In my experience, every board clearly wants its CEO to succeed, and one of the best ways to do that is to provide meaningful feedback. However, for many boards, feedback is often only provided when things go sideways, such as missed financial targets or a public relations crisis.
Senior leaders frequently mention to me how the performance feedback they receive from the board is relatively inconsequential or ‘lightweight’. Often just a cursory summary at fiscal year-end.
Like everybody else, top-level executives need structured feedback regarding their performance. The benefits are numerous – enhanced role clarity for both CEO and directors, clearer definition of strategic direction and key priorities, improved communications between all parties as well as increased accountability at both the executive and board levels.
Typically, this feedback should answer several key questions in relation to CEO performance, such as:
- How well is the incumbent doing in relation to their terms of employment?
- Are they realizing agreed-upon objectives and performance metrics as outlined in the company’s strategic and operating plans?
- How well are they demonstrating the leadership attributes needed to build an engaged workforce, high-performance culture and satisfied stakeholders?
- How well have they addressed emergent high-profile opportunities and issues?
- What has been their impact in terms of company profile, brand and reputation?
The challenge is to ensure your process is credible, transparent and effective. Here are seven key tips to guarantee your review is on course for success:
1.) Create Clear Role Definition
- It’s important that key roles, responsibilities and accountabilities of the CEO be clearly articulated. Too often, a very high-level description of the senior leader’s role is used to define expectations, leading to confusion around who’s responsible for what. It also has the potential to generate friction between the CEO and board in terms of boundaries. While role flexibility is important, this clarity is essential when evaluating performance.
2.) Include Articulated Objectives and Performance Metrics
- An organization’s strategic, business and operating plans provide the basis for specific performance objectives and measures for the CEO. Well-crafted priorities, along with the associated metrics, will enable a meaningful sense of progress through the year. While financial measures (e.g., sales, growth, profit) are the obvious, and still the most popular metrics, other key measures can be equally valid (e.g., customer acquisition/retention, sustainability, stakeholder and investor relations).
3.) Enable Collaborative Design
- Involving the CEO in the design of evaluation policy, process and measures creates the basis for mutual trust and collaboration throughout the entire review process. While the board clearly has final say in these parameters, the senior executive’s input can improve accuracy, strengthen relationships among executive and directors, and ensure greater credibility and ‘buy in’ for the end results. Opportunities for co-design include such aspects as the performance measures, executive competencies, stakeholder involvement and key steps in the review process.
4.) Create a Well-Defined and Transparent Process
- Identifying the key steps, timeframe and those involved in each element of the performance review is essential to ensure a smooth and productive experience. Ensure a lead director has overall responsibility for the review process with support from key board members. Be clear on how performance information will be collected, analyzed, aggregated and reported. Consider obtaining independent external guidance and support to ensure a credible, transparent and effective process.
5.) Confirm Specific Leadership Attributes
- In addition to the ‘hard’ performance measures that are established, it’s critical to identify and confirm a few key executive competencies for CEO feedback. These leadership success factors typically drive major elements of the business, including strategy, stakeholder relations, culture and employee engagement (e.g., strategic focus, influence and impact, change leadership).
6.) Expand Scope and Reach
- Don’t just rely on performance feedback from board members and senior level staff, instead, expand the scope to include other key stakeholders who have major impact on, and/or influence in, your organization (e.g., investors, joint venture partners, key clients, regulators). They’ll be able to add additional richness to the feedback mix and strengthen the quality and depth of the feedback. Consider incorporating a narrative 360 review into your overall review process to capture this feedback.
7.) Ensure Commitment to Action
- While the review process itself will provide extremely useful information for the CEO and the board in terms of adjustments to the business and leadership practices, without dedicated follow-up, all this effort is of questionable value. An action plan involving the CEO and directors is critical. Ensure that there’s full commitment to a few key actions that will improve both business performance and leadership effectiveness.
The CEO evaluation process is one of the best learning opportunities for both directors and the CEO, as well as one of the board’s most critical responsibilities. Creating a strong foundation for the review process will ensure a credible, transparent and effective outcome.
To learn more about how you can incorporate greater diversity, depth and accuracy in your CEO review process, contact me at [email protected] or 250-882-8830.