In a prior post, I focused on building a collaborative relationship between the board, the CEO, and the executive team. The watchword was ‘no secrets and no surprises.’ The challenge is how to effectively communicate and contextualize the metrics and measures being reported?
The most important line in corporate communication and analysis is the time line. For every metric, there is always value in knowing what happened in the past, what is happening now, and what we expect to happen in the future. One data point does not define a line, so reporting key metrics as single data points is pretty meaningless. We always want to understand the ‘now’ data point in the context of what happened in the ‘past’ that led up to ‘now,’ and what to expect for the ‘future.’ A single data point begs the question ‘so what?’ that I have written about often. If we cannot contextualize a metric with its past trend and future expectation, then we at least have to answer the ‘so what?’ question. Why is this lonely, solitary number important, and what does it mean to the business.
In formal and informal communications with the board, the CEO has to be a discerning editor and monitor the channel to manage the signal to noise ratio. Signal represents the well formed information that carries context and meaning, while noise is the superfluous data that does not answer the ‘so what?’ question, or is merely a stream of feel-good or happy metrics that do not reflect meaningful measures of business accomplishment or health. The CEOs role is to amplify the signal and tamp down the noise. Here are a few tactics:
Do not become trapped by an obligation to report some data value just because you reported it in the past. I have seen board books balloon in size over time because at some point in the past, someone asked a question, and forevermore we include the answer in the book — even if it is no longer relevant or meaningful. Current events and performance will dictate what is meaningful and informative about the business. Board members will want to drill down on ‘hot spots,’ but once the moment has passed, yesterday’s hot spot may no longer deserve the spotlight it commanded in the past. What was once signal will fade into the background and become noise. Manage it accordingly.
It is valuable to engage executive team members to create their own contribution to the collective board reporting. However, there is often a tendency to preen and showboat, and present too much happy data (noise) that drowns out the meaningful information (signal), or to avoid the troubled areas and only report the positive outcomes. If you think in terms of board slides, then limit each contributor to one slide, and require the font size to be no smaller than 16. If a contributor thinks they needs more space, make them justify it, and do not give in easily.
Require contributors to think in SWOT terms (strengths, weaknesses, opportunities, and threats). They do not necessarily have to present a SWOT analysis, but they have to at least consider whether their page is presenting a balanced view. The CEO-editor has to keep them honest. Do not become complicit in their ‘happy ears’ version of what is going on in their area.
Often, different executives will report measures or metrics that sound similar, but reflect different values. The CRO may categorize sales leads slightly differently than the CMO, or bookings different from the CFO or the CCO. The CEO-editor needs to look across all of the slides and ensure consistency. Board members are really good at finding a number on slide 7 that is different than a number on slide 27, but labeled the same. At best it requires explanation, at worst it erodes confidence. Take the time to catch the inconsistencies. I suggest tasking the CFO to be the score keeper to check every number across every slide.
Add the dimension of directional indicators to your reporting. Typical Red, Yellow, Green stoplight charts are one dimensional. They report on how things appear at a point in time. The real question is where is the metric going. Is it green today, but we can see it turning yellow or red in the future? Is it red, but rapidly improving? Is it stuck on yellow like a low-grade fever, so it is an irritant that requires attention, even though yellow may not be that bad? An easy method to augment a stoplight chart is to add a directional arrow (up, down, neutral) to each color. The context of direction and trend will dramatically amplify the signal.
Engage an independent board member or the `chairman to preview and proof the board pack before it goes out. The CEO knows so much about what is going on that they may subconsciously fill in the blanks with knowledge that makes the slides make sense. A friendly board member will read the same slides and find the gaps in logic or explanation or missing bits that seemed obvious to the CEO. They will read it like their fellow board members will, and their input will make the presentation better.
Lastly, ask for feedback. After presenting board materials, ask the recipients how effective the presentation was. Press them to candidly critique the information packet. Ask what can be eliminated, and what should be added or amplified. Ask a similar question to a CES survey (customer effort score). ‘How much effort did it take to understand and get value from the materials?’ CES is typically measured on a scale from "very low effort" to "very high effort." Most commonly, on a scale from 1 to 7. It is a great ice-breaker to ask this of board members because it does not require them to be specific about any particular element of the pack, it just elicits a general satisfaction response that can trigger deeper conversation.
Effective communication is a skill that is particularly critical for the CEO when engaging the board. Filter out the noise and amplify the signal. It will remove distractions and help everyone focus on what is important.