Reviewing The CEO'S Performance
The CEO is an interesting case when it comes to performance reviews. They manage an entire company and they specifically manage the senior leadership team. They do not have a single reporting supervisor. They report to a Board. And that Board may, like the team they manage, have differing views on their performance.
Also, some executives are strong at managing down but weak at managing up. And the reverse is often true, where an exec is great at managing up but weak at managing down.
A failure mode I have seen in CEO reviews is when a Board thinks a CEO is doing well but they are not and that CEO gets a strong review. I’ve seen the opposite when a CEO manages up poorly but down well and they receive a weak review from the Board.
Given all of that, this is what I have learned to do.
1/ Schedule a CEO review cycle with a regular frequency and stick to it.
2/ Review compensation at the same time that performance is reviewed. If performance is reviewed more than once a year it is fine to only review compensation on the annual review cycle. Do not review compensation without doing a performance review at the same time.
3/ Have a third party (a CEO coach or some other skilled facilitator) interview all of the CEO’s direct reports and all of the Board members.
4/ I like to have the facilitator interview the direct reports first and provide that data to the Board prior to interviewing the Board members. This ensures that the CEO’s performance inside the Company informs and colors the Board members’ feedback. This is the best way I have learned to mitigate the “manage up well, manage down poorly” issue.
5/ The third-party facilitator compiles a review report and shares it with one or more Board members. If there is a Board Chair, she should be part of this part of the process.
6/ The Chair and possibly one other Board member (the Comp Chair if there is one) meet with the CEO, go over the performance review in detail, and then address compensation in light of the review.
This is a time intensive process and must be done thoroughly and with care. The stronger and more experienced the third party facilitator is, the better. You cannot skimp on this work. It might be the single most important thing a Board does on an annual basis.
Feedback is so important to ensure that a leader develops in the role and functions at a high level. In my experience, CEO feedback is often an afterthought because no single person owns the responsibility. If there is a Board Chair, she owns this. But otherwise, it can be a shared responsibility that falls through the cracks.
As Board members, we can’t let that happen. We owe it to the CEOs we work with to give them clear, regular, and accurate feedback. And this process (above) works well to do that.