While there is no single method or philosophy for conducting a chief executive annual review and evaluation, there are some best practices.
Both the chief executive and the board of directors will benefit from a thoughtful process designed to support and enhance the board and chief executive relationship and foster the growth and development of the executive and the organization.
Utilizing a formal evaluation is usually more than a one-year process. Therefore, we recommend that a less formal evaluation process be considered the year following the formal process, giving time for the chief executive to consider the findings and follow-up goals that are established in the formal report.
So, how does a less formal process work? We’ve established the following steps for you to consider when conducting a less formal review of your chief executive:
- Determine responsibility for providing the chief executive’s annual review. Most board chairs take responsibility for ensuring that this process is completed. The executive committee of the board may also be accountable for planning the process with the board chair.
- Before any discussion with the chief executive occurs, it may be helpful to review the chief executive’s job description, the organization’s strategic plans/goals, and any other performance goals that have previously been given to the chief executive.
- Develop a list of questions for the board or executive committee to consider in the evaluation process. Engage either the full board or the executive committee with questions to prompt important feedback for the chief executive. A board executive session without the chief executive may be used for this conversation or a separately scheduled meeting. Sample questions to consider may include:
- What is going well in the organization?
- Are there any new positive changes or items that are going well for the executive and/or the organization?
- What challenges has the executive faced in the past year that should be noted?
- Were there any challenges or issues that the executive handled well or is there an opportunity to discuss how the challenges or issues may have been handled differently?
- Are there any new focus areas for the executive to consider?
- How is the relationship between the board and the executive? Is there an opportunity to change or improve?
- Are there concerns about the executive’s work-life balance?
- What other issues, concerns, affirmations, and support that the board can offer to the executive?
- Take notes or minutes of the board conversation regarding the chief executive’s performance. At the end of the meeting (or executive session), determine the top or most important feedback items that were generated from the questions and board discussion. Consider what is most important from the board’s conversation to share with the chief executive. In an informal process, the most important consideration is to provide affirmation and support for all that is going well, and helpful insights on any opportunities for improvement or change to be considered.
- If the full board was not involved in step #3, share the notes and summary generated in #4. It is always best practice for the full board to participate in the chief executive evaluation process to ensure all board members are engaged and in agreement on the feedback being provided.
- Depending on the board’s time constraint, it may be appropriate for the board chair or the board chair and executive committee to share the evaluation feedback with the chief executive and not involve the full board. In an informal process, the involvement with the full board in the follow-up process may not be as important as it is in the more formal process.
- After the evaluation feedback has been provided to the chief executive, the board chair is responsible for providing a condensed version of the conversation in a memo to the chief executive for their employee record/HR file. This memo documents and records that the chief executive evaluation took place and formalizes the annual evaluation process.
- Some organizations link the chief executive compensation review process with the annual evaluation process. If that is the case, a formal review with a competitive wage study may be considered at least every three years, if not more often. The chief executive’s salary and benefits should be reviewed and considered at least every year.
The main objective of the annual assessment or evaluation process, formal or less formal, is to encourage ongoing chief executive self-reflection, growth, and improvement. It also provides an opportunity for the board to be supportive of the executive in new ways and make any needed changes that can further support the chief executive in carrying out their duties and responsibilities.
For more information or support, contact MHS Association.