Appraising the CEO – 10 Simple Steps!

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The relationship between the board and the Chief Executive Officer (CEO) can determine so much about the performance of an organisation. So, why does something as important as the CEO appraisal process get carried out without the required care and diligence? Unfortunately, more often than not, the whole process doesn’t achieve what it is meant to and can sometimes be somewhat demotivating for the CEO.

The appraisal of the CEO is a key part of the board’s responsibility and the Chair must ensure that this function is performed on behalf of the board in an effective and timely manner each year. CEOs largely look forward to the encouragement and support they receive for a job well done and welcome feedback about how they can improve their performance and a well done appraisal can help to facilitate that.

The way the process is delivered is as important as the key components of the process. There must be two-way communication between the chair and CEO, with honest open dialogue and where necessary, ‘difficult conversations’ need to be had. The appraisal forms that are used then are important and must ask the right questions but a process that is not transparent or where there is lack of trust may mean that any feedback that is gleaned from them can be made redundant.

An annual appraisal can take the form of an informal chat between the chair and CEO, particularly if they are already meeting on a regular basis. However, even in those circumstances a robust, documented framework for the whole appraisal process should be followed. There is no excuse for not appraising performance but there are still a great many organisations that don’t carry out appraisals effectively.  As the saying goes; “…you can’t manage what don’t measure.”

A good appraisal process will be planned well in advance and contributors to the process will be well versed in what is required. The CEO will leave the process with clear feedback about their performance, measured against unambiguous goals that correspond with the corporate goals and the CEO’s job description.

A bad appraisal process will be carried out as a tick box exercise without due consideration being given to ensuring the performance measures are relevant. The collection of feedback provides an opportunity to challenge and support the CEO at the same time.

The best organisations and their boards see the appraisal process as more than an annual feedback meeting. It is part of the process of engaging with the CEO to challenge, stretch and develop them as the organisation too can be challenged, stretched and developed. This will mean that the performance matrix for the CEO will be more sophisticated than just the financial metrics and links will be made to the outcomes and real impact for beneficiaries. Performance will include achieving corporate plans and objectives whilst pursuing value for money. A high performing board will want to ensure that it sticks to its strategic role but at the same time it must be confident in its ability to ensure that the organisation is performing well. To achieve this, it will be necessary for the board to hold the CEO accountable for the performance of the executive team.

The following checklist is recommended in order to help you plan your CEO appraisal process:

  1. Review the CEO’s job description, performance measures and who should input to the appraisal process,
  2. Have a regular meetings with the CEO to get two way feedback on ongoing goals,
  3. Agree dates for the annual performance review meeting and board meeting at the beginning of each year and add to the annual calendar,
  4. Meet with people who will complete appraisal forms to explain the importance of and criteria for completing the appraisals,
  5. Send out appraisal forms to CEO and board members with enough time to complete them (I recommend at least 14 days). A full 360 should also be carried out every 3 to 5 years which cover leadership competences,
  6. Collate all responses from the appraisal forms into a consolidated report and forward the consolidated report to the Chair,
  7. Arrange a meeting with the Chair to review the information in the aggregated appraisals (that have been pulled together in the consolidated report),
  8. Carry out the appraisal meeting and get feedback from CEO, review previous goals, set new goals and agree development areas,
  9. Present the highlights from the appraisal meeting to the board at a designated board meeting, together with the agreed targets for the CEO.
  10. Evaluate the process and make recommendations for improvements to the process for next year

We all want to see organisations achieve the goals that they have set collectively. It is the responsibility of the board to set the vision and strategy but this can’t be done without the input of the executive. So, boards need to scrutinise performance and challenge the executive but they need to be careful in how they do this by engaging with the CEO.

A robust CEO appraisal process can help if we do it properly.

Until next time…