Posted on Upstarts and Titans: November 12, 2009 11:02 AM
It is hard to believe but yes, 2009 is winding down. Thanksgiving is around the corner, the holiday rush is almost palpable, and before you know it we'll be watching our TV screens for the ball to drop in Times Square. It is about this time of year that many businesses begin to feel the pressure of making Q4 work, budget planning for 2010 gets underway, and if there is any time left, to reflect on what this past year has meant.
Each November or December, we sit down with each of our portfolio company CEOs and ask that they put down their top priorities for the upcoming year and lessons learned for the past year. We do this exercise in the form of a CEO Memo to the Board. It's not complicated and certainly not overly detailed, but it sets the big picture and creates an incredibly powerful mechanism for alignment between boards and CEOs.
The bottom line is that writing stuff down clarifies thoughts and regularly revisiting and circulating those thoughts drives alignment. If you are on a board, ask yourself if you can honestly state the top company priorities for the next 12 months. What about the most critical lessons for the company? An annual one-page memo from the CEO to the Board that clearly articulates the most important lessons from the prior 12 months and the most critical priorities for the next 12 months is an indispensable tool to focus leadership on the things that really matter. Here is our five-point plan on how we develop and use a CEO Memo to the Board in our companies:
1. CEOs begin preparing an annual memo at the end of each year that summarizes their most important lessons over the past 12 months and their top four to five priorities for the coming 12 months. There are never more than five priorities for a 12 month period. An important rule for us: a new priority cannot be added until one is completed.
2. The first of these priorities is almost always: "Achieve the financial plan." The memo should refer to the top line and bottom line target or to the date when these targets will be agreed upon between management and board.
3. Other priorities reflect the top strategic initiatives for the year, which may include such things as new product launches, customer service enhancements, or new market locations.
4. This memo is then used as a recurring framework for update discussions and board meetings. For example, the first page of each board meeting presentation throughout the year is often an update on the major priorities as stated in the annual memo. The priority agenda in the memo also offers an opportunity to drill deeper into one of the specific priorities for the key purpose of a board or update meeting.
5. Regarding the lessons learned: we can accept failure, but we cannot accept not learning from past mistakes. Once a year, a CEO should share with the Board and with employees, what the most important lessons were and what it means for the organization going forward.
There it is. Nothing magical, but an annual priority agenda is one of those seemingly obvious things that is rarely done. I have no stats, but my conservative guess is that less than 10 percent of companies undergo such an exercise. I am sure that people feel that they do some version of this, but the litmus test is individually asking leadership members of a company what the top three priorities are for their company and seeing if their answers diverge We've just found it easiest to put it down on paper and to use it as a "ground hog day" agenda guide throughout the year to see if we are making progress against the big picture.
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