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.

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