The Centrality of CEO Performance to Board and Organizational Success
Your board has many responsibilities, but its primary function is to establish and maintain a framework for the effective, legal, and ethical operation of the organization. The board does this through a combination of policy directives and specifications: the mission statement, bylaws, policies, strategic and financial plans, short and long-term goals and objectives, and most importantly, the selection and evaluation of the chief executive. High performing boards are embracing new strategies and structures to ensure that their CEO performance is well planned, monitored and rewarded.
The American College of Healthcare Executives encourages expanded board attention to the CEO review process because “CEOs are faced with new and more complex responsibilities.” Concurrently, public and regulatory expectations demand that boards demonstrate higher levels of accountability for core responsibilities such as the evaluation of leadership performance. As a result, the board's evaluation of the CEO requires a well-designed, ongoing system for measuring leadership effectiveness and the attainment of established objectives.”
Five investments will help improve a board’s capacity to unleash their CEOs performance and pride:
- The Partnership
- The Performance Plan
- Mid-Year Engagement
- 360 degree Annual Review
- Link to Growth
Encourage discussion of these five initiatives at the Board’s next executive committee meeting.
One: The Partnership
Modern health systems encourage more team-work to accommodate the redesign and implementation of new care management roadmaps for high risk-cost population health. This culture of “partnership” needs to begin at the top between the CEO and Board Chairperson. To build a positive rapport and trust between the CEO and Board Chairperson, consider these three initiatives:
- CEO and Chairperson, outside of board meetings, can informally discuss strategy issues and likely areas of dissension from board members
- Chairman can advise and mentor on how to translate strategy into action
- Both can balance strong points of view with openmindedness, flexibility and a willingness to consider the other’s views
Two: The Performance Plan
Too many boards do not invest enough time or insight into a conversation with their CEO, at least a month before the performance period (usually the fiscal year). to reach a mutual consensus about the results expected from the CEO for the coming year.
Three: Mid-Year Engagement
Mid-year reviews enable the CEO to explain progress to plan, new challenges that may have become evident, and for the Board Chairperson to offer support and ideas that can help the CEO accomplish her/his objectives as planned. Three actions can enhance the value of these discussions are:
- Share the risks and implications of strategic decisions with transparency to ensure no board meeting “surprises”
- Share balanced scorecard year-to-date metrics
- Discuss whether planned objectives need modification due to unforeseen events
Four: 360 Degree Annual Review
The heart of the process to help CEOs enhance their performance and career growth is a well-designed and administered process in which all key stakeholders to CEO success are provided an opportunity to offer insights into how the CEO can be even more successful in the coming year. Key players to invite into the process are:
- Board members
- CEO’s direct reports
- Physician leaders
- Key community leaders, in some instances
In addition to the regular questions about the CEO’s ability to deliver on the organization’s budget and quality targets, physician relations, community partnerships, and adopting new Electronic Health/Medical Records, modern review may need to consider these other performance metrics:
- How effective is the CEO in shaping the organization’s culture, and is the culture reinforcing its mission and values?
- How effectively and collaboratively does the CEO work with board members and keep them informed?
- Does the CEO communicate a compelling view of the future?
- Has CEO developed succession planning strategies and champtioned internal talent development?
Who should oversee the process?
Often, Board rely on their executive committee to conduct the CEO review process. To help ensure a balance of continuity and fresh insights, some boards elect to use a special CEO Review Taskforce or committee that has carefully defined membership. To assure continuity, at least two members of the task force who participated in the immediate prior year review should participate in the process in the subsequent year. To assure new perspective, at least two of the members of the task force should change every year or two. The task force must remember that it works on behalf of the Board. The task force can neither assume – nor can the Board delegate – its authority regarding the CEO. The total Board serves as the evaluator and final arbiter of any issues related to performance of the CEO.
Five: Link to Growth
The results of a good CEO review should lead to professional and personal growth for the CEO, but also growth in the vitality of the organization. Both organization and CEO performance are linked. While many Boards link the annual performance review to an incentive pay model, the first priority should be for growth in CEO and organizational performance. Non-compensation recognition and reward options should be customized for the unique needs/desires of the CEO and might include such unusual options as:
- Funding a one week exchange study at a leading US health system well known for advances in population health, accountable care, and integrated delivery systems.
- Support for continuing education in unique learning experiences at prominent business or public health schools located in such diverse universities as: Sanford, Harvard, Yale, Michigan, Minnesota, or Berkeley;
- Access to use a modern suite of computer, printer, telecommunications technologies in their home office
- Subsidized personal growth experience for language, cooking, martial arts or music skills development.
 See: http://www.russellreynolds.com/insights/thought-leadership/essential-elements-of-an-effective-ceo-board-relationship