Boards of both commercial and not-for-profit organizations should be commended for conducting a comprehensive review process of its Chief Executive Officer. It is however, quite uncommon. Boards often fail to address this duty in a consistent, rigourous and professional manner. The reason: they don’t have adequate information.
The Board, usually through the personage of the Chair, has a fiduciary responsibility for the performance to the company or agency over which it presides, and of its prime agent, the CEO or Executive Director, but does not have access to the day to day processes.
This is obviously flawed in at least two ways:
First, the performance of the ED needs to be differentiated from the performance of the agency as a whole.
Second, the adequacy of the information upon which a judgment must be based.
One of the principles of performance management in organizations is that there should be no surprises. However, if the Chair is not present in an ongoing way, especially when the agency is operating under a policy governance model (full or partial ‘Carver’ model), he and the Board are left with only limited information: reports on the overall performance of the agency, its financial position, and its impression of the ED based on the limited experience of watching the ED perform at Board Meetings. There is no or only limited opportunity (or even expectation) of active frequent involvement and feedback by the Chair of the ED’s day-to-day operating style and performance.
We are of the view that the annual Review of Performance is a necessary and powerful tool for monitoring and sustaining the performance of key individuals, especially in leadership positions. This is especially true for the CEO. Moreover a properly conducted performance review helps the Board
But that said it must be done effectively or it is an empty exercise.
In our view the evaluation of the ED’s performance should be conducted annually by the Chair of the Board. It should be an evaluation of four main components: the core responsibilities of the ED, the competency profile for the ED, up to five key strategic/operational goals agreed to at the beginning of the review period for which the ED is personally responsible, and one or two personal development goals for the ED.
The Chair should seek data for the evaluation of the performance goals and the competencies through a ‘360o’ process using an external third party, biannually; in off-years the Chair can conduct this evaluation on his/her own by accumulating impressions informally through frequent interactions with staff and other key stakeholders throughout the year.
The 360 data is most effectively gathered if it is done in one-on-one confidential interviews. The [external] consultant would aggregate the findings, suitably consolidated or paraphrased to shelter the identity of the Observers, screen outliers and give a balanced and objective view. The CEO needs to be evaluated, not demoralized.
The Findings should be reduced in writing on a form suitably designed to capture the above four components. Upon review with the HR or Executive Committee the Chair should deliver the final report to the ED in a face to face private interview. The ED should acknowledge its receipt (though not necessarily its acceptance) by signing off on it.
The Evaluation should be conducted by the current Chair (who often becomes the Past Chair in the ensuing year); the Goals for the following fiscal year should be developed in concert with the incoming Chair and the ED with advice from the Past Chair. And so the process continues.
This process can be challenging and for some seem onerous, but that may the most important thing the Chair has to do. Surely the organization – and the CEO – deserves the effort.
