Evaluating Executive Performance

This month’s question on The Lead Edge from Eric Buehrens Chief Operating Officer, Harvard Medical School, Beth Israel Deaconess Medical Center the following – What is the right lean way to evaluate executive performance?

My response over on the Lean Edge:

Let’s consider answering this question in reverse for some contrast in terms of discussion. In other words what is the wrong way to evaluate executive performance? For starters as has been mentioned I don’t think you can just focus on results especially financial ones although of course they are very important. Many factors outside of direct executive control affect financial performance. Often a rising tide lifts all boats and simply being in the right place at the right time can make a company successful for a few years. Decisions made years ago by predecessors or colleagues in other departments might have a lot to do with financial success. So I don’t think we can rely simply upon financial indicators.

Similarly I am strongly against overly evaluating executives on conformance to standards or tools of lean manufacturing. Simply running a kaizen event a week or mandating that everyone draw a value stream map or adhere to someone’s “rules of lean” is not a recipe for success. Conformance to checklists is relatively simple. Performance is more complicated in the long run. Did the operation in question truly improve in multiple ways (quality, cost, productivity, safety, etc.)? Can it be sustained? Also did the team reporting to the executive develop as well? It is a tough set of questions to answer.

One interesting thing that I will note that was considered in Toyota in Japan by the HR department when evaluating executives was how their previous departments fared after they had left. If the department continued to improve then this was generally a good sign. Not proof of excellence but a good sign of course. In contrast if a department worsened after an executive left it was generally viewed as evidence that the person may have done some heroic deeds but did not built a true system or sufficiently develop other people under their management.

In this sense I think the consideration point is a lot like the discussion around Steve Jobs and Apple Corporation. No one doubts the brilliance of Mr. Jobs…the question is how successful will the company be in five or ten years not that he has passed away. If the company continues to develop hit products and produce stellar financial results his reputation will only rise. If the company struggles then it somewhat lessens his reputation in terms of developing people and developing processes.