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Good Governance: CEO Evaluation and Feedback

June 2011 – Vol: 34 No. 6
by Les Wallace, Ph.D.

Is it time to refresh your process?

June 1, 2011

Credit Union Management magazine’s Web-only “Good Governance” runs the first Wednesday every other month.

If you search for “credit union CEO evaluation advice,” Google delivers 250,000 entries. What they all have in common is core elements that ensure a helpful feedback process and recognition of the importance of this board function. If you haven’t refreshed your CEO evaluation process recently, you might wish to reflect on the following thoughts.

A board’s job is to help the CEO be as successful as possible. This calls for clear and candid communication and goal setting and timely feedback that’s “hands-on” rather than at arm’s length. Today’s high performance board will have a CEO evaluation policy, provide formal feedback twice a year, and encourage targeted CEO leadership development beyond CU-specific literacy. The best boards’ CEO assessment involves confidential input by all board members and a self-assessment by the CEO using the same metrics as the board.

First things first: Is your CEO job description up to date? Surprisingly, many position descriptions are several years dusty, despite massive changes in leadership demands on CUs. Taking some time to refresh the CEO job description with specific attention to critical leadership competencies benefits the CEO and is a great board development exercise. To ensure ongoing commitment to the CEO feedback and guidance process, boards should create a formal policy outlining the annual plan, as well as the process of doing the evaluation and giving feedback.

Leadership competencies: Leadership assessment and development have been competency based, not personality or style based, for over 20 years. Outgoing and introverted CEOs can both be effective if they are “interpersonally competent.” A leader lacking competence with change will be frustrated and will not demonstrate the nimble flexibility to lead effective organizational transformation that a competent change leader will. Leading transformation, developing others and strategic thinking are all competencies, not personalities. Therefore, a competency-based evaluation process is a most helpful standard from which to build.

Organizational leadership competencies: The literature reveals significant consensus around the core elements to be addressed in CEO evaluation and feedback. The bedrock of any feedback system looks at how well the CEO performs around the most common organizational leadership competencies: visioning and strategy setting; leading change and transformation; overall enterprise management (the business); member focus; board relations; integrity and self development. A typical assessment will seek board perception around how well directors believe the CEO has demonstrated these competencies. This is typically about 50 percent of the evaluation value. Board input should rate perceived competency while also providing written examples to provide context and perspective on strengths and improvement opportunities.

Goal achievement: Every year, the board and CEO should agree on a set of goals--prioritized outcomes the board expects to be delivered within a specified period. This segment of the overall CEO evaluation typically accounts for 40 percent of the evaluation value.

Recognizing priorities change in a fast-moving business environment, a high performance board will provide mid-year feedback and recalibration of goal expectations as necessary.

While many CEO goal lists may grow toward double digits, typically three to five goals (rarely more than seven) constitute more reasonable expectations. Remember, these are not “maintenance” goals; these are improvement or transformational outcomes to be delivered in organizational programs, culture, or member service and value delivery. Satisfactory maintenance of consistent organizational performance is covered under the evaluation of “enterprise management” competency within the “leadership competency” assessment segment described above.

Special accomplishments: About 10 percent of the evaluative judgment should account for how well the CEO dealt with challenging issues developing during the period of performance. These are typically unforeseen during the initial goal-setting period. Dealing with failure of a major vendor, a sudden merger opportunity provided by another CU’s failure, and regulatory surprises may show up in this category.

Certainly a board that’s thinking strategically has already accounted for challenges in shifting loan quality, technology upgrades, and new member services, so it would experience fewer surprises than a less strategically competent board. However, challenging circumstances do occur and CEOs should be recognized for how well they did or didn’t deal with the issue. In periods of extraordinary chaos, this category could be scaled to account for greater than 10 percent of the overall evaluation and may involve scaling back on other goals.

Leadership development: Leaders are learners and are always in pursuit of growth and development. The annual CEO feedback process should encourage the CEO to set developmental goals and plans and provide specific direction as necessary from the outcomes of the evaluation process. Clear board guidance and CEO-invested learning greatly improves the odds of success.

Les Wallace, Ph.D., the 9Minute Mentor, is president of Signature Resources Inc. and co-author of A Legacy of 21st Century Leadership. He is a frequent speaker and consultant on governance leadership and a subject matter expert for CUES’ Center for Credit Union Board Excellence.

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