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Evaluating Executive Performance

The board should conduct an annual evaluation of the CEO/executive director just as the executive should ensure that all of the organization's staff receive an annual review. The goal of an evaluation is to evaluate professional performance, not the person.

Boards introduce a high risk of bias and prejudice when they attempt to judge the executive as a person, particularly given their limited exposure to the executive. Using processes and tools that leave the board open to acting on the basis of stereotypes also introduces a legal risk as it can lead to discriminatory actions such as an executive for whom English is a second language being rated as a poor communicator or a woman executive judges as not decisive or a disabled executive as not seen as a good representative of the organization.

Organizational performance is the executive’s performance

The organization’s performance should be the primary basis for evaluating the executive. In order for the board to evaluate the executive on the organization’s performance, the board needs to clarify what impact or end results the organization is trying to achieve. This includes defining the specific results or indicators the board will monitor and the executive will report annually to the board.

Thus, if the organization is doing a good job of accomplishing its goals, gaining donors to support its work, is financially sound, and so on, the executive is considered to also be performing well. This prevents the board members from evaluating the executive on personal characteristics that are not relevant to organizational performance and are based on limited information, hearsay, or individual judgments.

Why a board is not the same as a supervisor

While the board hires and can terminate the executive, it is important for the board to realize that their relationship with the executive is not one of a usual work supervisor. A supervisor assigns tasks to their employee and works with the employee on a day to day basis. They observe the employees performance from many angles and participate in the same organizational structure and operate with the same constraints and processes.

The board governs the organization as a group and has a partnership with the executive director to whom they have delegated the authority to manage the organization so that it achieves the end results defined by the board’s mission as well as goals and policies established by the board. It is these end results and policy compliance that the board has the responsibility to monitor.

The board as a whole, or board officers, can ask the executive to act or provide information so that the board can better perform its governance role or so that board members can better support the executive and the organization.If a board member has an issue with the executive they should handle that issue individually by a speaking with the executive. The executive is under no obligation to take direction from any individual board member. Only official actions of the full board are binding on the executive.

Establish a stable process

Executives often report that they had no idea how they were being evaluated before their performance review. The expectations and judgments are often based on the board’s limited view and information about the organization and the executive is not informed about the topics or standards he or she is expected to achieve until the performance review. Each year the basis for the review changes based on who is involved.

Look forward in order to look back

An annual performance review can only hold the executive responsible for meeting targets, complying with policies, or achieving results that were agreed to at least a year in advance so that the executive has the time to organize resources to meet those targets and is given a chance to provide the board with information to indicate if the results and goals have been achieved and if they are in compliance with the policies.

So Step 1 of any evaluation process is looking forward to define the results and policies that will be used in next year’s evaluation of the executive. Once the work of defining the expectations of the executive is done, Step 2 is establishing and clarify the process by which the executive will provide the board with information they can use to conduct the evaluation next year. It is essential that the executive have a clear understanding of the basis for their evaluation and the indicators or evidence the board expects the executive to provide in advance of the evaluation period.

Write it down!

Once the board has determined the timing, process, and specific reporting requirements for the annual executive evaluation and consideration of their salary, it is very important to write it all down and include it in the board policy manual. While necessary changes can be made, the board should avoid tinkering with the process or the goals and reporting requirements. The board will get more benefit over the long run from having a stable and well-known process so the executive is focusing on the long term success of the organization and not the next evaluation.

Why a 360⁰ survey is a developmental tool, not an evaluation

It is currently very popular for board members to recommend that a 360⁰ survey be used to evaluate the executive. Many companies use multi-rater surveys to evaluate behaviors the company wishes to promote, so board members may be familiar with them from their work. While there are mixed results on the impact of these tools, companies that carefully construct them to measure specific behaviors they believe are important to business performance have generally found them to be useful if carefully implemented. This does not mean that using a survey randomly pulled from the internet or another organization with only one employee of the organization will be effective in promoting behavior change.

