7 Reasons to Conduct an Annual CEO Evaluation
1. To Support Accurate CEO Performance Evaluations
A CEO’s leadership can make or break an organization. A formal CEO performance evaluation provides a structured opportunity to assess leadership capabilities, execution against strategic goals, and financial performance—alongside cultural influence and stakeholder relationships.
2. To Use the CEO Review to Identify Growth Areas
Constructive feedback drawn from a balanced, 360-style evaluation helps the CEO recognize strengths and areas for development. It also creates a shared roadmap for leadership growth and performance improvement.
3. To Align the Board and CEO Through a 360 Review
Annual CEO reviews provide a consistent forum for alignment between the board and the CEO. The process surfaces differing perceptions early, opens up healthy dialogue, and ensures a shared understanding of what success looks like.
4. To Broaden the CEO Assessment with Executive Team Input
The CEO’s direct reports offer invaluable insights into day-to-day leadership, communication style, and decision-making. Including the executive team in a 360 CEO assessment gives boards a fuller picture and signals to the organization that all perspectives matter.
5. To Identify and Address Risk Before It Escalates
An objective CEO evaluation can help uncover red flags—like eroding team trust, poor succession planning, or cultural misalignment—before they turn into organizational issues.
6. To Reinforce Board Expectations Around Values and Behavior
A comprehensive CEO assessment reinforces that the board cares about how results are achieved, not just the results themselves. This sets a tone of accountability, ethics, and purpose-driven leadership.
7. To Inform Compensation and Succession Planning
CEO evaluations provide the context needed for informed compensation decisions. They also help boards understand whether the CEO is developing a strong leadership bench and preparing the organization for long-term success.
Best Practices for Conducting a CEO Review
Commit to a formal process
Use a consistent evaluation framework with clearly defined criteria. This creates reliable results, reveals performance trends, and enables year-over-year comparisons.
Get early buy-in
Make sure the CEO and full board are well informed about the process. While the CEO should be consulted about which executive team members will take part, the board chair should make a final decision.
Define evaluation criteria up front
Avoid vague or overly broad metrics. Align CEO performance expectations to the company’s strategic objectives and leadership competencies, such as:
- Mission & Vision
- Culture & Values
- Strategy Execution
- Operational Management
- Team Development
- Financial Stewardship
- Risk Management
- Communication
- Stakeholder Relationships
Involve the right people
Ensure the full board participates in the process. Invite input from key executives, and include a CEO self-assessment. The board chair or compensation committee should lead the process, but all perspectives must be considered.
Gather both quantitative and qualitative feedback
Use rating scales and open-ended questions to collect input. Aggregating feedback by topic or role group helps eliminate bias and identify patterns.
Deliver feedback thoughtfully
The board should review and discuss the evaluation results, and then deliver feedback in person—typically led by the Chair and Head of the Compensation Committee. This discussion should focus on performance and future goals, separate from compensation conversations.
Master the meaningful CEO review
A well-structured CEO performance evaluation process isn’t just a governance best practice—it’s a strategic advantage. To learn more about how your board can implement a high-impact CEO 360 review process, contact us to start the conversation.
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