Charity Governance

Let's face it: the annual performance review process is generally not favored by the majority of people, regardless of which side they are on. Managers often view it as a hassle, while employees tend to approach it with apprehension. When you factor in uncomfortable atmospheres and complex procedures, it's no wonder that stress levels can skyrocket!

Given the aforementioned circumstances, how does this situation impact the Executive Director/CEO of a non-profit organization?

In this article, I present six valuable tips for effectively conducting annual performance reviews for ED/CEOs. Here's a breakdown of the following recommendations.

‍

1. Establish a comprehensive policy and accompanying procedures for conducting performance reviews of ED/CEOs

The policy should outline the designated individuals responsible for supervising the process, which may include the Chair, a Performance Review Committee (often a subset of the board), or the Executive Committee, depending on the organization. Additionally, the procedures should include specific timeframes, such as the start date of the review, guidelines for compiling and delivering the results, and the expected completion date of the entire process.

‍

2. Streamline the process

We often see forms and excessively lengthy review processes that may significantly elevate anxiety levels. However, a concise one or two-page form can be sufficient as long as it covers the essential elements of a review, including:

• High-level summary of the overall review results.
• Brief assessment of whether the ED/CEO has achieved their objectives, which should be aligned with the strategic plan and organizational goals.
• Recognition of specific areas and accomplishments worth celebrating.
• Identification of areas that require improvement and potential professional development opportunities.
• Inclusion of details regarding any salary increase or bonus considerations.
• A section for the ED/CEO to share their reaction to the outcomes and procedures, including their insights on how the board can enhance support in their role.
• If feasible, verify SMART (specific, measurable, achievable, realistic, and timely) objectives for the upcoming year and establish clear expectations.

And strive to adhere to the same principle of simplicity when presenting outcomes to the Executive Director or CEO – keep it concise, limiting the length to one to two pages rather than a lengthy novel.

‍

3. Ensure that feedback is obtained from the appropriate contributors

While it is essential for the board to offer feedback during the process, it may be beneficial to extend involvement beyond that group by engaging other significant stakeholders, such as direct reports, additional staff (which can be accomplished through a staff survey), funders, sponsors, and other volunteers. Choose individuals who are relevant and would contribute value to the overall process.

‍

4. Maintain thorough documentation of the annual review process

Surprisingly, certain organizations lack comprehensive records of annual performance reviews for their Executive Director or CEO. On occasions when Chairs change, the documentation can be misplaced. It is important to keep suitable records of the process and store them alongside other staff records. Ensure that both the ED/CEO and the board are at ease with and fully committed to the process, including the discussions held with the board regarding the results. Transparency is key, and there shouldn’t be any unexpected revelations for anyone involved.

‍

5. Incorporate external salary benchmarks into the review process

A significant number of boards neglect to utilize external benchmarks when determining compensation for ED/CEOs. It is essential to avoid arbitrary figures and instead employ a framework that ensures the executive receives appropriate compensation in line with the current market. Not only does this foster a fairer process that the ED/CEO can endorse, but it also helps alleviate any perception of excessive or improper compensation.

‍

6. Avoid relying solely on the annual review and instead offer feedback consistently throughout the year

Despite the annual nature of the review process, it is vital to offer feedback to the ED/CEO consistently throughout the year. Ongoing, open communication and dialogue should prevent any surprises during the performance review.

There is no need to fear! Even boards that function exceptionally well may approach these reviews with anxiety and unease, understanding that the continued success of their ED/CEO has significant implications for the organization's health, sustainability, and future. Effectively managing the performance of the ED/CEO is critical to ensure that the organization is meeting its goals.

‍