One of the key assets of any nonprofit organization is its CEO (or MD, EO, GM, Coordinator or any other title that represents the chief staff leader).
A primary reason many great CEOs choose to leave their organization is due to poor handling of their performance management by the Board, or sometimes a lack thereof.
This article outlines six key factors that you should implement, in order to make the performance management of your CEO an organisational strength, it may even stop a great CEO from walking.
1. Make sure you performance manage your CEO
First and foremost, you need to be regularly performance managing your CEO. If you don't, this is a guaranteed way of losing a high performing CEO (and in some cases it can cause you to hold onto an ineffective CEO).
From our own anecdotal research, over half of the CEOs who leave their organization of their own volition do so because they were very dissatisfied with their performance management processes and outcomes.
One of the most common complaints of nonprofit CEOs is attributed to both the Board's failure to establish clear criteria for performance and to conduct the performance management process effectively and efficiently. This is an unnecessary risk for nonprofit organizations.
2. The role of the governance sub-committee
The performance management process for the CEO is most often left up to the Chair of the Board, who in many instances does not have any experience with performance management. Leaving the management of one of the organization’s key assets, the CEO, to one person who may not have the experience or skills is unwise.
It is too important a process to leave up to any one person, and should be the province of a Board subcommittee, most often called the Governance subcommittee.
Its primary function is to assist the Board in fulfilling its accountability responsibilities with respect to both the Board and the CEO.
The Governance subcommittee looks after the skills analysis, recruitment process, induction, succession planning and ongoing performance management of both the CEO and the Board itself. This subcommittee usually meets two times a year, and provides performance management feedback to the CEO every six months.
3. Key performance indicators for the CEO
One of the key tools of the performance management process is the Key Performance Indicator (KPI).
There are three distinctly different types of Key Performance Indicators that need to be developed concurrently for the CEO:
- Strategic: based on the strategic plan (usually 3 or 4 KPIs)
- Behavioral: based on the behaviors or culture that the Board requires (usually 1 or 2 KPIs)
- Compliance: based on contractual, process or compliance issues (usually 1 or 2 KPIs).
There should be no more than 5 to 7 specific KPIs in total for the CEO.
4. Board contribution to CEO development
The Board needs to continually work with the CEO to develop the CEO’s skills in relevant areas.These relevant areas are identified during the performance management process.
The Board also needs to develop processes that provide evidence of the CEO's performance and impact. The Board must have evidence-based trust in the CEO, rather than having blind faith in their abilities.
5. 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 time lines agreed. This reduces the chances of the irrelevant information, such as how daily operations have kept everyone busy, effecting the reporting process.
6. Succession planning for the CEO
The Board should develop a CEO succession plan as soon as they have hired their CEO.
The succession plan needs to assist in identifying the required skills and characteristics that the organization will need into the future, sourcing the most appropriate people, and ensuring that the whole process is strategically and seamlessly managed. It is also useful to have a key personnel transition strategy and a critical path for CEO succession planning.
If you have picked up any other performance management tips or procedures, we would appreciate your comments in the field below.