Reviewing the Executive Director Performance

A Guide for Boards of Directors

The relationship between the organization’s voluntary Board of Directors and the senior staff person in the organization, such as the Executive Director, also CEO, General Manager, Artistic Director, etc., is one based on a clear understanding, mutual respect and support that lead to a relationship of trust. However, the relationship is also one that can go wrong with serious consequences to the organization and the audiences its serves. This guide is intended to provide your organization’s Board of Directors with a reference and a model to evaluate your Executive Director’s (ED’s) performance.

WHY IS THE EXECUTIVE DIRECTOR’S PERFORMANCE REVIEW IMPORTANT?

The Executive Director is the key staff person in a voluntary organization’s ability to achieve its mission. If the Board of Directors does not manage the performance of this individual it is gambling with the future of the organization. However, with an effective process to manage performance, chances increase that the organization will be effective in achieving its goals. Failure to properly evaluate an Executive Director comes at a substantial cost to an organization:

• programs and services which do not achieve goals,
• irrelevant programs and services which do not meet the needs of target
• audiences,
• limited success in securing additional funding,
• loss of critical staff and/or volunteers, and/or
• public money which is not effectively utilized.

While supervising and evaluating the Executive Director is one of the most important responsibilities of a Board, it is also one of least welcome activities. Many Board members will feel uncomfortable in a role that may involve criticizing an individual that the Board, and the organization, relies on for direction and leadership. Many Board members simply do not know how to conduct a fair and informative performance review or what to evaluate.

Ongoing performance reviews are a continuous process that begins by establishing performance objectives, gathering information throughout the year and collecting feedback on the ED’s progress towards meeting the performance objectives.

GETTING READY

Before beginning any type of performance review process the Board must ensure that the following are in place:

• Clear and appropriate policies that define the relationship between the Executive Director and the Board. For example, does the ED have sole authority over the rest of the staff?; is the ED a member of the board?
• A strategic plan that establishes general goals and specific objectives, and
• Performance expectations that align with the strategic plan.

GROUND RULES FOR THE PERFORMANCE REVIEW

All too often, an annual performance review is seen as a once-a-year event where everybody focuses on the performance interview. This is the least effective way to evaluate ED performance. The build up to the performance interview creates tension and, frequently, the focus is on the most recent events, positive or negative. Performance reviews for all staff are based on pre-determined guidelines and should be characterized as being:

• On-going;
• Forward-looking; and
• Clarifying.

Ongoing performance reviews are a continuous process that begins by establishing performance objectives, gathering information throughout the year and collecting feedback on the ED’s progress towards meeting the performance objectives. Only then does it culminate in a final performance interview, which is also the opportunity to establish performance objectives for the upcoming year.

The performance review should also be forward looking; guiding the ED in performing on the job. While the review looks back to determine the ED’s strengths and weaknesses, the real purpose is to determine where the ED needs to focus his/her attention and energy in the future.

The performance review should also clarify communications and expectations between the ED and the Board of Directors. This relationship is a partnership – each has specific roles and responsibilities that need to be integrated to create an effective organization. A performance review is the opportunity to do this.

A performance review is impossible to do if the Board has not defined expectations for performance. In general, performance expectations should relate directly to the strategic directions of the organization. As the senior staff person, the Executive Director is normally responsible for the overall health of the organization including:

• Providing leadership and assistance to the board,
• Managing and directing the organization’s operations, including staff and volunteers,
• Ensuring the organization’s financial resources are properly managed, and
• Communicating the goals, purposes and programs to stakeholders.

THE PROCESS

The review process is a two-part process:

• Gathering Information for a Performance Review
• Conducting the Performance Review

Gathering Information for the Performance Review:

This is a continual process that should be done throughout the year. One of the difficulties that Boards face is defining the type of information that should be collected and analyzed. The template on pages 5 to 11 provides examples of the types of information that should be collected and reviewed on an on-going basis.

At times, your Board may wish to seek information from other people regarding the ED’s performance – this could include members of the organization, community/stakeholder contacts, or staff the ED supervises. This type of information can be useful in gaining perspectives on how the ED works and interacts with others. However, it may be difficult for individuals outside of the organization to rate the ED’s performance on specific job expectations or performance standards. Consequently, this type of information has limited use in evaluating the total performance for the ED. This type of information is useful if the Board is seeking specific information on the Executive Director’s interpersonal skills, but should not be the main source of information to assess the ED’s performance.

The template identifies three key performance areas:

• Strategic Management
• Human Resource Management, and
• Financial Management.

These three areas must be integrated to create an effective organization.

In columns 2 and 3, the template identifies typical outcomes (results) and possible indicators associated with the key performance area.

