The second responsibility of the not-for-profit Board was to hire the organization’s CEO. That individual works to implement the Board’s decisions, managing the organization on a day-to-day basis and achieving the organization’s mission. The Board cannot abandon the CEO once he or she is hired. As the supervisor and mentor of the CEO, the Board, must support that individual and provide whatever assistance is requested to make the CEO and the organization successful. An annual formal assessment is part of the process.

“Organization performance is synonymous with chief executive performance” – John Carver, noted governance expert in his monograph Monitoring: Relaxing about the Present…So We Can Get on with the Future.

Don’t let a fear of conflict, a lack of tools or the lack of tradition keep you from the formal evaluation of the CEO. This evaluation is one of the ways that the Board fulfills its duty to lead the organization. It provides a great forum and opportunity to set new annual goals and for monitoring whether organizational goals set in the past are being achieved. The formal evaluation is one of the best ways for the CEO to understand the Board’s perspective on his or her strengths and limitations. It will help the CEO work to their strengths and obtain assistance on their limitations. The specifics of what you include in your CEO evaluation and how you go about accomplishing it are less important than the commitment to perform a formal annual evaluation.

The first step is to establish an evaluation policy so that everyone knows it is coming. The overall goal is to recognize how well the individual is performing and to identify ways to improve. Clearly identifying performance expectations and standards makes this job much easier; so setting objectives is the logical second step in the process. Objectives should be linked to previous evaluation(s), the job description, board policies and the organization’s annual plan.

The next step in the process is to determine an approach to evaluating the CEO. In many respects, the Board is always evaluating the executive director whether it be in formal or informal meetings, discussion with volunteers and stakeholders, donors, etc. Care must be taken to separate personal judgments from observable data.

Some organizations use a performance survey where a questionnaire is provided to individuals and groups (including fellow Board members) relative to the CEO’s performance. The questionnaire is usually consistent with the job description, the CEO goals, the annual plan or all three. Other organizations base their annual assessment primarily on an assessment of the CEO performance compared to the plan. Care must be taken with this approach to properly factor in environmental changes that may require a change from the original plan. A third approach to CEO performance evaluation is an assessment of the executive’s strengths and weaknesses. This approach is more broad in context and hopes to strengthen the organization by strengthening the CEO. In reality, organizations tend to use a combination of these three approaches.

Ultimately the Board (or a committee) will meet with the CEO and document their meeting. It is important to be sure that everyone is on the same page so that the message is clearly delivered and does not stray off course. It is essential for the Board or committee to meet before the meeting with the CEO to evaluate and decide what topics will be covered and emphasized. As with all Board responsibilities, properly discharging this one requires work and effort and there is no short cut.

Usually compensation is part of the annual CEO review. However, there are many who believe that in the not-for-profit world, where mission is so critical, it is entirely appropriate to separate the performance evaluation from the compensation negotiation. People work for a number of intrinsic and extrinsic rewards and it is important for the Board to recognize the role of each in human motivation. Placing too much emphasis on either one reduces the effectiveness of the performance evaluation.

Ultimately, however, the amount the Board pays the CEO does make a statement about the value it places on his or her performance. And remember, compensation for the not-for-profit CEO is likely to be as important to that individual as compensation is to any of your Board members.

Read more on not-for-profit boards:
Board Development Series

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