In our experience nearly all CEO evaluation surveys fall short of their intended objective. Board members want to fulfill their obligation to provide candid and valuable input to the CEO about their performance. CEO’s seek clarity on the Boards perspective of their performance. Both objectives look for the Board to speak in “one voice”, while providing each Board member the latitude to express their individual perspective. This is easy to do when all Board members are in complete agreement as to the performance of the CEO. However, it is rare to find 7,9, or 11 individuals in complete agreement on any topic, much less the performance of an individual they see once a month running a business which is not usually the specialty of the Board raters.
Most credit unions have a qualitative survey as part of their CEO evaluation process. Typically, each Board member is required to complete a survey which is designed to assess key leadership attributes of a CEO. Each question is scored (typically on a five-point scale) and requests that Board members add comments to clarify and validate their scores. This survey frequently has a very high weight in the scoring of a CEO’s performance. Our next article will detail key quantitative elements that, we believe, should be a major focus of the CEO evaluation.
The Challenges of CEO Evaluation Surveys
Beyond the general challenge of finding unanimous consent among so many adults there is the very real challenge of “rater bias”. Rater bias comes in several forms; the first is “recency bias”. Recency bias occurs when we focus primarily on recent events to form an opinion that is supposed to take into consideration the body of work over a one year or longer period of time.
A second bias is scoring definition bias. We find this present when the rater believes things such as “nobody deserves a perfect score” or “someone making this much money must be held to a higher standard”. Both bias’ will skew the accuracy of the overall score. There is also “halo bias”. In this case the rater is in awe of the scope of the responsibilities believing that any reasonable effort should be substantially rewarded.
Go to the BARS
BARS stands for Behaviorally Anchored Rating Scales. This tool allows each rater to read a narrative definition exemplifying behavior that would warrant a specific score. The following Qualitative Leadership Factors example show how this tool can be used by credit union Boards.
A similar definition should be developed for each question answered/scored by the Board.
In our experience the use of the BARS approach substantially increases the consistency of ratings and clarity and value of the information provided to the CEO.
This process is used to provide assessment guidance for each of the factors to be rated be they Board Relationships, Community Involvement, Communications etc.
Completing this process requires the compilation of the individual scores. This is frequently done by the Board Chair, or the Chair of the Compensation Committee. That compilation is more of an art than a science. Simply totaling and averaging the scores adding all verbatim comments does not complete a successful evaluation.
A successful evaluation should provide a “one voice” summary. This requires the blending of all scores and comments into an objective narrative of the CEO’s performance. It should highlight excellent performance examples and offer productive coaching to further enhance future performance. This presumes a candid explanation of Board member’s expectations, easier said than done, and a sincere desire on the part of the CEO to receive information.
This “art” is rarely part of Board orientation or training. It should be, in particular for the Chair. The CEO evaluation is second, only to CEO acquisition, as the most important and impactful of Board responsibilities.
If you would like to develop or further hone this skill you can contact us at KNG.
John P. Gregoire is a partner in Koker, Nelson and Gregoire (KNG), a consulting firm dedicated to executive compensation, succession planning and performance management in credit unions. With more than forty years of experience in the financial services industry and having held senior management positions in state and national trade associations and credit unions, his is a broad-based perspective reaching to board governance, team leadership, CEO appraisal, score carding, succession planning, mergers, and the alignment between executive compensation and organizational strategy.
John also founded the ProCon Group Ltd., now in its twentieth year of serving a client base comprising over forty percent of credit unions with a billion dollars or more in assets. A founding member of the Filene Research Institute, he was instrumental in the development and publishing of the report on Board Responsibilities and Work Styles in Effective Credit Unions. He has authored a variety of articles on strategy, the balanced scorecard and governance. John earned his master’s degree in management from the Claremont Graduate School – Peter B. Drucker School of Management Program, working directly with Drucker on topics of executive management. He is a former board member of the National Credit Union Foundation. You can reach John at 608-239-3449 or John.Gregoire@kngco.com.