While outcomes and indicators can be identified, collecting information that helps define if outcomes/indicators have been achieved can be difficult. Column 4 of the template suggests the types of information that can be collected to inform the Board. The information is typically available from most organizations, but is often overlooked in reviewing the ED’s performance. Some of the information may need to be collected and formatted for the performance review. For example, the ED may need to prepare an annual report that identifies and describes how policy has been implemented in the organization. Depending on the size of the organization, the scope of its activities and the year-to-year focus of the organization, not all of the outcomes or indicators may be needed for each and every performance review.

One of the weaknesses of any performance review process, including that of the ED, is that information on which performance is based can be vague. The template provides concrete information to assess performance – for example, either there is a written communication plan with documented evidence of implementation or there is not; if there is not, the question becomes why. Furthermore the evidence relates directly back to the outcome/indicators and the key performance area.

Over time, each organization may be able to refine the specific outcomes that are critical to the success of their organization. As well, each organization may have unique sources of information that can be used.

Caution: While it may be tempting to try to implement all of the outcomes/indicators it is probably too much to accomplish in one year. Rather, identify the important outcomes/indicators and focus performance expectations, and the performance review, on these.

For example, if your organization is starting a major strategic planning cycle, then focus on the outcomes/indicators that relate to the key performance area of Strategic Management, plus one or two outcomes/indicators from the other key performance areas (such as staffing, fund development).

THE ROLE OF POLICY GOVERNANCE

Many organizations function through a policy governance model; inherent in policy governance is the use of ends which describe the target towards the staff must aim.

Frequently, the performance of the ED is based on ends statements – the rationale being that if the ends are being achieved, then the ED’s performance is acceptable. While this is a good start, few ends statements address specific performance standards for the ED. Those ends statements that do address performance are often intended to limit the actions of the ED. Assuming that ends statements are sufficient to assess the performance of the ED may be misleading.

For example, common Executive Limitations statements on budgeting rarely move beyond balancing expenditures with revenue, a minimum percentage retained for working capital, etc. These do not contribute to measuring the performance of the ED – particularly the relationship between the decisions the ED makes on the use of resources compared to the results achieved.

Ends statements will influence the specifics of key performance areas, however relying only on ends statements to assess ED performance may lead to assumptions about performance that are unfounded.

CONDUCTING THE PERFORMANCE REVIEW

The performance review is usually conducted in a five-stage process:

1. Collect and review information.
This should be on-going throughout the year. When reviewing the information identify areas or work where there appears to be consistent strengths and/or weakness. However, guard against:

• Preoccupation with one outstanding quality – look at total performance,
• Tendency to rate personality traits above performance,
• Substituting personal likes and dislikes for the objective appraisal of performance

2. The board (or a committee appointed by the board) prepares a general report summarizing the ED’s performance; the report should be balanced providing both positive and negative comments. However, negative comments should be supported by information reviewed as part of the performance review process. The report should indicate, in clear language, where the ED’s performance was strong and where performance was weak or did not meet expectations. An overall rating could be included such as:

• Exceeds all performance expectations
• Meets all performance expectations
• Meets most performance expectations, but overall performance is satisfactory
• Most performance expectations are not met
• Unsatisfactory overall performance

The whole board should review and approve the summary document.

3. The report is provided to the ED for review. At this point, the ED may decide to provide additional information (based on facts) and/or comments. If the ED provides significantly different information, the Board committee may wish to review their report.

4. The President of the board meets with the ED to discuss its assessment with the ED. This is an appropriate role for the President – there should be an on-going working relationship between the President and the ED – the performance review extends that relationship. The purpose of the interview is to review and clarify provided and identify preliminary expectations for the future. If required, the interview should identify when and how the ED’s performance needs to improve.

5. A final report is prepared. The report:

• summarizes the information from the review,
• the rating on performance,
• areas for improvement including clear expectations on when and how performance will be improved (identify gaps in specific skills or knowledge) as well as any support the organization is prepared to provide to improve performance, and
• expectations for performance during the upcoming year – this will also set priorities that the ED will need to focus on.
• The final report serves two purposes. First it is a reference document for future discussions and performance reviews. More importantly, it is the primary document that will be referred to if, in the future, the ED’s performance slips. If dismissal becomes a consideration, the actions that the Board undertook to define and guide the Executive Director’s performance will be examined, in particular, if the Board conducted performance reviews that:
• were based on evidence of performance, rather than opinions, identified weaknesses in performance and provided directions on improvements, and
• identified performance expectations.
• Standards required for any performance review where performance does not meet expectations for any staff include:
• Clear statement that the situation cannot continue,
• That changes and improvement in performance are expected,
• Document all discussions,
• What support the museum is willing to provide to help staff improve performance,
• Time frame for improvement and
• What will happen if there is no improvement?
• This approach will ensure that the organization is not subjected to charges of unfair dismissal.

Reviewing Executive Director Performance - A Guide for Boards of Directors was developed to give concrete direction to Board of Directors on the types of tasks and responsibilities of an Executive Director that needs to be reviewed and identifies sources of organizational information to inform a Board if the ED is doing a good job. The resources - in the link below - may provide additional information.