CEO Evaluation: 10 Tips for Process and Content

The organization’s Board of Directors is responsible for evaluating the performance of the CEO. Boards that don’t take this role seriously are making a big mistake. Skipping performance reviews tells the CEO that he is not valued enough to justify such an investment of time, energy, and effort by his supervisors. This is a bad message to send to the person who bears all the burdens of a company or agency.

Sometimes boards ignore reviews because they just don’t know how to do them. The purpose of this article is to provide critical advice on the process and content related to appraising the person in charge’s work. If YOU currently serve on a Board, regardless of whether the organization is large or small, make sure the following is happening:

1. Evaluate the General Manager annually without exception.
Ideally, CEO evaluations should be handled by the Executive Committee and scheduled for the same time each fiscal year. The end of the year is a good time to do them, for example. However, there are times when evaluations need to be done more frequently. At the end of a new employee’s probationary period (whatever the length of time) the first evaluation should be done. Within three months of an unsatisfactory annual review, another assessment must be conducted to track progress on serious deficiencies. Giving a CEO a poor or questionable assessment and then failing to present standards for expected changes and the corresponding timelines for demonstrating those changes is unacceptable behavior on the part of the Board.

2. Incorporate a self-assessment into the overall process.
The Executive Committee of the Board must decide on a meaningful approach to the CEO self-assessment. This should be done well in advance of the implementation of the evaluation process. Content suggestions include: discussing in writing how well the objectives of the strategic plan have been met during the year, the reasons for not meeting particular objectives, the specific struggles encountered in the position and how they can be overcome, and personal barriers to success at work. A safe Board may even ask the CEO to evaluate his or her relationship with the Board of Directors, discussing what is working effectively and what could be improved from that person’s point of view. Most boards, unfortunately, are not open to this kind of candid feedback.

3. Seek input from employees representing various levels of the organization.
Executive Committee members can conduct twenty-minute face-to-face or phone interviews with a sample of staff to gain insight into how people experience the CEO first-hand on a regular basis. This part of the process is essential. Because the Board is somewhat or totally removed from day-to-day operations, they need to spend time with the people who know what’s really going on. Joints often skip this piece and it is a mistake to do so. It’s hard to gauge someone from fifty miles away. Meeting with staff allows the Board to get an up close and personal view of reality.

4. Measure the CEO’s performance primarily against the job description, job standards, and strategic plan.
While these three documents provide the meat for evaluating any CEO, the problem lies in how comprehensive and clear they are in the first place. Incomplete and poorly prepared documents can lead to an ineffective, useless and potentially disastrous evaluation. The Board should ensure that they are reasonable, well written, and relevant to the current work environment BEFORE attempting to measure the CEO’s performance against them. Otherwise it is unfair to the executive. If a Board has a certain expectation of the CEO, it had better appear in one of these documents. Making up expectations at the last minute, other than what’s on paper, is not credible.

5. Evaluate how well the CEO grows other people.
Leadership is about more than meeting or exceeding revenue/profit targets. How much and how well does the executive invest in the company’s employees? How exactly is that investment? But isn’t it happening at all? Do people feel motivated to excel at their jobs? Are they recognized for outstanding contributions? Are they given the appropriate liberties? Are they given the opportunity to express their creative ideas? Are they given permission to attend professional development workshops and seminars and then share what they have learned? A Board can find the answers to these questions simply by asking the staff.

6. Examine the CEO’s interpersonal skills and their effect on the organization.
A Board needs to know how well its CEO interacts with others, whether he praises others and makes them feel valued, how he criticizes people, whether he engages in self-interested conversations with them, whether he can inspire employees to achieve stars. A CEO toolbox lacking effective interpersonal skills strongly implies that this particular CEO may not work at this particular company or any other company. In fact, interpersonal skills count for a lot when looking at the whole package. Whether extroverted or introverted, the CEO must be able to get along with others in all kinds of situations.

7. Check the CEO’s ability to manage conflict, risk, and organizational change.
This area cannot be overlooked or minimized. Most boards know what’s going on here simply by the nature of the board’s work. How does the CEO handle conflicts between himself/herself and another Board member? Among the members of the Board themselves? What observations can be made? How does the CEO present various risks and upcoming changes to the Board? Does he/she confront them head on or avoid such discussions? Again, what is the Board seeing here? CEOs give many clues about their performance during Board meetings, as well as during less formal interactions with individual Board members. The key is that the Board has to pay attention to those clues. Sadly, many people “sleep in” at Board meetings, ignore clear signs of trouble, or tend to go along with the crowd when opinions are expressed. Because? It is easier to function like this than to pay close attention, take a position, express a different opinion and/or really get involved.

8. Identify the CEO’s efforts to develop personally and professionally.
It’s hard to grow others if the CEO isn’t doing anything to grow himself. Does the CEO value growth overall? Is he reading trade magazines, attending seminars, conferences and workshops, joining professional groups, networking with other executives? Is he looking for a mentor and/or is he mentoring someone else? Has he considered the benefits of hiring a trainer? A therapist if necessary? Boards may think these things are none of their business, but they are wrong. All of these things are Board business. Who wants a CEO who disdains personal and professional development? When this type of person runs an organization, beware! Whatever happens, or doesn’t happen, at the top trickles down through the multiple layers of the business and has a huge impact.

9. Develop a corrective action plan that addresses the deficiencies cited.
Simply talking about what doesn’t work can never be enough. The board chair should include the deficiencies in the written evaluation, discuss them clearly with the executive AND create an action plan to correct problems and/or build important skills that are currently lacking. An action plan serves as a road map. It’s something the Board can use to measure progress over the next few months. Ideally, the CEO accepts the plan and is motivated to make the changes the Board wants. Some negotiations may occur, depending on the issues. Both the CEO and the chair of the board must sign off on the action plan to seal the deal, so to speak.

10. Establish an evaluation environment that invites dialogue.
Formal CEO evaluation should never be a one-way communication from the Chairman of the Board. It is not a diatribe or a thesis to be delivered without comment. The Chairman of the Board is not a dictator. The Chairman of the Board is a facilitator of information that, in the best of cases, leads to the positive growth of the executive and the improvement of the organization in general. The evaluation process should not become a power struggle between the two people. When that happens, a lot is lost. Great strategy plays out like this: The chairman of the board relays an observation about something and asks the CEO how he/she views that very thing. Where do the differences lie, if they exist? The discussion centers on differences in perception. In cases where the gap is wide, both individuals must negotiate what each can live with in order to reach some sort of consensus on how to move forward. But evaluations are not contests where one person wins and the other loses. A smart chairman of the board understands this and behaves accordingly.