VideoUnlike some other CEOs, Owens Corning's Hiner believes that finance chiefs, and CEOs as well, desperately need the kind of frank appraisal of their work that a good performance review can provide. "The higher you get in the organization, the less candor and feedback you get," he says. Most CFOs have become successful because they are driven, and are "hungry for feedback," as Hiner sees it. "That drive doesn't go away. The only way to do something bigger and better is to get some feedback" about what you've accomplished so far.
Devonshire's current agreed-upon goals in the grid's shareholder-value row target cash flow from operations at 12 percent of sales by 1999, compared with the current 9 percent, and shoot to boost earnings before interest and taxes (EBIT) to 14 percent from today's 12. His "finance indices" include working capital below 10 percent of sales and costs below 1 percent of sales. Under "global leadership," objectives included a more diverse work force and cross-functional expertise, while another box, headlined "change agent," rates him at setting a course for "bold outcomes."
Devonshire credits the rigorous performance template with helping align the efforts of the entire finance department and for helping improve Owens Corning's results. When Devonshire joined the company in 1993, cash flow from operations was only 6 percent, for example, with EBIT bogged down at 7 percent.
PERFORMANCE BY AGREEMENT
Other companies work with simpler models in trying to make the CFO review relevant to today's needs.
At Tenneco Inc., the $6.6 billion Greenwich, Connecticut, automotive-parts and packaging manufacturer, CFO Robert Blakely and other managers draft "performance agreements" at the start of each year. Blakely's is reviewed by CEO Dana Mead, and the two delineate both traditional financial objectives and qualitative personal ones.
Drawing up a written contract that the CFO can fulfill--or break--is part of Tenneco's four- year-old management planning and control process, which Blakely says "took a company driven on financial accounting systems to one driven on performance systems and forecasting." In each year's fourth quarter, Blakely asks those working for him to provide their lists of priorities for the next year. He also asks the board for its priorities for finance. From the lists, he prepares a summary memo outlining what items should be in his performance agreement when he and Mead prepare it.
"It's not vague or general," says Blakely, whose current agreement, for example, calls for him to hit working-capital targets and reengineer the cash-forecasting process. And it's hard to take the reviews for granted, because meeting objectives "affects my compensation significantly," he says. "Believe me, there's a minimum of process and a maximum number of specific tasks in our performance agreement."
At Hannaford Bros. Co., a Scarborough, Maine- based supermarket operator, creating precise targets is also a guiding principle for senior vice president and CFO Blythe McGarvie and president and CEO Hugh Farrington. Reviews grow from the company's three-year strategic plan, which serves as "kind of an umbrella for specific thoughts," McGarvie says. "At the end, we come up with four or five bullet points about what [Farrington] expects from me for the coming year." Two current goals: getting the general ledger on the company's intranet--as part of a drive to slash cycle times by 35 percent and speed up decision- making--and redefining and simplifying how finance generates its pro forma financial statements for new locations.
"It's a chance to sit back and make sure we're going in the right direction and doing the right things," Farrington says. That both he and Mc-Garvie use the word "fun" to describe the process probably reflects all the times in Farrington's career he has found himself on the wrong side of the big desk, hearing the boss drone through a meaningless review. "You come out of sessions like that saying, 'I'll never treat anyone like that.'" He shuns the traditional HR-department review forms. "I haven't found a form yet that really captures the kind of relationship I want to have with people who work directly for me," he says. "What I'm after is to fit the review to the personal style of the individual."
In McGarvie's case, that style involves plenty of questions about Farrington's reactions to her work. "You have to ask for feedback," she says. "I want to know what he thinks of how I've done in the past year and how I met those expectations."
With CFOs prizing the role of performance evaluations in building "communication and trust with the CEO"--65 percent in the survey list that as the review's main benefit-- such interactivity indeed may be a valuable quality. It could also be a blessing for CEOs, who don't always have an easy time appraising CFOs. John Hall, retired chairman and CEO of Ashland Inc., a consolidated energy and chemical firm, concedes that reviewing other members of the senior management team can be uncomfortable, especially "when they're about the same age and you've worked together for a long time." But Hall viewed the annual exercise as a discipline that made certain criticisms easier to deliver--and that set an example for other managers. "If I don't do my reviews," he says, "I can't expect them to do theirs."
"GET OUT OF YOUR OFFICE"
Anne Meek, CFO of Active Construction Inc., in Gig Harbor, Washington, thinks CFOs can give the boss a break by taking the lead in their own review process. "You don't put all the burden on the CEO," she says. "What we've done is to make it a two-way street. I submit to him what I feel I've accomplished in the past year, and objectives for the new year."
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