We are, once again, coming to a time of the year I particularly enjoy – it’s time to start dealing with CEO Performance Review processes.
It is practically impossible for the CEO to get objective feedback from anyone within his or her organization. It is the role of the Board to provide a clear feedback mechanism. Most Boards have little or no experience on how to do this. And so, I get numerous calls to come in and set up and facilitate the CEO Performance Review process.
In my experience, the reason it’s perceived to be difficult to give formal feedback is because there is no clear agreement on what the CEO should actually be doing. While everyone agrees he or she should deliver a return to shareholders, the next level of detail is usually missing.
As we move into a VUCA world of greater uncertainty, few people may have given much thought to the question of what the CEO’s job really is versus others in the organization.
In order to evaluate the CEO, it is key to create a formal CEO Performance Review System. In my opinion these are the key areas in which we need to evaluate the CEO (Note: there can be adjustments naturally, depending on the nature of the organization, its mission and its DNA). If the CEO is executing in each of the following areas, shareholder value will follow.
- Own the Vision – I use the word vision, but this area includes the entire corporate strategy. Has the CEO signed off on and communicated a clear vision, mission, corporate values and strategy to all stakeholders, both internal and external? Is it an effective strategy that leverages the unique strengths of the organization to establish a clear competitive advantage? Do employees come to work excited and engaged by the mission of the company? Do clients and shareholders know what to expect from the company?
- Provide the Proper Human Resources – How many times have we heard CEOs say “Our people are our most important resource”? If that is the case, then has the CEO built a company whose people are clearly better than the competition? It is easy for the CEO to say we have great people, but if they are not as good as the competition at acquiring talent, then the company is at a competitive disadvantage. While all the members of the team are important, the Board and CEO should pay special attention to the C-Level executive team and provide clear succession planning. In the people area, the Board should consider two key questions: Is the CEO getting the right people? And is the CEO making sure they are developed to perform to their fullest potential?
- Provide the Proper Capital and Other Resources– No business can continue to function without the proper financial resources. Those resources can come from external funding sources or from the internal operations of the company. The CEO must constantly anticipate the needs of the organization and not allow a shortage of resources to cause the company to miss opportunities. Additionally, the CEO is the one person in the company in the position to bring in external expertise. Has the CEO attracted the right Board members and surrounded himself with external advisors and service providers that can provide real value to the company?
- Build Culture – I define culture simply as how things get done in an organization. High-performance cultures don’t just appear. They require a CEO who understands what motivates people throughout the organization and is able to instill “trust” throughout the organization and its teams. Too many CEOs allow the culture to develop organically and then are surprised when people develop attitudes that aren’t aligned with the company’s vision, mission and goals. Is the CEO setting the standards for the company or is each employee left to his or her own standards? Are the company’s stated values applied consistently across the company? Is the culture driving a high level of performance consistently across the organization, or is performance highly variable based upon the particular group?
- Make Decisions Well– Decisions are the fuel on which every organization runs. The quality and speed with which decisions are made determine the productivity of the organization. The CEO is responsible not only for the decisions he makes but also any decisions his management team makes. Building an organization that consistently makes thoughtful choices in a timely manner is one of toughest but most valuable things a CEO can accomplish. Does the organization run like a well-oiled machine or are there constant stops and starts as decisions are either: 1) not made or 2) have to be sent to the top for review?
- Deliver Performance– At the end of the day as we all know, CEOs are responsible for delivering performance. The challenge with evaluating performance directly is that it often takes years to see how things play out. Instead of just waiting to see what happens, the CEO must work with his management team to understand the key metrics in each area that will lead to superior performance. Is there a clear system of goals and metrics that tie to the vision, mission, values and strategy of the company? Does the CEO know what makes the business work, and can he identify problem areas before they significantly impact performance?
By evaluating the CEO in these six areas and developing a formal Performance Review System, we can provide great feedback and start a valuable developmental conversation with the CEO.
The CEO Performance Review Process is straightforward and unfolds as follows
- development of a baseline with this six key evaluation parameters and a rating system
- conversation with the CEO to seek ratings and qualitative inputs on these six parameters
- conversations with Board members and Management Committee to seek ratings and qualitative inputs on these six parameters
- development of a collective view for discussion with CEO
- feedback session with CEO and co-creation of a development plan
About Luis Soares Costa
From the very beginning, coaching has always been at the core of my passions.
For the past 38 years I have been an Executive and Team Coach working globally with CEOs and their C-Suite Executives, Business Owners and top talent in a significant number of the major global companies (including a significant number of Fortune 500), innovative companies operating in new ecosystems and dynamic family owned businesses.
During the past 28 years, I have also been an Executive and Team Coach and a “consultant to consultants” developing partners and top talent at major consultancies, Big4 Firms and Legal Firms
As an Executive and Team Coach, I partner with you and/or your teams in a “real play” thought-provoking and creative process which inspires you to “connect the dots” and maximize your personal and professional potential. The aim of the partnership is to bring about a sustained behavioral and performance transformation and profoundly shift the quality of your and your team’s working and personal life, whilst maximizing your potential and generating sustainable value.