Monday, November 25, 2013

Things No One Will Tell You 3: CEO Performance Planning and Evaluation Methodologies

By Virgil Carter

What’s the best method for CEO annual performance planning and evaluation?  I suppose the answer is, “it depends!”  This is because every non-profit organization has its own unique culture, strategic and operating situation and personalities, which evolve and change over time.  Thus, there is really no “one size fits all” methodology.  That said, there are several major approaches for CEO annual performance planning and evaluation that may help to put in place what will best fit and work best for every organization and CEO.

There is (or should be) a common purpose for performance planning and evaluation:  help the organization to improve each year by helping the CEO to improve annually.  It’s important to recognize the connection between successful organizational performance and successful CEO performance.  One doesn’t often happen without the other!   It’s usually the CEO, who leads the staff, and is responsible for the organization’s annual program planning, budgeting and execution.   It’s often the CEO who helps identify the strategic directions and priorities of the organization.  Thus, the CEO is a very valuable person for the organization’s success.  Volunteer leaders should understand the direct connection between organizational performance and CEO performance and, thus, be committed to helping support and improve CEO performance each year in a constructive and positive manner.

Each non-profit organization has its own special culture, it’s “life-style” and value system.  Annual CEO performance planning and evaluation should fit the organization’s culture.  The following table illustrates a range of association cultures or “life-styles” and the characteristics of CEO planning and evaluation systems which fit each culture.
It’s worth pointing out that the “ambiguous” category is in recognition of the situation where some associations attempt to use either a “generic” style of performance planning and evaluation that may have been handed down over time from within the organization, borrowed from another organization and/or attempts to fashion a planning and evaluation process which will represent a broad range of priorities and ideas, i.e., a smorgasbord!

Categories of Association Culture or “Life-Style”
Organizational Success—Basis for CEO Performance Planning
Metrics & Evaluations
Organizational “Fit”
CEO objectives focus primarily on organizational performance, i.e., strategic objectives, business operations, etc.
Performance-oriented measurements for strategic and/or business operations; programs & products often seen as operational means to strategic ends
Appropriate where organization puts priority of implementing strategy & successful business operations; innovation & change may be common
Annual objectives focus primarily on continuity & maintenance of status quo programs and products
Metrics for how well CEO maintains existing key programs & products seen as ends in and of themselves
Appropriate where operational predictability and consistency have priority; strategy is secondary; change is infrequent
Annual objectives focus on forming & maintaining key relationships w/other organizations & individuals according to organization’s purpose
Metrics may be very difficult to identify or measure; may focus on “soft” data, i.e., “activity summaries”,  “committee reports” & personal commentaries
Appropriate where external relationships are critical for organizational purpose, i.e., umbrella, coalition, clearinghouse, cooperative & similar
Critical competencies-oriented
Annual objectives focus on the competencies key to the success of the overall organization and/or its specialized membership
Metrics may be tangible but elastic; may identify target goals, documented activities; measurements of business operations in direct support of competencies
Appropriate where organizational success is tied to critical competencies, i.e., resource & donor development, advocacy, etc.
Annual objectives may either be undefined, or a “smorgasbord that attempts to combine objectives from various association cultures and personal priorities across an organization
Metrics may often be based on generic template; taken from some other organization; may reflect “one size fits all” perspective
Eventually unsatisfactory; frequently leads to a frustrating experience; typically results from lack of focus or lack of conscious attention

The table illustrates a wide range of association cultures or “life-styles” and attempts to show how different they may be when it comes to CEO performance planning and evaluation.  While many organizations may have elements of some (or all) of these cultures, when it comes to CEO performance planning and evaluation it really is important for the volunteer leaders and the CEO to reach common agreement on what is truly most important—what matters most when it comes to organizational performance.  Remember, the purpose of planning and evaluation:  helping the organization improve through helping the CEO to improve!

