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A Simple Approach To CEO Performance Assessment

The beginning of the new year means evaluating the performance of the past year for yourself and your direct reports.  This performance assessment determines the payout on your short-term incentives as well of those of your leadership team.

The Process

There are many ways of effectively completing this assessment.  One highly effective approach is when the CEO prepares a self-evaluation based on the objectives the board approved at the start of the past year.  This provides quantitative and as importantly qualitative assessment and perspective to performance.  This document is then reviewed and discussed with the board chair and the lead director.

Approving the Incentive

When the board chair and lead director reach agreement of their assessment of CEO performance, they review it with the compensation committee.  After the committee discusses and agrees on the performance and payout, they review it with the full board for discussion and final approval.

You can also apply this same review and approval process to your direct reports.  Also, apply the following learnings to your personal interactions with them throughout the year.

Learn From This Process

  • If the objectives that your board approved were not clear or measurable, work on creating better ones for this year.
  • If any of the feedback you received was a surprise, think about the quality and frequency of the feedback you received from your board during the past year.

The quality of this evaluation and rewards process is a leading indicator of CEO and board communication, feedback and clarity of expectations.  When it works well, it strengthens the CEO and board relationship.  When it becomes bumpy or adversarial, it points to larger issues that need to be resolved.