You can't predict the future but you can design it.

CEO Evaluations Need To Have Specific And Straightforward Goals And Guidelines

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Every association should have a carefully thought out executive evaluation and compensation policy that is objective rather than subject to the whims of a transient board majority.

If you're a CEO who is happy with the process that is used to evaluate and compensate you, count yourself fortunate. More often than not, when I ask a CEO whether he or she is satisfied with the process at their association, they sputter in frustration. Frequently they make their judgments by the seat of the pants - driven by such irrelevant considerations as whether the exec is earning more than the board members, has a different regional accent, or is disliked by an influential director's spouse.

Every board should have a carefully thought out executive evaluation and compensation policy, one that is objective rather than subject to the whims or will of a transient board majority. This evaluation process should be firmly tied to the organization's strategic objectives. The basic principle to remember is that the board has only one employee, the executive director, whose job it is to advise the board as it develops its grand strategies and then to carry them out under board supervision. He or she should be evaluated and compensated on how well this assignment is carried out. As yourself these questions.

1. Does the board evaluate the performance of the executive director in a way that assures systematic policy compliance, yet leaves the board free to concentrate most of its time on creating the future rather than checking the past? In other words, is your board observing the principle of "nose in, fingers out?"
2. Is monitoring of performance a continual process, providing feedback and guidance in real time when it can be helpful rather than at the end of the year when it is too late to take corrective action? Is the annual appraisal a summary of the ongoing evaluation?
3. Is it clear what the board charged the executive director to accomplish? Were these outcomes arrived at jointly? Did he or she succeed in achieving the specific ends agreed upon by the board and included in its strategic plan?
4. Has the board adopted specific policies that clearly spell out what the executive is prohibited from doing? Do these policies cover such subjects as protection of assets, financial condition, compensation and benefits, employee protection, budget and indebtedness? Did he or she comply with the policies adopted by the board?
5. Except for these limitations, is the executive director free to operate by the exercise of his or her own judgment? Does the executive have the authority to do what needs to be done? Or is the board jealously guarding what it wrongly perceives to be its own turf?
6. Is compensation tied directly to the achievement of previously-established objectives by a specific formula? Is it clear to everyone involved what the executive must accomplish to obtain a clearly identified level of compensation?
7. Do both the executive and the board believe the evaluation and compensation process is fair? Can both parties freely discuss the subject and come to an amicable resolution of honest differences?

Once you can answer "yes" to these questions, a major source of friction and resentment between the board and the exec will have disappeared. A more harmonious and better-functioning association will be the result.