Mar 15th, 2022
Essentials for the CEO and Association/Non-Profit Boards
With the end of the financial year fast approaching, Boards of most associations and non-profits are starting to get ready for the annual CEO performance appraisal.
The problem
Sadly, many associations and non-profits either don’t bother doing it or just do it poorly.
By failing to adequately evaluate the CEO, many association and non-profit boards miss an opportunity to express support for the CEO and strengthen their performance. Neglect can be costly, resulting in high turnover, mistrust, and ongoing poor performance.
Too many associations and non-profit organisations and their boards seldom take the time to assess the CEO’s performance. In many cases, the assessment is perfunctory and may not produce useful results for the CEO or organisation. In fact, when the CEO does receive feedback, it is often during a period of change or stress - hardly a time when effective dialogue can take place.
Why is evaluation so often neglected?
Some boards feel that it requires too great a commitment of time and energy. Others are reluctant to open a can of worms when things seem to be going just fine. Often the board chairperson and the CEO have mixed emotions about giving or receiving candid feedback.
There are many reasons why a board should conduct regular, systematic assessments of the CEO. With no peers and no direct supervisor, the CEO’s position within the organisation makes it difficult for them to obtain honest feedback to use as a basis for improving performance. Many CEO’s would welcome this feedback and complain that they cannot get the board to let them know how they are doing.
The assessment also provides an opportunity for the board to express formal appreciation for a job well done, which most CEO’s will value. Most importantly, the CEO's performance affects the performance of the entire organisation - one of the board's chief concerns.
The solution
Implement the
CEO 360⁰ Assessment & Performance Program. Designed and rolled-out to dozens of Australian associations and non-profits, this well-established assessment tool is designed to guide the board and the CEO through an effective dialogue. The assessment process has three broad goals:
- to clarify expectations between the board and the CEO on roles, responsibilities and job outcomes;
- to provide insight into the board's perception of the executive's strengths, limitations and overall performance;
- to foster the growth and development of both the CEO and the organisation.
The assessment should be a learning exercise. It is not meant to be a report card, to assign blame or to be used strictly as a basis for setting compensation. This assessment instrument provides tools to lead the board and the executive through a thoughtful discussion about the CEO's past performance and future aspirations. It is only through discussion of this type that nonprofit leaders can chart courses of action and make progress in fulfilling their organisations' missions.
How to conduct the assessment
There is no single method for conducting an assessment, but boards and CEO’s are more likely to find the assessment constructive if it is implemented in a thoughtful and planned way.
The assessment should be undertaken in the context of:
- the CEO's job description;
- annual goals and objectives for the organisation established by the board and the CEO;
- the CEO's individual performance goals.
Since many organisations may not have these elements in place, the assessment process can be used as an opportunity to establish, clarify or revise them.
The steps outlined below will help you develop a process for assessment.
STEP ONE:
AGREE TO CONDUCT THE ASSESSMENT
Assessment can be a nerve-racking experience for the person being assessed - especially if it comes as a surprise. The process can begin with either the board or the CEO. No matter who initiates it, however, everyone involved needs to be informed. The board and the CEO should have an opportunity to discuss the assessment and the CEO should help design the process. The CEO should also be familiar with the assessment instrument, including the self-assessment questionnaire, so they will understand the performance areas on which the assessment will be based.
STEP TWO
DECIDE WHO WILL LEAD AND PARTICIPATE IN THE ASSESSMENT
Decide who will participate in the assessment and who will provide feedback to the CEO at the conclusion of the process. Usually the assessment process is led by the board chair or the chair of the Governance or Remuneration committee, if one exists. Some boards use an external consultant to assist in the assessment. A competent, objective third party can add credibility and perspective to the process.
Depending on the level of interaction between the board and the CEO, an organisation may have all board members complete the assessment questionnaire. In other circumstances, participation may be limited to members of the executive committee or an ad hoc committee appointed to conduct the assessment.
We also recommend considering inviting other key contributors to participate, including:
- Senior staff, and
- Key external stakeholders
These groups interact closely with the CEO and possess an in-depth understanding of programs and operations that may not be fully evident to board members.
Importantly, we also recommend that the CEO be invited to contribute to the survey process by completing a self-assessment. Their results can then be compared to the feedback provided by the board, senior staff and key external stakeholders.
Direct interaction between board members and senior staff can be a sensitive and complex issue - particularly when it involves discussing the CEO’s performance. The following conditions need to be in place in order to successfully involve staff in the CEO assessment process:
- Senior staff members must be willing to participate in the process;
- Senior staff involvement in the assessment process must be carefully planned;
- The format for the assessment must be agreed to by both the CEO and the senior staff members.
Informal discussion between board members and staff, which may undermine the CEO’s relationship with the staff, are not recommended.
STEP THREE:
DISTRIBUTE THE SURVEY
Distribute the survey to all board members, senior staff and key external stakeholders who are participating and distribute the self-assessment form to the CEO. A firm deadline for completion and return of the survey should accompany its distribution. A typical time frame for return of the survey is about two weeks. A letter from the board chair explaining the assessment process and the importance of individual participation in the survey can help generate enthusiasm for the process. To increase the response rate and to encourage candour, emphasise that the information will be compiled in a composite summary report and that individual responses will be anonymous.
STEP FOUR:
TABULATE AND ANALYSE THE ASSESSMENT RESULTS
When all the surveys are returned, the comments and responses are compiled into a survey report. (The goal should be 100 percent participation, although it is rare for all the surveys to be returned. Those conducting the process must make a realistic assessment of the likely response rate.)
Comparing the results of the board's assessment of the CEO with the CEO's assessment of their own performance is an important step in this process. Large discrepancies in scores may indicate a communication problem between the board and CEO regarding the CEO's responsibilities and expectations.
STEP FIVE:
REVIEW THE RESULTS WITH THE CEO AND DEVELOP ACTION PLANS
Once the survey report is complete, representatives of the board should meet with the CEO to review the assessment results. The purpose of the meeting is to review the strengths and limitations of the CEO as identified by the board and by the CEO in their own self-assessment questionnaire and to develop action plans for future growth. The implications of these strengths and limitations for the future of the organisation should also be discussed at this meeting.
STEP SIX:
SUPPORT THE CEO’S FUTURE DEVELOPMENT
The main objective of the assessment process is to encourage self-discovery and improvement. After evaluating the CEO's performance and preparing action plans for the CEO's development, the board must support the CEO over the next year. Change can be a difficult process, and the board should encourage the CEO's personal and professional development.
In addition to rolling out the
CEO 360⁰ Performance Appraisal Survey as outlined above, we recommend that the Board also implement the following four steps:
- Development/update of the CEO Job Description. Ensure that you incorporate quantifiable and measurable KPIs that are benchmarked against other Associations and non-profits.
- Implement a Board training program on how to use and apply the information obtained from the CEO 360⁰ Performance Appraisal Survey so as to conduct a quality performance review.
- Conduct a Remuneration benchmarking review – to ensure that you are paying the CEO the correct amount, and
- Development/update of the CEO Employment Contract. The employment contract should be regularly reviewed to ensure that it is not only legally compliant but properly protects the organisation.
Conclusion
Evaluating an association’s/non-profit’s top employee can be a daunting task, but it is a necessary one to ensure that the CEO is helping the organisation’s progress. Performance evaluations benefit not only the CEO, but the board as well, and it’s up to the board to make sure that they carry them out regularly, both formally and informally.
For further information and costing on implementing the
CEO 360⁰ Assessment & Performance Program in your organisation, please contact Mark Werman, Managing Director, Wentworth Advantage on 0403 051 616 or
mwerman@myadvantage.com.au
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