Monday, November 18, 2013

Things No One Will Tell You: 5 Critical Elements for CEO Performance Planning and Review

By Virgil Carter

Annual performance planning and related annual performance review of association CEOs is often a mysterious “black box” process for which little is known and even less is written.  As a result, the planning process and the review process may be very different in every organization.  In fact, these two processes may often be very different year to year, in the same organization, unless some education and discipline is applied to make planning and review positive and helpful year in, year out, regardless of changing personalities.  Here’s five critical elements which may help performance planning and review to be the constructive learning experience they should be.

Purpose of CEO Planning & Review:  There are a variety of reasons for CEO planning and review, which should be reflected in the annual process, including 1) achieving a clear strategic plan and supportive annual operational plan; 2) strengthening the CEO as one means of achieving organizationsl progress; 3) making the processes a professional and constructive process for all involved; 4) matching the organization’s culture and characteristics (there’s no “one size fits all” process for CEO planning and review)

Formalize and Document the Full Annual Process:  This element should address 1) a written policy that formalizes the purpose, process, schedule for common understanding and consistent annual commitment of all parties for a successful process; 2) written annual performance objectives and metrics prepared by the CEO and approved formally by the governing board; 3) written documentation of the results of each annual process with copies to the CEO

Recognize and Foster a Clear, Open Process:  In most non-profits, the only employee of the board is the CEO.  Everyone else is an employee of the CEO.  Therefore, a  clear, open process is needed to support and aid the CEO in achieving the mission of the organization.  This should include:  1) the CEO being a full participant in the planning, execution and assessment of the performance planning and evaluation process; 2) direct CEO communication opportunities with the board at every board meeting, keeping communications channels open and working.

Provide for Lessons Learned and Annual Improvement:  Performance planning and evaluation are like every other association function:  subject to lessons learned and the need for continual improvement.  Thus the process should:  1) work to build trust, honesty and mutual respect—teamwork should be stressed; 2) incorporate lessons learned and improvement into the process annually as mutually agreed.

Compensation Principles:  CEO compensation varies by type, size and location of the non-profit organization, as well as by the level of knowledge, experience and duties of the CEO.  Annual compensation should consider:   1) reliable association-based compensation studies for similar organizations and CEO roles; 2) both fixed and variable compensation, with the variable compensation, in most cases, being discretionary bonus programs, rather than the higher paying incentive programs common in industry; 3) CEO and staff annual compensation are not comparable to the compensation levels of association volunteers in their personal line of work—CEO and staff compensation are only comparable to their peers in similar non-profit organizations.

A couple of closing thoughts:  A non-profit CEO is not a “manager”!  The CEO is really a leader, thus the executive performance and evaluation should reflect the characteristics of leaders, i.e., vision and initiative, accountabilities, delegation/monitoring, outcomes, communications and relationships.
A subsequent article will explore various methodologies for CEO planning and evaluation.

Monday, November 11, 2013

Things No One Tells You: 5 Things to Always Get In Writing in Your CEO Agreement!

By Virgil R. Carter

Want to be a CEO?  Already a CEO, but switching jobs?  Here are five components of your employment agreement that are important to consider and that no one else may tell you:

  1. Duties:  Are the roles, duties, title and authority of the CEO clearly stated?  Is it clear the CEO is singularly responsible for staff, budgets, contracts, and other essential annual business operations?  Can these be changed, and if so, by whom and how?  Are changes (change of duties, change of role, title or authority, reorganization, merger, acquisition, cessation of operations, etc) considered as termination for good reason (see termination below)?
  2. Compensation, benefits & annual review:  What is the base compensation?  What are the types of variable compensation, e.g., bonus, commission, deferred compensation, etc.?  Are other types of compensation appropriate, e.g., one-time (moving, relocation, etc.) and/or recurring (car, travel, business club, etc)?  Will compensation be established and maintained as “market rate” and how will market rate be determined annually?  Does the association’s standard benefits package apply to the CEO?  Who participates in these annual recurring decisions?    How is annual performance planning and evaluation conducted?  Who leads the annual review process?  Who participates in the process?  Is the CEO annually at the mercy of only a single volunteer or a balanced group of senior volunteer leaders? 
  3. Term & renewal:  Is there a reasonable initial term of employment?  When and how will the initial term be extended or renewed?  Is there annual compensation if employment is terminated before the initial term of employment has expired?  Who participates in these decisions?  What if there is no formal action to renew the term of employment—does it renew automatically, or is it considered involuntary termination?
  4. Termination:  How will unfavorable “termination for cause” be defined?  How will other types of favorable termination (voluntary, involuntary and for good reason) be identified and defined?  How are the termination definitions linked to annual compensation, benefits and any special termination pay-outs, e.g., termination in first year of employment, termination prior to expiration of initial term or subsequent term of employment, involuntary termination, for good reason, etc.
  5. Restrictions:  Are there personal or professional restrictions on the CEO while employed, and/or upon termination?  For example, can the CEO teach, write, do research or other similar activities, while employed?  Upon termination, can the CEO immediately work for another association in the same geographical area?  Can the CEO immediately approach employees of her/his former organization about career changes?

