The Assessing CEO Performance booklet asserts that assessing the CEO’s performance is amongst the Board’s most important functions. The booklet considers the preparation, format and details of a comprehensive assessment including; example assessment tools, case studies and the common issues that arise.
To complete a successful CEO performance assessment requires the Directors to have a detailed understanding of the company, the market and the circumstances facing the CEO. To ensure a performance assessment of the CEO adds value, Directors must consider a number of factors including:
- The companies current and expected trading conditions and how this impact performance and what the options are to ensure the company thrives.
- The relativity of performance, including internal and external conditions the faced by the CEO. For example, has the CEO had a dream run or faced major obstacles and has the CEO had time to lift performance or has adequate time elapsed and company performance should be on the way up by now.
- Image versus substance. Some CEOs are good at looking good, which is not the same as getting good things done. Interestingly, this group of CEOs is often quick to blame others or circumstances for not delivering results. By contrast, some CEOs get results but do not broadcast their image. This group is often quick to praise others. Then there are the CEOs who get short-term results, but in the process weaken the company for the mid to long term.
Ensuring the Board selects the right numeric matrix in a CEO performance assessment is vital. Of course, numeric measures must be agreed with the CEO well before their performance assessment occurs. The Assessing CEO Performance booklet cautions directors to appreciate that some performance data is reliable e.g. return to shareholders, while other data such as efficiency gains can be harder to access.
The author, John Mero, draws on his involvement in multiple CEO performance assessments for and with Company Directors. He is convinced that when the CEO performance assessment does not add value it is primarily because Directors did not ask the right questions, and/or Directors did not get the process right. When done well, a performance assessment can add value to the CEO, to the Board and improve the company’s (for profit and non-profit) performance.