CEO Evaluation Process
TWO PERSPECTIVES WITH ONE SOLUTION…
IN SIX "SIMPLE" STEPS
The most important decision your Board can make is
the selection of a Chief Executive Officer. Second only to that selection
is the retention of that CEO retention that assures superior performance,
professional growth and proper balance between personal and professional
life.
The annual performance evaluation of the CEO, if conducted
objectively, candidly and with the proper input, is essential to retention.
The evaluation process should be based upon established Board policy;
(refer to CEO Evaluation Policy in the "Sample Policies of the
Board" on this site).
The CEO evaluation must simultaneously respond to two
perspectives:
PERSPECTIVE 1
- What the Board Wants
o A leader with commitment to the organiza-tion's mission and values
- passion
o Creative champion of the organization's vision and strategic objectives,
a risk taker - "an early adopter"
o A strong working relationship with the
organization's primary stakeholders…the community, patients, employees,
physicians; visible internally and externally
o An educator - for leadership and governance
o An excellent communicator
o Assurance of the clinical and financial viability of the organization
o A partner
Honesty, forthrightness…no hidden agendas, no "done
deals" to the Board.
PERSPECTIVE 2 - What the CEO Wants
· A well defined job with regular feedback…no surprises,
objective assessment
· CEO/Board roles that are defined and
respected; voting membership on the Board
· Support of CEO by Board
· A partnership between CEO and Board, friendly but business-like
relationship
· Regular CEO/Chair meetings
· Collaborative goal setting
· A Board that is willing to learn, is well prepared and asks
substantive questions
· Competitive salary and benefit, contract, achievable incentives
How the Evaluation Can Effectively Serve Both Perspectives
· Basis for salary and incentive rewards
· Defines the Board's expectations of the CEO, ensuring that
the organization's mission, values and vision are reflected in the CEO's
strategic priorities and leadership
· Clarifies the Board's role
· Provides regular, objective feedback based upon collaborative
goal setting
· Reinforces the partnership with mutual
accountability
· Candid - reflection of successes and failures, effective communication
· Furthers trust and respect.
SIX STEPS
The evaluation should not be the responsibility of
the chairman alone, but rather should be the responsibility of a Board
Committee such as the Executive Committee which includes Board leadership.
The evaluation process takes six steps:
1. Board evaluation
2. CEO self-assessment
3. Board review
4. Discussion with the CEO
5. Board approval
6. Establishing future objectives
· The evaluation is completed in writing by all
Board members. Note: In recent years, some Boards have incorporated
evaluations from selected management who report directly to the CEO;
this is an approach the board may want to consider; it certainly is
not a requirement.
· Using a form that is thorough, easy to use
(i.e., 1 to 5 ranking with comments) to encourage participation and
comparability of results
· CEO completes self-assessment using same form, as well as providing
additional comments
· The Board evaluation (summary of ranked responses, as well
as comments) and the CEO's self assessment are reviewed by the Committee
· Preliminary recommendations are developed and are provided
to the CEO
· The committee reviews Board evaluation, self-assessment &
recommendations with CEO
· Final recommendations are developed by the committee
·The Committee presents recommendations to Board, discussion
with CEO
· Board vote (executive session) on recommendations
·The CEO presents objectives for coming year, incorporating Board
recommendations from evaluation
· Objectives approved by Board
· Evaluation process, schedule and form updated and approved
by Board
The Key Components of the Six-Step Evaluation Process
· Clear, written definition of the goals and
objectives against which the CEO will be measured; the evaluation form
was based on this
· The responsibility for conducting the evalua-tion and reporting
to the Board was assigned to a qualified committee
· The input of the entire Board was obtained
· The self-assessment by the CEO was incorporated into the evaluation
· The delegated committee met with the CEO to review his report
and evaluation, there was opportunity for revision
· The committee reported to the entire Board on the evaluation
and salary, the Board reviewed the recommendations and voted
Note: Some Boards prefer to keep develop-ment and, in some cases, approval
of salary within a designated committee. While thisapproach may be appropriate,
the institution's IRS Form 990, readily available to the public, includes
the CEO's salary. Furthermore, the entire Board retains responsibility
and reliability under the IRS private inurement and benefit rules for
appropriate compensation and benefits.
· To prepare the for the next year objectives and the evaluation
process were developed in collaboration with the CEO
· MOST IMPORTANT - This was an open,
inclusive, honest process without surprises
You should not wait for the evaluation form to arrive.
You should prepare for the evaluation by keeping notes throughout the
year...
· Identify CEO's assets and how you (Board) reinforce these
· Identify CEO's weaknesses and how you can help
· Identify the important success and failures of the past year
· Identify the crucial objectives for the coming year
· How can the CEO help you do your job?
Also, don't let serious problems wait for the evaluation
- talk to Chairman. And, don't wait until the evaluation to acknowledge
successes
Finally, ensure that the CEO evaluation process is
part of the annual Board self-evaluation; keep notes on how you believe
the process can be improved.
Content Provided by:
Gary Daniels, Berry Dunn McNeil & Parker
