Evaluating Your CEO on What Matters—and No More!

• Author: Ted Hull
• DOI: http://doi.org/10.1002/bl.30079
• Date: 01 July 2017
• Published date: 01 July 2017

4 BOARD LEADERSHIP

Evaluating Your CEO on

What Matters—and No More!

by Ted Hull

Board consultant and governance practitioner Ted Hull looks at CEO evaluation from the

perspective of the Policy Governance® system.

Policy Governance seems to make so

much sense. It’s attractive to boards

that want to identify the results their

organization exists to produce in terms

of knowing who will be better off in

what way, and knowing what it’s worth

to produce those results. The concept

of freeing up the CEO to use any means

to accomplish these results or ends—

excepting only those means that would

compromise the values of the board,

rather than wandering in and out of the

minutia of operations is also appealing.

Most boards even see the importance

of monitoring the CEO’s performance

against the accomplishment of the

board-stated ends and avoidance of

the unacceptable means. The board has

made it through the first year of using

this new model of governing. Now it’s

time for the CEO’s performance evalua-

tion. So how does that work?

Someone on the board points out

a policy that says that the board will

view the CEO’s performance as identi-

cal to organizational performance, so

that organizational accomplishment

of board-stated ends and avoidance

of board-proscribed means will be

viewed as successful CEO performance.

It made sense to the board when the

policy was developed, but how does

that practically work when it’s time to

evaluate the CEO?

Suppose you want to have a fence

built around your property. You want it

constructed on your property line and

in a way that doesn’t violate any munici-

pal codes or bylaws. You want the

fence high enough to keep the dog in

and the vagrants out. You might even

mandate that it is built with cedar and

not spruce or that all the fence boards

must run vertically.

With those criteria in place and after

interviewing a variety of fence builders,

you decide to engage the one who has

the expertise, experience, and dem-

onstrated success in building fences.

You’ve checked references and looked

at fences that have already been built

and you are confident this builder

will do the job expertly, ethically and

legally. A contract has been signed that

outlines the terms of the agreement.

Included in that contract are the loca-

tion and height of the fence, the mate-

rials that will be used, and assurances

that the posts will be in the ground to

a depth equal to or greater than the

industry standards of the local Fence

Builders Association. The contract

contains the terms of payment, includ-

ing the amount as well as when certain

portions of the payments will be made.

Both parties agree that they know what

to expect and will be satisfied when

those expectations are met.

Now the job is completed. The dog

isn’t running away, the kids are corralled,

and no one is poaching your cauliflower

plants. And the bill is paid.

Now it’s time for a performance eval-

uation. You are disappointed that the

builder drove a Ford truck rather than a

Toyota and you certainly wouldn’t have

used that brand of tools. You are upset

with the tattoos on one of the helpers

and the amount of time he took for cof-

fee breaks.

If you think there is something wrong

with this picture, you’re right. The prob-

lem is that now you are evaluating the

fence builder rather than the fence. So

why do boards evaluate their CEO’s job

performance in ways they would accept

as unreasonable in evaluating another

individual?

To make sure that board members

have really identified all their CEO evalu-

ation criteria, I encourage them to create

a list that assumes that all their policies

have been fulfilled. The aim is to identify

any still-unstated criteria and I call it the

“Yeah … but what about…?” list. Of

course, this is a good list to have; but

preparing it after the job is done (at least

for the year) is not great timing. It should

have been developed in the form of the

board’s ends and executive limitations

policies prior to the job being started.

Let’s go back to the analogy of our

fence. If you are disappointed in the final

result, it will likely relate to one of two

reasons.

1. You Weren’t Clear in

Communicating Your Expectations

When you were deciding to have a

fence built, you hopefully had a good

idea what you wanted. You could envi-

sion what it would look like and what

function it would perform long before

you started looking for a builder. If you

wanted privacy, you wouldn’t have a

chain-link fence built. If you have a swim-

ming pool in your yard, you would want

a fence that is high enough to ensure

children won’t wander into the yard, fall

in the pool, and drown. But if you don’t

communicate that to the fence builder,

don’t be surprised if the fence doesn’t

accomplish the intended results, such as

privacy for your family or safety for the

neighborhood children.

It’s your fence, your yard, and your

money. You have every right and

responsibility to make sure that the

fence is built to your stated expecta-

tions, including it being done in a man-

ner that is legally compliant and ethically

responsible. Your municipality or county

may have bylaws dictating how deep

the posts need to be and the permits to

ensure that underground cables aren’t

damaged. It may be that you aren’t

acquainted with the applicable bylaws.

Don’t worry; you don’t need to be. You

can ask the builder to provide you with

evidence that all the relevant bylaws are

being complied with.

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