My last post – “Welcome To Your New Profession: CEO!” – talks about the unique features of CEO-ship that make it different in kind from other executive positions. One unique feature that is worth taking a closer look at is the CEO’s responsibility to make sure that she works with her board to put in place an effective process for the board’s evaluation of her performance as CEO. Unfortunately, I’ve seen a lot of pretty ineffective approaches over the years, such as the board chair doing the evaluation or all board members filling out evaluation questionnaires. I’d like to describe a real-life example of an effective approach that is becoming much more common.
I was fortunate to have the opportunity to sit in on a fascinating, highly productive work session that lasted a little over three hours. The governance committee of the board of a professional association was conducting the end-of-year evaluation of its fairly new president and CEO’s performance. The first hour of the session was devoted to discussing the CEO’s performance in terms of association-wide outcome targets that had been established for the year just ended in the annual operational planning/budget process. The discussion focused on such outcome measures as membership numbers, attendance at the annual conference and at various educational programs that had been presented during the year, the profitability of income generating programs such as the annual conference, overall revenue growth, and the like. Making and exceeding targets was noted, but most of the discussion centered on targets that were not met. By the way, the president had prepared for the session by putting together an explanation for the shortfalls in performance that she knew would be highlighted.
The final two-thirds of the session were devoted to the president’s “CEO-centric” outcome targets that had been negotiated with the governance committee a little for a year ago. These targeted outcomes, which were explicitly tied to the president’s chief executive leadership priorities and which involved significant presidential time, fell into four main leadership categories:
- Association strategic growth – for example, the president had committed to the full implementation of a strategy to grow the association’s membership and participation in educational programs by specific percentages in selected countries outside the US.
- External/member relations – for example, the president had committed to improving the association’s image among its members as measured by a member survey that had recently been administered.
- Internal management – for example, the president had committed to significantly upgrading the association’s financial management capacity, including hiring a well-qualified chief financial officer and completing a major overhaul of the accounting system.
- Board of directors support – for example, the president had committed to working closely with the governance committee in developing and implementing a comprehensive program to strengthen board member governing knowledge and skills, including a completely re-designed process for orienting new board members.
The president had also prepared for the latter segment of the evaluation session by documenting progress in achieving her CEO-centric targets and explaining any performance problems she had encountered. What hit me in the face as I observed this lively session was how substantive the discussion was from beginning to end. By focusing on two tiers of outcomes, the board’s governance committee got to the heart of the president’s performance and was able to deal with truly important performance issues, such as an actual decline in attendance at the annual conference. Three further steps were taken to complete the evaluation process after this three-hour meeting. First, the governance committee briefed the full board on the evaluation results and solicited board members’ feedback. Second, the governance committee finalized its evaluation and reviewed it with the president. And third, the governance committee set the president’s compensation for the coming year. The ultimate bottom line? Agreement between the board and its CEO on performance issues that she needed to address over the coming year.