Exec. evaluation & comp
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Haven’t Done a CEO 360 Review? You Should!

by Boardspan

Every board wants its CEO to thrive--and there’s one simple thing all boards can do to improve the odds: Offer FEEDBACK. It’s surprising how many boards expect top performance from their executives, but only give feedback when they have a specific disagreement or concern about performance metrics. That’s an enormous missed opportunity. Executives have a much better chance for success when organizations undertake a well-planned, objective annual CEO 360 Review with the participation of the full board and key executives.

We know conducting a meaningful review isn’t easy. Just deciding on a process—who should be involved, which topics should be covered, etc.—can be challenging. But “winging it” is hardly a recipe for being comprehensive and can unwittingly unleash an unproductive complaint-fest. Perhaps the only worse option is failing to do a review at all, leaving a CEO feeling overly confident or utterly unappreciated.

The good news is that, after experiencing it, board members and executives agree that a carefully considered CEO 360 Review is well worth the effort. Recall that the CEO is in a unique position — no other professional has so much decision-making authority and accountability yet reports to a diverse collection of individuals (the board). Giving that person objective, comprehensive, and constructive feedback is, by far, your best chance to help them thrive.

 

7 Reasons to Conduct a CEO 360 Review

1. To Evaluate Performance: A CEO’s leadership skills can make or break a company and should be thoughtfully evaluated—alongside meeting strategic objectives, financial goals, and other business metrics—to determine successful performance.

2. To Encourage Positive Growth: A CEO will get constructive feedback from an objective process, can identify growth areas and set goals for future performance, and will be acknowledged for the full range of his/her accomplishments.

3. To Ensure Alignment: The 360 Review process gives the board and CEO a common view into a concrete set of leadership topics, reveals whether they share a common perception of the CEO’s performance, and invites discussion on any issues raised by the review. For CEOs whose boards don’t regularly offer informal feedback, an annual 360 Review may be their only opportunity to learn how the board views their work.

4. To Honor Multiple Perspectives: A 360 Review gives company executives, the board, and the CEO a chance to express their views on CEO performance. Further, it gives the board the ability to know how direct reports perceive the CEO, how the CEO self-assesses and demonstrates to all of these executives that their opinions matter.

5. To Preempt Negative Consequences: An objective review that includes participation of the full board and management team can uncover significant issues before the organization experiences a negative impact.

6. To Set the Tone: Importantly, a comprehensive and objective review process signals that the board cares about behavior, not just results.

7. To Inform Compensation Decisions: Formal, objective reviews are critical to a board’s determination of the appropriate compensation adjustments, if any, for a CEO. While performance incentive plans are typically put in the place at the beginning of a given year and should always influence compensation, boards need to look at the complete picture to best serve the organization they govern.

 

Best Practices for a 360 CEO Review

Commit to a formal process: The use of a consistent framework with all participants ­creates reliable, comprehensive results that can reveal trends and deliver actionable insights.

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.

Identify leadership competencies to evaluate, such as:

    - Mission & Vision

    - Culture & Values

    - Strategy

    - Operations

    - Teamwork

    - Talent Development

    - Judgment & Context

    - Communication

    - Relationships Outside the Company

Collect quality data: The best reviews include quantitative and qualitative information by asking participants to rank performance in specific areas and encouraging open-ended responses to performance questions

Eliminate biases: Aggregate results by topic and/or constituent group. This minimizes the influence of outlying opinions, contextualizes feedback, and depersonalizes the process.

Take care delivering feedback: The full board should review and discuss the 360 CEO Review results. Then, two board members, generally the Chair and the head of the Compensation Committee should deliver the feedback IN PERSON to the CEO, receive the CEO’s response, and relay the board’s suggested goals for the coming year. Reserve discussion of the board’s compensation decisions for a separate time, allowing the focus of the conversation to remain on feedback and goal setting, apart from financial considerations.

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