In an earlier post, I proposed that board members should insist on seeing information presented in the form of trends. I have also advocated that CEOs and management teams need to provide the board with information that puts every element of data into a context that is relevant and understandable by the board. I call this the ‘So What’ test. If you present a fact, put it in the context that explains why it is important, and why we should care about it.
As an example, if marketing reports that there were 20,000 visitors to the corporate website, that is a fact (we hope). If they show it on a trend line over time that shows the number is growing or declining each month, and is a helpful directional indicator. However, it still does not tell us if this is a good result or why we should care about it. In other words, it does not answer the ‘So What’ question.
What was the goal? Why was that the goal? If we did not reach the goal, what are the implications for the business? Why is the number improving or declining? How much are we investing to improve the number? Are we getting a positive ROI on that investment? There are many more questions that all go to the issue of ‘So What,’ but it is clear to see that the fact that we had 20,000 visitors is a hollow statistic. It is like food with empty calories that will not nourish a meaningful understanding of the business.
However, the real ‘So What’ question is ‘why is this number even being reported to the board?’ Too often, in the interest of giving every functional area of the company a voice, CEOs acquiesce to include information from functional leaders that is more like ‘what I did on my summer vacation’ than an important indicator of corporate success. We have all seen these ‘essays’ - “we attended 4 conferences,” “we updated 12 pages on the website,” “we tested 32 new feature points,” etc. These are often feel-good metrics. They may be adjacent to a meaningful measure, and masquerade as a leading indicator, but in reality they are just empty calories.
Take website visits as an example again. For some businesses, this is absolutely an important measure, but for most companies, it is a feel-good metric. Our goal is to drive sales, and in order to do so we have to find and close prospects. We follow a sales cycle that moves prospects through the sales funnel from lead to closed-won, and we identify several clearly defined points along the journey that we can measure. Website visits are at the very top of the funnel, and represent contacts before we even know if the visitor is in our target market. Don’t get me wrong, I am not saying that marketing should stop measuring visits, but many many things can influence website visits. I am saying that as a standalone measure, it is not board-worthy. There is too much noise in the statistic to get a clear signal to communicate to the board. Visits can go up while qualified leads go down. It just means the bait we are using attracted the wrong kind of fish. The reverse can also be true - visits go down, but qualified leads go up - we may have done a better job crafting a more targeted message. A change in traffic may be driven by external factors that are not related to our actions at all. There is just too much noise.
If we are looking for leading indicators of bookings to report to the board, a better path is to work our way backwards up the funnel through each of the defined earlier sales stages that lead to closed-won. This is where we have actual indicators of interest and intent - classic BANT (budget, authority, need, timeline). Focus on conversion rates from one stage to the next (volume), and the pace of movement from one stage to the next (velocity) which will provide a much more valuable insight into future sales outcomes. As a board member, it is a feel-good moment to know that people are visiting the website, but the data that delivers real ‘nutrition’ is the information that is much closer to actual sales and the trends that represent a pattern of progress.
I have focused on marketing and sales as my example, but feel-good metrics abound throughout board books. Examples like the number of hours worked in engineering, when what we care about is feature output. Customer success meetings held, when what we care about is measures of upsell and avoidance of churn, not the number of meetings. If a manager is reporting a statistic or data point, the CEO needs to apply the ‘So What’ question to ensure it is presented in a meaningful context, but they also need to test if it really has meaning and value, or if it is just a feel-good measure that takes up space and does not advance board knowledge.
Board members have limited time, and are often distracted by their own businesses, or other companies where they participate on the board. I refer to the phenomenon of “Board Amnesia” in earlier posts. It is the common occurrence where, from one meeting to the next, board members tend to forget a substantial portion of what was discussed and decided. The CEO has to make the most of the time the company gets from board members, and not burden them with junk calories and hollow data. Crafting a concise business analysis with meaningful metrics and measures, coupled with solid “So What” analysis is an art form, and one that CEOs have to master if they want to nurture an effective board.