Seven factors in CEO performance management

1. Most attempts at not-for-profit CEO performance management do not work! The process is often left up to the Chair, who may, or may not, be any good at it. This is a guaranteed way of ensuring you lose a high performing CEO.

2. Performance managing the two key assets of your organisation. The CEO and board are the organisation’s two key assets, and they both need to be performance managed. This is best done through the mechanisms of a governance subcommittee of the board.

3. The role of board sub-committees. There are three true board subcommittees that facilitate the accountability and decision making of the board, including performance management. The finance/audit/risk subcommittee looks after the profit & loss, balance sheet, cash flow, investment and possibly the risk management processes. The governance subcommittee looks after the skills analysis, recruitment process, induction, and ongoing performance management of both the CEO and the board itself. The internal audit subcommittee ensures that key processes and policies are actually followed.

4. Key Performance Indicators for the CEO. There are three different types of Key Performance Indicators (KPIs) that need to be developed concurrently for the CEO – strategic, behavioural and compliance. There are usually no more than five to seven specific KPIs in total.

5. How the board can contribute to CEO development. The board needs to continually work with the CEO to develop the CEO’s skills in relevant areas. They also need to develop processes that provide evidence of the CEO’s performance and impact, and ensure they have the processes in place so they know they can trust the CEO, rather than having blind faith in them.

6. The impact of strategic planning on performance management. The board should require the CEO to report against achieving the success measures of the strategic plan within the timelines agreed, not report against how busy they have been.

7. Succession planning for the CEO. The board should develop a CEO succession plan as soon as they have hired their CEO.

For more details on developing performance management for the CEO, visit Conscious Governance.

Erin Radford

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