The collaborative and evaluative role that directors play necessitates a delicate balance in the relationship between the CEO and the board. Mutual trust and respect is necessary. Directors provide objective and independent counsel to the CEO, but shouldn’t interfere with day-to-day management. They must balance their personal and professional respect for the CEO with a sense of responsibility to accurately judge the fulfillment of his or her duties.
Some boards have the erroneous notion that the higher you rise on the corporate ladder, the less need there is for performance evaluation. But in fact, CEOs, and consequently, their companies, benefit from systematic appraisals. They generally receive less feedback on how they are doing than executives at lower levels who are regularly evaluated by superiors, and who are more likely to get candid feedback from peers and even subordinates. Most CEOs appreciate greatly the benefits of feedback from gifted peers on their boards.
Evaluation of the CEO should start with a dialogue between the board and the CEO to establish a Profile of Success™ aimed at capturing the elements crucial to the individual’s optimal performance in the position. This process enables the CEO and board to identify the success factors to be used as benchmarks. It should stress the strategic and performance.