A carefully designed and implemented 360⁰ survey of staff and outsiders familiar with the organization and the executive can provide feedback that can help the executive improve their communications and management style but they do not measure organizational performance. They are inherently nonobjective, as they incorporate feedback from people who have limited knowledge of the executive’s work or the constraints under which the executive operates. Board member responses to 360 surveys are also clouded by the small amount of time board members spend with the executive and their limited knowledge of the day to day operating environment of the nonprofit.

Boards can suggest or require that the executive uses a 360 every few years as a development tool to give the executive insight on their behaviors and how they are perceived by others, but the results should be either provided only to the executive or should be provided to the board with the executive’s self-evaluation and a developmental plan they have developed based upon the input from the 360 survey. When the board discusses the results of a 360 with the executive, the focus should be on asking the executive how the board can support them in their professional development goals, including encouraging the use of a coach or mentor, pursuing education or training, or other types of developmental professional support. An organizational climate survey (staff survey) periodically implemented can also provide good feedback for the executive.

It is particularly damaging given the small size of the average nonprofit, for the board to do a 360⁰ surveys annually as many staff opt out of surveys that are repeated annually unless they are disgruntled or dissatisfied, further skewing the results for the small number of respondents that are generally engaged in these surveys. Attempting to engage donors, volunteers, funders and partners on an annual basis can unintentionally signal that the executive is “in trouble” and that board members are trying to build a case for their dismissal. For this reason many people will choose not to participate in a 360 unless the executive has encourage and solicited their input.

A 360 degree survey, even one that has been validated and has balanced participation, is not a substitute for evaluation of the executive’s performance on clear, agreed upon goals that advance the mission of the organization.

The difference between governing and managing

Except in arts organizations where there is a managing director and an artistic director, the board has a single point of delegation. Both within the evaluation process and outside of it, the board should never direct staff other than the executive. The board should only get engaged in personnel matters if a grievances has come to the board in compliance with the organization’s personnel policies or if there is a whistle blower complaint that falls under the board’s whistle blower policy.

If the board as a whole or individual board members get involved when staff members are upset with the executive, the board undermines the authority of the executive. This makes it impossible for them to effectively carry out their role as the chief executive of the organization. By engaging with staff directly outside of the grievance or whistle blower policies the board is crossing the line between management and governance.

Setting the Executive’s Pay

The board also has the responsibility to review and set the executive’s pay. When making pay decisions, the board should consider organizational performance and the pay being provided by comparable organizations of a comparable size. You may also want to look at the by the subsector like arts, housing, education etc. One source of information about Washington salaries is the Archbright Nonprofit Salary Survey. There are also national nonprofit salary surveys.

The board should not leave it the executive to bring up their salary, propose their own salary level, or remind the board about a salary determination. It is humiliating for the executive to have to manage this part of the board’s job. The board should recognize that a salary increase for the executive also generally means that they have to do more work to generate the funds for the raise so the board – who ultimately is responsible for assuring that the organization has the funds to do its mission – should volunteer to increase their giving and to contact donors in order to generate additional funds for the executive’s increase.

It is important that the current executive is paid what you would expect to pay a new person should you have turn over in the job. It is unfortunate when a long time executive retires or leaves an organization and the person assuming the job is paid $20,000 more than they were! Pay is usually not the most important factor of job satisfaction for the executive, but this does not excuse the board from its responsibility to compensate the executive fairly.

Support your executive

In addition to the board’s collective responsibility to govern the organization, board members should also support the organization. This includes providing various types of support to the executive such as help in identifying donors, meeting with foundations, recruiting staff or volunteers, providing counsel and advice when asked and expressing gratitude for the executive’s service to the organization. The board and the executive should have a conversation about the types of support the organization and the executive needs from board members so that expectations are clearly articulated and board members can identify opportunities that are a good match for them.