COVID-19 has stimulated hospital and health system boards to make numerous changes to their routine governance practices, and boards have been creative and adaptable throughout the many stages of the pandemic. CEOs and board leaders have streamlined board agendas to accommodate virtual board meetings, with a focus on the strictly essential elements of governance. Boards have also been appropriately sensitive to the extreme demands of the pandemic on C-suite time. Accordingly, they have thoughtfully instituted practices to protect and preserve the CEO’s time whenever possible.
As the board prioritizes its work, it may be tempting to delay the CEO’s performance evaluation to save time. The board must not give in to this temptation—CEO performance feedback has never been more important and is an essential function of the board. And, because boards are extra sensitive to the heightened demands on C-suite time, it is incumbent on the CEO to be clear with board leadership about the need to proceed with the evaluation process as scheduled.
Why is CEO performance evaluation so important during the COVID-19 era?
- It provides a framework for much-needed feedback in a formalized and structured manner between the board and CEO.
- It allows the board to formally recognize the CEO’s leadership during an extraordinary time in healthcare, along with a discussion of what went well and what did not.
- The board’s executive session discussion of the CEO’s performance can be a tool to coalesce the board.
- Equally important to the backward glance toward performance results is a focus on the future, including the board’s next set of expectations (goals) for the CEO.
Following are ways in which the board and chief executive can work together to ensure the board conducts a productive CEO performance evaluation, even during a public health crisis.
Board and CEO Communication Considerations
In the past year, communication between the board and CEO naturally revolved around the pandemic. Discussion of the CEO’s recent performance forces both the board and the CEO to intentionally analyze the past year more broadly. Although many boards have publicly praised their CEOs, the pandemic response revealed deficiencies in executive leadership in some organizations. Regardless of the situation, it is important for the board to provide a constructive assessment. Timely feedback will enable any needed course corrections while reinforcing the positive aspects of the CEO’s performance and organizational results.
For their part, CEOs are encouraged to welcome the performance discussion because firsthand discovery of the board’s observations is always preferred, the sooner the better, so that any needed adjustments can be made. Ideally, the CEO and board leadership will initiate the performance review process together. Understanding that the pandemic has also placed unusual demands on board members’ time due to their own business and family needs, CEOs and the board might consider streamlining the process. For example, the board may wish to use a shorter evaluation tool. For boards using the 360-degree performance review process, perhaps narrow the focus to board feedback only. It is the responsibility of the CEO to provide any needed administrative support for the process—even if an outside firm must be engaged—so that board time can be focused on the appraisal content.
The Rear-View Mirror
Performance evaluation always includes a review of the past. This year, all boards and CEOs are sharing the same reality: This year did not turn out as planned. Boards, assisted by their compensation committees, will need to evaluate missed annual metrics. They should be guided by their compensation philosophy and policies, while remaining open to a complete reset due to such unusual circumstances.
It is also the first time that many boards have observed their CEO’s leadership in a sustained crisis. Boards are weighing subjective performance factors such as the CEO’s:
- Response to adversity.
- Personal resilience during extreme time demands.
- Leadership and decision-making abilities amid utmost uncertainty.
The CEO is owed a thoughtful assessment from the board that covers all elements of job performance, including the board’s observations about the CEO’s crisis leadership skills.
Focus on the Future
Equally important to the discussion about past performance is the conversation about expectations for the coming year. While fighting a war with a virus, it can be extraordinarily difficult to think beyond today’s urgent operational needs. However, the CEO and board have a fiduciary obligation to consider the future. Start by creating a post-pandemic financial and strategic forecast. Consider near-term versus long-term scenarios. This is an excellent opportunity for the board to blend its planning with a vision of the future.
Based on these conversations, the CEO would be wise to consider drafting suggested performance goals for the coming year for discussion with the appropriate board committee. If committing to a set of goals for the next year seems unreasonable, then consider a time frame of six months. Too many goals are a common flaw in many performance systems, so use this opportunity to decrease the number of goals. The final step is for the board and CEO to reach agreement on all goals and metrics for the next performance period. The performance review discussion also serves as an opportunity for the CEO to clarify what he or she needs from the board in the coming months.
As a result of the deep impact of the pandemic, board expectations of the CEO have changed and evolved. Carrying out the CEO’s performance review process should guarantee frank and open feedback between the board and CEO about past, present and future mutual expectations. Maintaining open communication is essential to the quality of the partnership between the board and its CEO.
Kimberly A. Russel, FACHE, is CEO of Russel Advisors, a healthcare governance and CEO consulting firm in Lincoln, Neb., and an adviser with The Governance Institute (russelmha@yahoo.com).
CEO To-Do List:
- Reinforce to the board the value of the annual evaluation.
- Initiate the process if needed.
- Prepare a concise report of goal statuses for the recent performance period.
- Suggest (and provide an example of) a shortened evaluation tool.
- Arrange for administrative support for the process.
- Consider changing the evaluation time frame from one year to six months.
- Together with the chair, build board consensus on reasonable future goals.
- Ask for board assessment of the CEO’s crisis leadership skills.