Friday, November 6, 2015

Board Chair Best Practices #1: CEO Annual Reviews

I’ve heard this refrain numerous times—and it’s true: “As the board goes, so goes the organization. And the board will be no more effective than its chair.”

Here’s my Board Chair Best Practice #1 (stay tuned for more):

#1. Ensure that there is 100 percent board participation in the CEO’s annual performance review. Since the board chair is not the CEO’s boss, never-ever-ever should the board chair conduct the CEO’s annual review as a Lone Ranger.  

The best boards agree with the CEO—in advance—on the format and setting for the CEO’s annual review and the protocol for how the CEO responds with next steps, following the review. 

My opinion: 50 percent of the annual review should be based on agreed-upon annual measurable goals, set at the beginning of the year. (Peter Drucker said, “If you have more than five goals, you have none.”) 

The other 50 percent: focus on biblical qualities, including character, leadership, vision, passion, and other critical characteristics per your ministry’s culture, DNA, and mission.

Some organizations conduct a 360 review (the board, the CEO’s direct reports, and the CEO’s own self-assessment). Others develop metrics to discern if the core values of the ministry are being lived out, and if so, to what degree.

As a reminder, though, heed this wisdom from Ten Basic Responsibilities of Nonprofit Boards (Second Edition), by Richard T. Ingram, regarding CEO performance reviews: 

“In the end, although we may not be able to precisely define what outstanding leadership is, we know it when we see it! Let’s admit that this very subjective process is more art than science, more human than anything else. We can and should use various objective measures or strategic indicators of the organization’s progress on its financial condition, for example, as part of the assessment process—but whether a leader stays or goes so often hangs on much more subtle factors.”

And, as I’ve often quoted in this blog, here again is Ram Charan’s insight from Owning Up: The 14 Questions Every Board Member Needs to Ask, by Ram Charan

“There is nothing more important for a CEO than having the right strategy
and right choice of goals, and for the board, the right strategy
is second only to having the right CEO.”

He also notes, “With the right composition, a board can create value; with the wrong or inappropriate composition, it can easily destroy value.” So while you’re conducting the annual performance review of your CEO, be sure you schedule the board’s annual self-assessment process.

As the board goes, so goes the organization. Great boards are intentional about spiritually discerning God’s direction and how they will steward all the resources of the ministry—including their CEO’s leadership and tenure. Many times, however, it’s the board chair that must lead and put the CEO’s annual review on the front burner (sorry—bad metaphor!).

QUESTION: Is your board creating value or destroying value when it conducts your CEO’s annual performance review? (If you’re not conducting an annual review—you’re not adding value, and you’re missing an opportunity to grow your leadership.)

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