Before I explain the mantra in the title of this blog post, I want to review some basics.
1. Boards and the CEO measure success based on the achievement of objectives. Some say those objectives are not clear, but in most cases they can be made clear – if you are prepared to do a little digging.
For example, look at what has been promised to ‘the street’, the analysts covering the company. They usually include revenue, profit, and other financial metrics such as market share. They often include other targets, such as headcount reductions or improvements in climate footprints.
Get a copy of the objectives set by the board (usually the Compensation Committee) for the CEO and others. These are normally the basis for their compensation, and money rules.
Ask the CEO, CFO, COO and members of the board how they measure success.
2. We should be concerned with risks to those objectives: what might inhibit their achievement, and what might enable their achievement.
There are a lot of risks. Risks are taken every hour of every day across the extended enterprise. But the ones we should be concerned with (I suggest the only ones absent good reason) are those that affect the achievement of enterprise objectives.
3. Management relies on internal controls to ensure that those risks (the risks to enterprise objectives)…
