Is There a Danger to Conducting Executive Performance or is Maintaining the Status Quo More Preferable?

By Steven E. Sacks, CPA, CGMA, ABC

Just like the uncertainties surrounding a client loyalty assessment, so, too, do questions surround the performance of a CEO. I have previously written about board responsibilities, one of which being developing and implementing an executive review process. If one is lacking, this indicates that there is no mechanism to collect timely and relevant performance metrics, which leads to the lack of hard and accurate data that allows for honest feedback between the executive and the board.

A performance assessment tool enables the board to identify and convey to the executive expectations that embrace the qualitative and the quantitative. Without this, the status quo is maintained and the yearly results evince no appreciable improvement. The board, if it is doing its job, should establish a performance evaluation form and process. It should include when the assessment will be conducted, the identified individuals on the board, and what agenda elements will be covered.

Oftentimes, an organization or association decides for whatever reason to make substitute a CEO for another. How much thought is given to this? You got me. The usual pabulum expressed is “We are going in a different direction,” or “We need to restructure.” Just for fun, the outgoing CEO should push to find more about either of these excuses. Usually, after the hemming and hawing, a reason is given is a head scratcher. On the other hand, maybe it’s not worth asking because the answer contains doublespeak and the usual obfuscation.

How and What to Measure

It goes without saying that during the process when the CEO is being interviewed, the expectations should be made clear and memorialized in the initial contract. A period of three to six months should be the first milestones to establish measurable objectives — coupled with measurements against which the CEO’s  performance should be measured. If the board is doing its job, the metrics will be consistent with management objectives that have been created as an outgrowth of a strategic plan (assuming one has been developed).

When the performance data is measured, the executive should not be based solely on the quantitative aspects. If the business’s purpose is to produce X number of a product or the association’s is to attract X number of members, these are fairly simple to assess. But this is insufficient on its own. The board should observe the CEO’s demeanor, interaction with the board; peers, subordinates and staff; outside organizations and vendors; and other groups whose assistance is vital to the CEO’s success.

The measurement part is tricky. Is it a one-way approach: from the board to the executive? Is it a 360-degree process? Is there a questionnaire that the board issues to the staff, including C-Suite executives? The forms contain some sort of numerical score that then translates into a grade. In fact, the questionnaire will be broken down into personality, demeanor, composure, consensus building. Anyone can do the math, but can anyone go beyond the numbers?

The qualitative questions will offer a more accurate assessment, explaining why there was a mixture of accomplishments and failures. Who should conduct the assessment and see the results? Should it be an executive performance review committee that reports to the full board? Or should the full board be on the front lines to conduct, evaluate and reach a decision? I opt for the latter. After all, the board was put together to function for the greater good of the business or association. A chair’s declaration of “We are going in a different direction.” may not reflective of the rest of the board. Some board members will push back; others will just act as lemmings.

So You Got the Data. Now What?

Once the quantitative and qualitative data has been analyzed and summarized, hopefully reflecting a full board consensus, the feedback should be accompanied by new objectives for the coming year. This can be done by the board chair and vice chair, who if they are doing their job, can confidently speak for the rest of the board.

What is known as crucial conversations should be conducted between the CEO and the chair and vice chair. It should be a two-way conversation and allow for an open airing of views. This does not mean a knock down-drag out meeting, but an authentic sharing of ideas.

There is a greater likelihood that not all board members are familiar with the CEO’s performance. Perhaps not all of them were involved in the selection of the CEO. Moreover, the board members may not be familiar with the business or association and how the CEO operates it, let alone know the role and functions of the other staff members. If the conversation turns toward strategic initiatives, some of the board members would not have a clue.

If you want to have a successful business or association, then a mutual understanding of roles and functions is crucial to the success of the organization. Otherwise, the status quo will be baked into the operations and other organizations will surpass yours, leaving you to wonder “Where did we go wrong?”

As the great pitcher, Satchel Paige once said,  Don’t look back. Something might be gaining on you.

About Steve

Steven Sacks is the CEO of Solutions to Results, LLC, a consultancy that specializes in helping individuals, firms and organizations meet the challenges of communicating with clarity and purpose. Visit his website at www.solutions2results.com.