David Hammond, Executive Search Lead, Tribe.
It should be easy to develop the Terms of Reference (ToR) for a Chief Executive Performance Committee (titles may vary).
Across the internet there are about 40 examples to draw from that I could find. While they are easy to ‘cut n paste’, the ToR are hard to get right. There are a lot of Board Chairs and Mayors who would agree with this when they ruminate on past experiences of organisational performance.
If you look over the 40 examples as I have done, you would summarise the purpose of these committees as the following.
“Chief Executive Performance Committees oversee and evaluate the CEO’s performance, setting annual objectives aligned with strategic goals. They provide regular feedback, review and recommend remuneration, and ensure compliance with legal requirements. The committees manage the CEO’s contract terms, including renewal or termination, and prepare performance reports for the Board. They engage with stakeholders to gather feedback on the CEO’s effectiveness. The intent is to ensure robust leadership, accountability, and alignment with the organisation’s mission, promoting long-term success and stability through transparent evaluation processes.”
Do you know what I find interesting? The ToR are missing the match between monitoring and motivation of a Chief Executive and the balance between ‘what’ is achieved with ‘how’ it is achieved for sustainability of the results.
I wish I could find the original ToR these are all based on and change it! My work with Tribe Leadership is in both the recruitment of Chief Executives and then the onboarding of them through the whole process of KPI development, and frameworks around their monitoring and motivation.
What I am seeing is governance committees (and therefore, whole Boards) being exposed to risk through the ‘cut n paste’ development of their ToR.
What about the perspective of the Chief Executive? As a Chief Executive facing your CEO Performance Committee, does it feel like you are getting called to the Principal’s Office?
Just the very name of these committees probably tells you a lot about how they see their role. Is it a CEO ‘Performance’ Committee, or a ‘People & Culture’ Committee, a ‘Remuneration’ Committee or just a vanilla ‘CEO Committee.’ There is a truth that what we choose to measure will be what our Chief Executives prioritise and do, and a lot of that hinges on the quality of KPI development.
I would advise that these committees are not there to administrate the process, and nor are they there just to ‘monitor’ performance.
Monitoring is easy. We want these committees to be thought-leaders for their organisation over the development of their Chief Executives into excellent leaders who are locked-in and highly motivated.
We want the committee to think about the frameworks of success and how these are worked through the Chief Executive and their organisation.
We want the committees to toss out old, outdated KPI approaches that have not stopped the high-profile failures across any sector. We are calling for much more thought into these critical committees.
If the ToR are a ‘cut n paste’ not enough thought is being put into what you are trying to do with the Chief Executive. A lot of the ToR are heavy on performance monitoring and silent on professional development of the Chief Executive.
This is a mistake. In my view, if you want to manage a Chief Executive well, there is a need for the Chief Executive Performance Committee to balance monitoring and motivation of the Chief Executive.
Many of the ToR documents make a reference to good employer obligations under the laaw and that’s it really. It is hardly motivating. There is almost nothing about professional development. The counter argument might be, “training is a part of total remuneration” in their Individual Employment Agreement.
I take a very dim view about treating staff training as some kind of ‘benefit’. It is not. Chief Executive professional development is as necessary to them as any other staff member. It is ‘tools of the trade’, not a benefit
Equally, if your Chief Executive asks the Performance Committee to go to a conference to spend their training allowance, I am just as cynical about that. It is the role of the Chief Executive Performance Committee to understand the development needs of their Chief Executive and ensure they are being trained into their actual needs, not just wants.
We keep coming back to KPIs. In my approach I seek to balance the ‘what is achieved’ with the ‘how it is done.’
When we concentrate on the ‘how’ we end up with Chief Executives and their staff taking a longer-term sustainable approach to KPIs more in keeping with the values. It is the role of the Chief Executive Performance Committee to invest significant time into the development of a KPI framework that is well-balanced and focussed on the few things that lead to success in the organisation. Cluttering the Chief Executive is not smart.
To finish this article, here are some pointers to what your Chief Executive Performance Committee could look at:
A ToR for the Committee which balances monitoring with motivation.
The Committee supported by a specific Chief Executive Performance, Remuneration and Professional Development Policy that is market-competitive.
A KPI approach tailored to (a) the experience level of the Chief Executive and (b) the current context of the organisation, which rebalances the ‘how’ and the ‘what’, and ‘hygiene KPIs’ with ‘strategic KPIs’.
A Professional Development Plan for the Chief Executive that starts with an evaluation of their skills, experience, knowledge and attributes before preparing the Plan itself.
I am happy to chat to you at any time about the improvement of the Chief Executive framework.