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Chief Executive Officer (CEO) Review

In our previous article we described the CEO review as a weakness in the all- important Board/CEO relationship. We also mentioned that the performance evaluation is complex and difficult. HR professionals tell me it is the “bane of their existence”. Typically, the reviews are late and poorly constructed. They believe that most managers see the performance review process as a “necessary evil”. In reality this process is one of the most valuable of all management tools.

A proper performance evaluation is both informational, instructive and personally valuable to the employee. It is also a reflection of the manager’s skill and commitment to their staff. All of this applies in spades to the performance of the CEO.

Most CEO reviews consist of two key components; a set of organizational performance measures – typically in the form of an organizational scorecard, and a more subjective perspective of the Board’s perception of the CEO as an organizational and community leader, and their comfort with the Board/CEO relationship.

Our prior article gave some basic metric information We will provide a detailed method to develop a robust and member centric scorecard in a future article. This article will focus on the more subjective portion of the CEO review.

Typically, each Board member is asked to rate the CEO relative to several questions designed to assess leadership and relationship – communications performance.

  1. The CEO is effective at identifying strategic long-term needs of the Credit Union and developing and implementing plans that result in achievement of these needs.
    Rating:
    Comments:
  1. I am satisfied with the level and quality of information and communications provided to me by the CEO.
    Rating:
    Comments:

The opportunity is provided for explanatory narrative for each rating. There is also typically an opportunity to provide written perspective of the CEO’s performance in a more general manner at the conclusion of these forms.

This process is a well-intentioned attempt to insure all Board members the opportunity to give input and to provide the CEO with a clear perspective of the Board as to his/her performance and some guidance towards any potential corrective actions. In our experience the end result of this process is rarely clear. In fact, there is frequently one or two scores or comments inconsistent with the general tone of the comments. Such comments and scores make the overall Board message unclear and often lead to confusion on the part of the CEO. Occasionally the CEO does not challenge this inconsistency to the potential detriment of the Board/CEO relationship.

In our experience CEO’s want, and we believe deserve, a review that clearly reflects the Board’s perspective of performance with productive comments on areas for improvement. A critical element in Board Governance is that the Board will, “Deliberate in many voices and Govern in one”. This value should also apply to the CEO review.

How To Provide “One Voice” In The CEO Evaluation

In our discussions with CEO’s it is clear that they would value an evaluation that reflects the consensus – govern in one – perspective of the Board. This requires the assimilation of the score and narrative replies into one consensus document. This may become the responsibility of the Board Chair or a CEO review committee depending on your governance structure.

One method of achieving this is to have the Chair or committee provide a consensus document from the individual responses. This document should be provided to the entire Board for acceptance before provided to the CEO. We know of many occasions where this step is missed and the Board is not privy to the final document provided to the CEO. It may seem to be a small detail but considering the importance of this document, we believe that it is vital to have all Board members both aware and in support of the Board’s CEO evaluation.

Creating the consensus document is an important and challenging task. The easy road would be to simply develop that document with little to no input from the full Board and give it to the CEO. Discussion of the proposed document with the entire Board adds an additional step but pays multiple dividends. It always valuable for the Board to speak with one voice. This step insures that all Board members are aware of the “one voice” message.

Best practices in this process go a bit further. The additional step of providing the entire Board with the proposed consensus document is embellished with a dialogue to insure that consensus.  It is strongly suggested that this dialogue be facilitated by a governance expert to allow all Board members to participate equally. Often the Chair or committee will attempt to facilitate this discussion. This takes on of their natural and important Board role by adding the responsibility of facilitation. A governance expert will provide both facilitation and perspective on this important discussion.

Another rationale is to simply provide all scores and narrative without the consensus process, to insure that the CEO is fully aware of the feelings of all Board members. Clearly it is valuable to know if one or more Board member(s) hold a strong, even if minority opinion, of the CEO’s performance.

  1. I am satisfied with the level of information provided to me by the CEO. I am adequately informed to function as a director.
    Average Rating: 4.0
    Comments:
    I value the effort that the CEO is making to condense and reduce the amount of material and info being provided us.  Rating 5

This is one more reason for inclusion of a governance expert into the process. Frequently those Board members with such opinions have uniquely different perspectives of events or issues. In our experience when all Board members have the same perspective of events and issues a consensus evaluation can be easily developed. Those with a minority view are often convinced and willingly support the majority view.

There are undoubtedly times where an individual has such a strong belief, contrary from the group, that it must be addressed. A governance consultant will be equipped with tools and techniques to insure this is accomplished.

By completing this process, including the “best practice” described, the Board will insure a strong and clear Board/CEO relationship now and into the future. The CEO will have clarity as to his/her performance and guidance as to performance improvement opportunities.

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