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CEO Evaluation 3.0
Boards have solid business reasons for their increased focus on CEO evaluation.
Today, more and more, it’s Evaluation 3.0–a rigorous annual review that includes the CEO’s self-assessment. The review considers numbers, of course, but beams in as well on that less quantifiable aspect of CEO performance: leadership. Consider a few examples of Evaluation 3.0:
- Microsoft evaluates the CEO against “company culture/leadership objectives.”
- Xerox applies “Leadership Effectiveness Measures,” such as employee morale, strategic leadership, and enterprise guardianship.
- Delta asks the CEO to self-evaluate in “strategic planning, financial matters, and leadership.”
- Fiserv applies criteria for strategic and succession planning, senior team development and performance, client and shareholder relations, ethics and compliance.
While financial results are easy to measure, they reflect the past. Leadership, more difficult to measure, is critical precisely because it predicts the future.
Six key areas of 21st-century leadership may help boards structure a true CEO Evaluation 3.0. AchieveGlobal identified these areas in a 2009 worldwide study. We analyzed 80 recent leadership studies, tested summary findings with executive groups, launched a global survey yielding 971 responses, and identified 42 best practices–some behavioral, some cognitive–sorted into six categories, or zones, of leadership.
Boards may find it useful to compare their CEO’s actions and abilities with those of successful leaders in each of the following six zones.
Zone 1: Reflection (Finding Strength Within)
CEOs who succeed in a turbulent economy regularly consider the limits of their knowledge and strive to grasp the changing big picture. They reflect often on their challenges and the impact of their decisions and actions. These executives openly acknowledge their mistakes as they seriously entertain views that differ from their own. Aware of their natural tendency to overvalue their abilities, these leaders seek an objective picture of their strengths and liabilities, see failure as a chance to learn and grow, and cultivate lifelong learning and development.
Zone 2: Diversity (Finding Value in Human Differences)
An effective CEO can tap the capabilities of under-represented groups, value their contributions and develop their careers. Such a leader fosters collaboration among people very different from one another, whether that difference reflects gender, ethnicity, age, nationality, beliefs, education or work styles. Critical in a global economy is a leader’s deep appreciation of other cultures and their impact on how people process information, express themselves and engage with others. Business history is rife with examples of failed global initiatives headed by leaders blind to the role of diversity.
Zone 3: Ingenuity (Accelerating Innovation)
Leaders who excel in this zone continually rethink the status quo, seeking corporate agility and regular reinvention. They allocate resources to ideas with the greatest potential. They understand that breakthroughs come when leaders at all levels create an environment in which innovation thrives. As they develop ways to share intellectual capital, leaders strong in ingenuity focus R&D efforts by embracing Peter Drucker’s conclusion that the purpose of business is to serve customers.
Zone 4: People (Connecting on a Human Level)
Effective leaders seize opportunities to make human connections with stakeholders and people up and down the supply chain. These leaders know that a sense of belonging strongly affects commitment and action. Though leadership requires dynamism to communicate urgency and boost enthusiasm, these leaders also recognize the need to listen, empathize and show humility. Leaders effective in the people zone model what they expect of others. By encouraging work-life balance, engagement and team-building, they promote a culture that attracts and retains the best talent.
Zone 5: Society (Working for the Common Good)
Corporate citizenship is good for business. It promotes an economy unfettered by excessive regulation. It protects assets through sustainable business practices. It builds open relationships that foster cooperation. As James M. Kitts, former CEO of Gillette and Nabisco, has said, CEOs must “tell the truth”–to the public as well as their boards. Further, our study found that socially-aware executives make fair decisions regardless of any negative impact on themselves, that they reward employees based on merit, not politics, that they groom worthy successors and that they personify the best company values to all constituencies.
Zone 6: Business (Planning and Execution)
Successful CEOs focus on the long-term future rather than analysts’ quarterly expectations. Working with the board, they create strategies that leverage the company’s unique strengths, set workable goals, develop implementation plans in line with company values and establish milestones for judging progress. Even with ambiguity and insufficient information, these executives are decisive, balancing risk, competitive intelligence, industry trends, and the need to control operating costs without compromising customer satisfaction. Employees see them as leaders who can mobilize the workforce to meet ambitious goals.
Why Have CEO Evaluations?
Boards have solid business reasons for their increased focus on CEO evaluation. Apart from helping to meet fiduciary responsibilities, evaluations allow greater objectivity about CEO compensation and they set an example of accountability and dialogue for the entire organization. At the same time, many CEOs now share their evaluations with senior managers to promote a culture of openness and personal development.
So, whether they employ the six leadership zones or other criteria, carefully focused CEO evaluations can bring immeasurable value to the entire organization.
Sharon M. Daniels is CEO of AchieveGlobal, which provides performance-improvement consulting and solutions in leadership, sales and customer service. With offices in 42 countries, the company offers customized learning in 30 languages and dialects.
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http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
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