Though Chief Executive Officers (CEOs) are often the top-ranking employees in companies, board members, investors, and other executives seek metrics to measure their performance. Key performance indicators (KPIs) for CEOs can help organizations measure both company operations and CEO performance. Learning about CEO KPIs and how they can help you measure performance and progress can help you when setting your own. In this article, we discuss what KPIs for CEOs are, why they’re important and share 8 examples that CEOs across industries can use.
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What are CEO KPIs?
CEO KPIs are measurements that companies can use to evaluate the performance of a CEO. Their KPIs are often numerical values that others in an organization can track in graphs or spreadsheets that can show if they meet or exceed the benchmarks they set. Because these professionals are often the highest-ranking executives in an organization, many of these relate to overall business performance.
Why are CEO KPIs important?
There are several reasons why setting and tracking CEO KPIs is important:
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Increasing accountability: Board members and company presidents often elect CEOs to oversee a company. Having trackable metrics with benchmarks can ensure a CEO is accountable for both positive and negative business performance.
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Improving business performance: CEO KPIs can show board members and executives how the business is performing in different areas. This can show what areas the CEO excels in and where they might improve.
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Improving systems and processes: Some KPIs measure internal satisfaction methods, like how effectively systems or processes help people perform their duties. With this data, leadership can decide how they might improve or replace existing tools.
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Tracking progress: Organizations might track KPIs over time, showing the progress in key areas of the business. For example, if the profit margin is lower than expected, a company might decrease costs and track how that figure improves as a result.
8 Possible CEO KPIs
Depending on your organization, goals, and industry, you might select different KPIs. For example, technology companies might track KPIs around system development and bug resolution times, while a retail companies might track time to market. Here are some CEO KPIs that you might consider across different companies:
1. Revenue growth
Revenue growth means your earnings are increasing over time. To calculate revenue growth, you can use this formula:
(Revenue for the current period – Revenue from the previous period) / Revenue from previous period x 100
Revenue growth shows board members, investors, and other stakeholders that the CEO can continuously improve overall revenue earnings. Companies can set revenue growth targets and review them for each pay period to monitor CEO performance.
2. Profit margin
More than just revenue earnings, companies often want to measure profit margins. CEOs might hope to increase profit margins by either increasing overall revenue or reducing costs. To calculate the profit margin, you can use this formula:
Gross profit margin = (Revenue – Cost of goods sold) / Revenue
Companies may also choose to measure net profit margin (how much net profit a company earns compared to total revenue) or operating profit margin (the ratio of operating income against a company’s net sales). A high-profit margin can show that a CEO is making the right business decisions that can help strengthen a company through investing or saving its profits.
3. Net promoter score
Net promoter score is the likelihood that an individual will recommend your business or company to others. This is important for CEOs because they’re responsible for the overall reputation of a company and can show board members how customers respond to their business decisions. Net promoter surveys ask customers how likely they will review a business on a scale of 1-10. People who rate a company 0-6 are detractors, 7-8 are passives and 9-10 are promoters. To calculate NPS, use this formula:
% of participants who are promoters – % of participants who are detractors
This helps measure a company’s and its CEO’s ability to create and maintain customer loyalty and growth.
4. Customer satisfaction
Similar to the net promoter score, you might choose to measure customer satisfaction percentage. This can sometimes be subjective, but it can tell you how satisfied customers are with their company interactions, products or services. You might create a sliding scale of 1-10 with a series of questions for customers to fill out at the same time, like at check out, to ensure you capture consistent data. Consider setting a percentage benchmark for your KPIs. For example, you may want 95% of survey participants to rate their experience as a 9 or 10.
Tracking change here is also important to show improvements in customer satisfaction. If there is an area where customers rated lower scores, tracking the change in satisfaction can show that any adjustments you made improve their satisfaction.
5. Employee satisfaction
Employee satisfaction is how happy employees are with certain areas of the business, like culture, processes, and leadership. Tracking KPIs like the percentage of satisfied employees can help identify areas where the CEO should focus and where they’re excelling. Improving employee satisfaction helps companies motivate their staff which can lead to improved performance and an increase in sales.
6. Spending
Tracking spending can help companies understand how much it costs to produce and sell goods and services. Consider tracking the percentage of spend over total revenue, as that shows if you’re earning more than you spend. Depending on the company budget, you may also measure the difference between the budget and actual spending. Tracking spending KPIs can show where a CEO is allocating money and where they can improve.
7. System quality
Particularly in technology organizations, measuring the quality of systems can show board members how invested a CEO is in providing employees with the needed technology. You might include this as a sliding scale in an employee satisfaction survey, or have technology teams track defect frequency, the time between defects, and development time. Consider setting benchmarks with the Chief Technology Officer (CTO) to ensure the acceptable level of defects or time helps increase business performance.
8. Return on investments
Return on investments is the amount of profit earned after making strategic spending decisions. You can calculate this percentage using this formula:
(Current value of the investment – Cost of investment) / Cost of investment x 100
CEOs often decide what systems, partnerships, tools, and people they might invest in to improve business performance, so tracking this can show board members and investors their ability to make good decisions. Return on investments can change over time, so it’s important to track how the value of the investment changes to calculate accurate figures.
I hope you find this article helpful.
