There’s wide agreement in the nonprofit sector that one of the preeminent vehicles for building and maintaining a close, productive, and enduring board-CEO working relationship is a well-designed and meticulously executed process for board evaluation of CEO performance. CEO evaluation is often carried out by the board’s “governance” (sometimes called “board operations”) committee – at least annually and often semi-annually early in the CEO’s tenure. I’m pleased to report that in recent years, an increasing number of nonprofit boards have moved away from those once-popular but highly subjective questionnaires that assess the CEO’s functional excellence (for example, ranking the CEO on how well – on a 5-point scale – she handles the external relations and long range financial planning functions). Instead, many boards these days take a much more objective – and relevant – approach: assessing their CEO in terms of overall organizational performance in meeting targets established in the annual operating plan/budget (for example, a planned increase in membership or program participants; the net income earned from the annual conference; the completion of a major capital construction project; etc.).
Many nonprofit organizations have made the CEO evaluation process even more meaningful by focusing not only on overall organizational performance, but also on the CEO’s achievement of his unique “CEO-centric” leadership targets. CEO-centric leadership targets involve the CEO’s direct use of her own time in achieving particular high-priority outcomes meriting close CEO attention. These annual CEO-centric performance promises, which are typically negotiated with the board’s governance (or board operations) committee at the end of the fiscal year for the upcoming year, tend, in my experience, to fall into four main categories:
- Board development and support: for example, the CEO promises that he will make sure the board’s new standing committees are fully functional by the second quarter of the upcoming fiscal year.
- Strategic organizational development: for example, the CEO promises that she will make sure that the cooperation agreement with the local university is adopted by both boards by November 30.
- Internal management capacity building: for example, the CEO promises that he will play a hands-on role in recruiting a new human resources vice president by September 1.
- External/stakeholder relations: for example, the CEO promises that she will reinvigorate the relationship with the chamber of commerce, partly by engineering her appointment to the chamber board.
There are two compelling reasons for adding CEO-centric promises – CEO resolutions, if you will – to the evaluation mix. First, negotiating CEO-centric leadership targets with the governance or board operations committee has proved to be a highly effective way to ensure agreement on the CEO’s more particular leadership priorities (as distinguished from organization-wide operational priorities). Second, experience has taught that the discussion of CEO-centric leadership targets helps to cement the board-CEO relationship – by surfacing and averting potential conflicts that might damage the relationship, and also by signaling that the CEO welcomes – and isn’t the least bit defensive about – the board’s involvement in CEO priority setting.
If you’ve already negotiated your CEO leadership resolutions with your board’s governance committee, now – at the beginning of a new calendar year – might be a symbolically attractive time to update and fine-tune them with your board’s governance committee. And if you haven’t yet come up with a set of mutually agreeable CEO leadership resolutions, what better time to begin the dialogue with your board’s governance committee than at the onset of the new year?