A CEO’s Impact? It’s Not Just about the Money

How do you measure a CEO’s impact? In November 2014, Harvard Business Review (HBR) ranked CEOs according to “increases their companies have seen in total shareholder return and market capitalization.” Jeff Bezos of Amazon.com earned the top ranking.

But as Charles Fombrun points out in an HBR blog, “Companies now need to understand what value they are creating, not only for their investors, but also for their employees, customers, and society at large.” When HBR asked Reputation Institute to create a broader measure of CEO performance, it came up with a performance index that included a score for each company’s workplace, citizenship, and governance. Reputation Institute then re-rated the CEOs using a combined ranking.

The results? “Companies that deliver strong financial results do not always have good reputations with the public, and vice versa.” Amazon.com’s CEO fell two places in the ranking, to number 3. The biggest changes in ranking were for Monsanto, which fell 74 places, and Volkswagen, which rose 68 places.

Fombrun says, “The fact that financial performance and non-financial performance reputation do not correlate among HBR’s top 100 CEOs underscores why it is so important to keep refining our non-financial metrics and ensuring their rigor. . . . A great CEO’s legacy is never as one-dimensional as the ledger.”

How do you come up with and refine your own set of nonfinancial and financial metrics? The Baldrige Excellence Framework and its Criteria for Performance Excellence focus you on just this composite of metrics: product and process, customer, workforce, and leadership and governance results, as well as financial and market results.

Said Ken Schiller, co-owner of Baldrige Award recipient K&N Management, “Personally, I measure [success] by, are we achieving excellence? . . . But I don’t focus primarily on profitability or growth. I focus on, are we achieving excellence? And the means we use to do that is delighting every guest that walks in our door.” In addition, “I consider my most important job as an owner is to create an environment that attracts A-players and then to recruit them, select them, and make sure that they stay.”

This attention to a broad set of measures doesn't mean that K&N's financial results have suffered: in the years before receiving the award, K&N's restaurants significantly outperformed local competitors and national chains in sales. They also topped the industry standard for profit.

For additional examples of organizations that track a composite of results, see the profiles of Baldrige Award recipients Lockheed Martin Missiles and Fire Control, MESA, and PricewaterhouseCoopers Public Sector Practice, among others.

And see the Baldrige Excellence Framework or the Baldrige Excellence Builder for key questions that will help you decide what metrics you should be tracking.