year’s targets.
Roles—the skills needed to drive the business model and strategy and how they align with the skills existent in the present talent pool of the company. Does the company have people that are capable of driving the outcomes that need to be achieved for the company vision to be realized? If not, how will those gaps be filled? (See Talent Framework.)
Success Standards—which are the clear outcomes you need fulfilled for each of the roles you have identified.
Value Creation—the revenue and profit thresholds that indicate whether the company is on pace to achieve its growth targets. In addition, this has to do with defining the production expectations the organization has of its people and the point at which profits can be attributable to the efforts of employees at work (productivity profit) as opposed to shareholder capital and assets at work.
Business leaders need a complete, compelling and agile employee value proposition that allows them to always compete for the talent their companies need. This is not a static exercise, but it can be constructed in a way that allows for both flexibility and sustainability. Organizations should view, design and maintain their pay strategies in much the same way an investment portfolio is put together. Asset classes are chosen based on the outcome that is sought. As things change and evolve, you don’t necessarily change out the asset classes; instead you just rebalance them. With that in mind, a well-constructed compensation framework will identify—
A Pay Philosophy—a written statement of what the company is willing “to pay for.” This document becomes a kind of “compensation constitution” that identifies how value will be shared and with whom. A company’s rewards philosophy becomes a key tool in filtering out potential (or existing) employees that do not relate to a value creation philosophy for pay. You want people who are willing to have their compensation tied to their performance.
Pay Offerings Consistent with the Philosophy—ones that offer the right balance between guaranteed and variable income and between short and long-term value-sharing. The specific pay plans a company offers are the equivalent of asset classes in the investment portfolio referenced earlier. They shouldn't be changed often. Each asset class (pay program) is just given a different emphasis as the company evolves in its growth or endures various economic cycles.
A Total Rewards Approach—that demonstrates the company realizes there must be more to its value proposition than financial rewards. Employees must be able to envision a compelling future for themselves, feel like their unique abilities are being properly employed within a broader unique team and that there are substantive opportunities for personal and professional development.
The final piece is the talent framework. This has to do with the development of a recruiting and retention strategy that ensures you always have a full pipeline of top talent and are vigilant about nurturing a culture that becomes a magnet for such people. When a talent framework is constructed properly, business leaders will be able to:
Identify Key Producers—which would be those who are meeting the success standards you identified in your business framework.
Identify Talent Gaps—which is essentially the difference between the skills you defined needing in your business framework and those you actually have. This part of your framework informs what your strategy should be for attracting the people you will need to achieve your company’s vision and execute your business model and strategy.
Communicate Expectations—the performance standards you expect for the role a person is being hired to fulfill. You want your people to becomes stewards of the outcomes their role exists to produce; which is difficult to do if the person in that role doesn’t know what the expectation is.
Communicate Rewards—which is how you reinforce the financial partnership you wish to have with your people. Top talent wants to know how they will participate in the wealth multiple they help create in your business; so how you frame and promote your compensation offer becomes an essential part of your talent strategy.
Organizations that build this kind of construct become somewhat immune to the uncertainties that will always surround their businesses. It provides a mechanism by which they can continually evaluate their current condition and identify the steps they need to take to ensure their growth plan does not get derailed.