Article originally published in the Philadelphia Business Journal on April 6, 2015
When boards evaluate the annual performance of their CEOs, the areas assessed are most often focused on those metrics that drive shareholder value, such as growth in revenues, cash flow and earnings, as well as annual and multi-year operational and strategic goals. Goals are established by the board and their CEO at the beginning of the year, and at the end of the year, results are measured against those established goals.
Evaluated less often are leadership traits of the CEO. Unlike performance against numerical goals, these are more subjective and harder to assess, but very important to the long-term success of the company. The assessment of the following traits should be part of every CEO performance review:
Establishes a clear vision and mission for the organization
If you don’t know where you are going, you can’t get there, and without a clear vision and mission, the long-term goals of operating and staff units down through the organization will not be aligned. The process of establishing a clear vision and mission is just as important. CEOs should be evaluated on the extent to which they involve their senior leadership team, so the team develops a sense of ownership and commitment to the vision and mission, and they know what roles they play in achieving them. Just as important, the senior leadership team can communicate this role down through their respective units.