Effective CEO Evaluation

“The only way a board of directors can base its confidence in its executive director upon solid, demonstrated fact is through the mechanism of appropriate supervision.  Few things can be worse than a board unsure of its expectations of its chief staff officer, and this same executive not knowing what his or her employer really wants accomplished …performance evaluation is probably the most mutually beneficial of all forms of appropriate board supervision.”

Andrew Swanson

Evaluation: Bane? Or Boon?

Why evaluate the CEO?

The performance of the CEO, and the relationship between the CEO and the Board, are critical factors in successful governance and fulfillment of the organization’s mission.

Because the CEO directly influences the success and financial performance of the organization, it is imperative for the board of directors to set performance standards, and then objectively and fairly evaluate the performance of its CEO against those standards. This should be one of the board’s key responsibilities.

Yes, it may take up time and it could prove challenging for some board members, undertaking a regular and formal performance evaluation will  ultimately save the board time and enhance the performance of the CEO.

There are many reasons for implementing a formal CEO evaluation process.  A well-designed and implemented process can:

• Contribute to the Board meeting its duty to effectively lead the organization.

• Ensure organizational goals are being met.

• Allow the Board and the CEO to understand each other’s expectations about performance issues.

• Highlight areas where the Board is insufficiently informed.

• Ensure continued development of the CEO to more effectively conduct his or her role.

• Ensure a formal and documented evaluation process that meets standards of fairness and practicality.

• Provide a written record of the Board's impression of the CEO's performance.

• Mirror the Board’s expectation that the CEO will ensure evaluation of other staff.

If there are so many good reasons to undertake regular formal appraisals of the CEO, why is it that so many organizations are not doing so?

Why evaluations don’t happen?

There are numerous reasons why well-meaning and conscientious Boards do not implement a formal evaluation process:

• Board members may feel uncomfortable in a role that may involve criticism of an individual on whom the organization relies.

• A process of formal evaluation may be easily deferred by the pressures of immediate issues and day-to-day activities.

• In cases where evaluations have not been occurring, the CEO may perceive the initiation of a performance evaluation as a sign that the Board now lacks trust or confidence in his or her performance.

• Task-oriented Board members may resist devoting time to a process of this nature.

• Board members may lack the skills or tools to undertake effective evaluations.

• The CEO does not request or insist on a formal evaluation.

• The whole organization generally lacks formal policies and processes.

• There is not an organizational emphasis on planning or evaluation – either of the Board, organization performance, or staff.

• The Board may be dysfunctional and/or experiencing high turnover.

• The CEO may lack a job description and there may be no formal plan or performance targets.

• The CEO may be dominating the Board, rather than being accountable to the Board.

• It wasn’t effective the last time around so why do it.

Getting by the obstacles to evaluating the CEO is not enough.  Unfortunately, it is not uncommon for the process to fail and/or participants in the evaluation process to be dissatisfied with the results.  The failure to undertake an effective evaluation process can come at a significant cost to the organization, but so can the failure of an evaluation effort.

Tips for An Effective Process

• Start the process with mutually understood expectations that are clearly articulated at the beginning of the evaluation period (based on job description, strategic plan, performance criteria, etc.).

• Commit to open and honest communication.

• Maintain strict confidentiality, because you are dealing a person’s career.  Performance issues should not become public information.

• Be sure the process positively impacts the CEO.  Focus on the positive as well as areas for improvement.

• Strike a small committee of board members to take the lead in conducting the evaluation.  Nevertheless, it is important that all Board members have input into the process (e.g. through an evaluation questionnaire).

• The committee (or the Board) and CEO should develop the process together.

• The process should begin with the CEO submitting a self-evaluation to the  committee.

• Separate the evaluation process from salary negotiations.  Keep in mind that a key purpose of the evaluation process is performance improvement.

• Be careful before involving staff or other volunteers in the process (such as through a 360° evaluation process.  If the source of feedback is expanded, it is best done in the context of an organizational review, and not just as a review of the CEO. Of course, the CEO can decide for themselves if he or she wishes to seek feedback from staff for their own personal and professional development.

• Use benchmarks of organizational success as indicators of your CEO’s performance (and with Policy Governance, the results of the Board's monitoring activities.)

• Take into account the CEO's personal goals and needs regarding future leadership. If you only focus on the organization's needs, then the CEO could seek to fulfill those needs elsewhere.

• Provide a written evaluation to the CEO, but also hold an evaluation meeting with the CEO to discuss the evaluation and ensure full understanding and future expectations.

• After the meeting, provide the full board with an oral in-camera report.

• The final step is to evaluate the process. Make it an objective to improve the process each year.

And, of course, it is important to remember that ongoing feedback throughout the year is also essential.  An annual evaluation is not sufficient!

Resources:

Annual Evaluation of the Executive Director, Board Cafe, September 1999.

Hiring and Performance Appraisal of the Executive Director, Muttart Foundation and Board Development Program (Alberta Community Development, Government of Alberta).

Evaluating the Performance of the Association Chief CEO, Association Forum of Chicagoland, 2003.

Wayne Amundson is president of Association Xpertise Inc., a consulting firm serving associations and non-profits. He is also a writer and speaker on association and non-profit management and governance, and is editor of The Canadian Association e-zine and co-author of the new “Primer for Directors of Not-for-Profit Corporations” published by the Industry Canada and three non-profit umbrella groups in Canada. 
Phone: 403-374-1822 E-mail: admin@axi.ca  Website: www.axi.ca 

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