Magazine article HRMagazine

Appraising CEO Performance

Magazine article HRMagazine

Appraising CEO Performance

Article excerpt

Board members need training and assistance to properly evaluate the CEO.

Constructive feedback "is hard to give and hard to receive," says Glenn Gilkey, chief human resources officer at Fluor, a worldwide construction company headquartered in Irving, Texas. This is especially true when a board of directors evaluates a CEO's performance.

"CEO performance is mainly driven by the numbers: 'Did you meet the earnings target or safety goals for the year?' " Gilkey notes. But in his role he also has a lot of conversations with board members about how others in the company are responding to the CEO's direction, which ultimately contributes to the CEO's evaluation.

As a result, Gilkey walks a fine line when coordinating the efforts of the board and his boss. When Alan Boeckmann retired as Fluor's CEO and became the company's chairman, he called Gilkey and new CEO David P. Haxton into his office. "He said, 'Glenn, it's your job to tell David to call me if he does something that you don't think I would agree with. David, if Glenn comes to you with these issues, it's your responsibility to call me,' " Gilkey recalls. "David knows that I have confidential conversations with the board. Trust between all of us is extremely important. David understands that is my role, but it is nerve-racking sometimes."

Nerve-racking though it may be, HR executives have a role in training the board of directors on corporate governance and how to conduct CEO performance appraisals. And, it's tricky to balance the needs of the board with those of the CEO.

HR's Role

Experts say savvy HR professionals understand that they have counseling roles in five areas related to corporate governance and CEO performance appraisals:

Recommend a corporate governance consultant. Dan Clark, founder and CEO of Dan Clark Associates LLC, a consult ing firm in Tallahassee, Fla., says board members must understand corporate governance before they can conduct a CEO appraisal.

Patrick M. Wright, professor of strategic HR at Cornell University, says his interviews with chief human resource officers (CHROs) reveal "incredibly dysfunctional dynamics on boards because of the high status and self-image of all the members. Everybody is an expert, and all are used to being the leader who calls the shots," he says. "So throwing them together and asking them to work as a group isn't an easy task."

Offering training in board processes can help, but it isn't always easy. Some board members "think they are beyond training," says Mark Faust, principal at Cincinnati-based consultancy Echelon Management and author of Growth or Bust: Game Changing Secrets from a Leading Corporate Strategist (Career Press, 2011). He even warns against using the word "training" when talking with board members. Instead, he advises, use the word "consulting."

What should HR executives look for in a consultant? "Find someone who has worked with boards. This is not a job for a typical performance appraisal specialist because there is less importance placed on the mechanics and more importance placed on the dynamics," Wright says.

Remember to check consultants' references. "Find out if [the consultants] have expertise with nonprofits or forprofits. Interview people and find out if it is a good personality match," advises Simone P. Joyaux, principal of Joyaux Associates, a nonprofit-sector consulting firm headquartered in Foster, R.I., and author of Strategic Fund Development: Building Profitable Relationships That Last (Wiley, 2011).

Scout university-level courses for board members' continuing education. "Our board members come from very diverse backgrounds," Gilkey says. "We arrange university-level classes based on the individual needs of the board member. Stanford has some good 'how to be a board member' classes and classes on how to better understand financial information."

Assist in developing performance appraisal tools and a CEO job description. …

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