Overcoming Board Challenges: 4 Key CEO Annual Performance Indicators
Q: The annual performance review date has come and gone as our board acted like deer in the headlights. We can’t really understand what to assess. And, to be honest, some board members who don’t really like or trust our executive only want to assess the behaviors and personality they dislike. What to do?
A: Admittedly, assessing CEO performance is a challenge all boards face. In recognizing that the typical nonprofit board member only spends 30 to 40 hours annually “being” on the board, setting aside the time and determining who will do the work (Governance Committee or Task Force?) can be barriers toward a commitment to this task. I do, however, think these resolvable challenges and not as big as the central questions of “what” should be assessed and “how will we know?”
Based on my own client work, I propose there are at least four indicators or areas of activity a board can utilize assess a CEO’s performance. And I would pose these indicators have been selected with three important criteria in mind:
1. Each indicator mirrors the fiduciary and strategic responsibilities of the board. Nonprofit executives are recruited principally to provide their experience and expertise to scale the board’s mission.
2. Each indicator is quantifiable and measurable, thus removing or at least limiting the potential subjective biases that might be factored-in as the natural course of humans “judging” humans.
3. The goal of an assessment is to measure effectiveness toward ensure alliance with the board’s intentions (aka plans). Assessments focused on identifying and addressing perceived deficits may enter the conversation, but they are not the purpose of an annual assessment. Boards do best if they address perceived deficits and failings, often relational or behavioral, as they arise as a course of doing business.
One last consideration before identifying the four indicators: A board’s stage of development should be a factor for measuring the weight or degree each indicator applies to the executive.
Specifically, in its earliest infancy stage, rarely is there a paid individual to carry out the interests of the board and the board must executive many of its own governing-specific responsibilities, while also serving as volunteers doing the agency’s work.
Somewhere not so far down the line, however, that board acquires resources to recruit an individual who will over time take on more of the governing work on behalf of the board again affecting the expectations of executive performance. And, in its most mature stage, the executive is more of an agent who not only informs but guides the board in its governing tasks. Again, a performance assessment consideration.
Now, here are my four performance indicators for a board’s annual assessment.
1. Ensure Compliance
The board’s duty of care holds the board accountable for ensuring their nonprofit does not violate the many and varied rules and regulations demanded of corporations that may also be nonprofits. I pose that the first duty of an executive is to ensure that the board knows and understands its requirements and supports the board in putting-in-place policies and procedures to ensure observance.
A checklist of these laws, guidelines and regulations, where applicable, reports by enforcement bodies will serve to satisfy an understanding of compliance. And, of course, events and activities that may have occurred during the year must be reviewed.
2. Prevent/Manage Risk
Doing any activity that serves or affects others involves risk to the organization and its resources. The board depends on its executive to recognize and advise the board regarding risks. The board also depends on its executive to help it develop and manage risk mitigation plans. Again, a checklist and chronicle of events will serve to assess performance.
3. Annual Program and Financial Goals, Strategies
On the one hand, many might argue that the executive does not have full control of whether the nonprofit achieves all of its goals and completely implements its strategies. And there is much to be defended on this case.
And, of course, this assessment begins with a review of the program and financial plans established at the beginning of the year and comparing these with the monthly or quarterly reports.
4. Client and Staff Satisfaction
Consumer, customer, client or patient satisfaction would appear essential, but obviously challenging to many nonprofits who argue that it takes financial or volunteer resources to have in hand knowledge about this. I would pose the question: Why would you not and how could a board not want to understand satisfaction levels given that this is one of the indicators of what is culture and values—key underlying frameworks of an organization’s Theory of Change, values and culture?
I do know that many boards hold great stock in whether or not and to the degree their organization is recognized, known and valued in the community and desire to hold this measure up as a performance indicator. I would offer that this is not an easily measurable indicator, but one that is better demonstrated by whether monies are received and folks use the service.