Imagine you’re a CEO or Executive Director (ED) who has had exemplary performance but has not had an evaluation or raise in three years. Or, imagine you’re part of a board who hasn’t completed a formal evaluation of the ED in three years. Now, you’re beginning to question their ability to lead the organization.

When asked about the ED’s performance criteria and how they’re tied to the strategic plan and organizational performance metrics, you reply, “We don’t do that.” Does this sound familiar?

Every organization believes they have good reason for not performing a CEO evaluation sufficiently (or at all) or spending meaningful time developing a dashboard of organizational performance with related targets that become the foundation of the evaluation.

However, a proper CEO evaluation is one of the most important tasks a nonprofit can perform to ensure they are operating optimally and that the ED performance stays on track.

Not sure where to begin?

The Standards for Excellence:® An Ethics and Accountability Code for the Nonprofit Sector provides guidelines for a CEO performance evaluation that every nonprofit should follow to ensure sustainability of their organization.

While the Standards Code may not give an extremely detailed outline of what the evaluation should look like, it does give one very important specific — this exercise must be performed, at minimum, once per year, every year.

Follow these 7 guidelines and you’ll no longer be the board member who hasn’t completed a formal ED evaluation in three years, or the ED who hasn’t received one.

Educate the entire board about the evaluation and their role in it

Sometimes board members don’t understand the purpose of conducting the CEO evaluation or their role in it. The full board, or some designated committee of the board (usually the Executive Committee), is responsible for evaluating the ED’s performance.

It can be difficult for a busy board president to understand why they should take the time to evaluate the ED. However, it’s important for them to know that what they learn from the evaluation can support both the ED and organizational growth.

When your board understands the meaningful difference a CEO evaluation can make, they’re more likely to execute it well and use the findings to their great advantage.

Set the criteria for the evaluation

Believe it or not, the board should set the criteria for the evaluation far in advance and communicate this with the CEO so they understand what they’re being evaluated on.

The CEO evaluation is not a trick test. The goals and expectations for the ED should be transparent and fair, and based on the job description and strategic plan goals. You don’t want the ED to be surprised during their performance evaluation regarding what the board is actually evaluating them on. Both the ED and the board should agree to the evaluation criteria in advance.

Set the goals for CEO performance

It’s important that everyone (ED and board) is on the same page with a set of goals that are in line with the strategic plan. These should be mutually agreed to in advance.

Sometimes board members have their own agenda that includes a handful of goals that are unrelated to the “big picture” of organizational performance. Be mindful that goals should be set by the board as a whole, not by individual board members.

Involve the CEO in identification of metrics/targets

The ED should know what success measures are meaningful and can identify targets that are stretch goals without being unrealistic given the environment. Their knowledge can and should be used to properly identify metrics and establish targets for organizational success.

An open dialogue between the ED and Executive Committee will ensure that the ways in which organizational success is measured in reference to CEO performance are clear, realistic and agreed upon.

Do not evaluate the CEO on “how” they do things

While the board has a role to provide input into the vision and direction of the organization (the “what”), the ED and staff are responsible for strategy and execution (the “how”) of the plan. Board members must recognize that there may be style differences between how they wish to approach things, and how the ED actually approaches things.

Don’t evaluate (or attempt to micromanage) the ED on how they do things. It’s important to allow the ED to embrace their own leadership and management style, not the board’s. Remember that it’s the outcome that is important.

Evaluate the ED on how well they provide “staff support” to the board

As long as an organization has paid staff, part of the ED’s job description is to provide “staff support” to the board. This includes, but is not limited to:

• Educating the board on key issues facing the industry

• Assisting with setting agendas to keep the board’s attention on policy and strategy

• Organizing meetings and preparing/distributing meeting minutes

While the board can evaluate how well the ED supports the board, the board should not hold the ED accountable for the board’s performance (or lack thereof) in support of the agency’s goals. The board should hold itself accountable for its own performance and conduct an annual self-evaluation based on the Standards Code as well.

Include legitimate professional development goals for the ED and provide appropriate support to achieve them

All professionals today should recognize the need to be life-long learners. The ED must be open to new technical or management skills that can help them be more effective in their position. This part of the evaluation should be a positive and proactive discussion that identifies training and/or coaching resources that would benefit the ED in their professional development, especially if the board has a concern about ED performance in a particular area.

Resources for ED skill building and executive coaching (if required) should be made available to the ED with the results and outcomes evaluated as a component of the overall evaluation process.

Now that you know the 7 guidelines for conducting a CEO performance evaluation, you’re ready to begin the process! If you find yourself getting stuck along the way, contact us with any questions.

With more than 20 years of experience, Strategy Solutions has worked with both nonprofit and for-profit sectors through organizational change and growth.

Debra Thompson and Jacqui Catrabone are licensed consultants, trainers and peer reviewers for the The Standards for Excellence:® An Ethics and Accountability Code for the Nonprofit Sector.