Thinking about these key parts of your CEO employment agreement, and reaching mutually agreeable resolution with your volunteer leaders will help to establish your credibility as a senior executive.  It will also make your life a lot more enjoyable, so consider these points before hiring and contract negotiations.  Good luck!

Monday, November 4, 2013

Aristotle on A Happy Life

By Virgil Carter

Is there really anything new under the sun?  Most non-profit organizations consist of a diverse and geographically dispersed of volunteers and staff, united in some common organizational purpose.  The Greek philosopher Aristotle wrote about the “Virtues” as a guide to living a “happy life”.  The more diverse a non-profit organization may be, the more important it is to have a “happy life”!

Author Deb Mills-Scofield, writes, “Look at your organization, your teams. You see people with a mix of traits; some are very courageous, others conservative; some live and breathe customer delight, others obsess with operational excellence. These are examples of the classic virtues — the Greek four of courage, justice, prudence and temperance, and the Christian three of faith, hope and love (or charity)”.

For successful organizational leadership and a “happy life” for an organization, here’s a brief summary of what Aristotle felt was important:

·         Courage:  It takes courage to challenge the status quo, to try something untried, to propose unprecedented solutions. Most disruptive innovations (products, services, supply chain, operations, management) take a lot of courage. Courage recognizes opportunity and leads change while managing risk (smart risk).

·         Faith:  Faith equals trust, which is based on our experience, on promises kept. It is increased with authenticity and honesty. It assumes worth (value) and worthiness (valuable) is aligned. Is Google’s market cap based on its computer servers and communication networks or on its algorithms, people, corporate culture and the belief, based on past experience, they will continue to produce worth, value.

·         Hope:  Hope is tied to faith. Hope looks ahead to the future and is rooted in facts, not fantasy. It balances the possible with the probable. Hope is based on experience, learning and application, so there must be freedom to fail. Learning from failure helps determine fact from fiction.

·         Justice:  Justice is the difference between fair and equal. Justice also applies the triple bottom line to innovate solutions that are meaningful and effective and preserve the environment — think of Patagonia, Toms of Maine, and Whole Foods. This directly affects your brand’s reputation.

·         Love:  Aristotle defined love in 3 ways: Eros (passion), Philos (friendship) and Agape (sacrifice, servant leadership). Think of “Voice of the Customer,” “Voice of the Employee,” and “Voice of the Community.” Passion is exhibited through excellent customer service (e.g., Zappos), social capital and servant leadership.  Love is all about creating and sustaining authentic customer value.

·         Prudence:  Prudence is about empowering people so the organization is agile and adaptable. This affects who and how you hire, train, develop and free your talent. It means you balance short, medium and long terms. It’s about assessing outcomes and outputs and can require courage. Prudence means your people know, and can impact, the processes and rules of the road and knowing “when to hold ‘em and when to fold ‘em.”

·         Temperance:  Temperance is Greek for “the middle way,” moderation, balancing competing interests. It applies to work-life fit, stakeholders, team’s diversity, policies for consistency but not constraint, long versus short term and accountability versus authority.

Your organization and teams may not have all of these virtues on an everyday basis, but hopefully it has (and uses) the virtues most critical for success of your various projects and activities.  If not, consider reviewing Aristotle’s ideas about the “Virtues”.  

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