After retiring, Holzer taught board governance classes for NRECA and NWPPA. In all his professional interactions with CEOs and boards, he said the one consistent theme he heard is executives want and need to be evaluated by their boards.
“They (CEOs) want honest, open and objective evaluations. They want to hear the good and the bad,” he said, adding that CEOs regard feedback as essential to their development not only as CEOs but as leaders both in the co-op and the greater community.
Holzer said that his experience tells him that CEOs share common ground in the feedback they want from boards. Their basic questions, he said, would include:
Is the board satisfied with the information and analysis the CEO provides in assisting the board to arrive at the best decisions on critical matters?
Does the CEO, along with the Board President, assist in and encourage an atmosphere of critical thinking in the board room?
What goals, objectives, or strategies does the board want the CEO to focus on? This should be an on-going discussion or exercise and should be more commonplace than something that is only discussed during the annual CEO evaluation.
Does the CEO keep abreast of industry related issues and continually update and educate the board regarding important matters?
How has the CEO carried out the directives of the board and how is the CEO doing with regards to protecting the financial stability and integrity of the cooperative?
Does the board see the CEO as open, proactive, and transparent?
Is there an atmosphere of trust and confidence between the CEO and board?
“Everyone wants to hear praise, but leaders also want constructive criticism in regard to their work or approach, if needed. The last thing they want is to be surprised or feel blind-sided if something at the co-op, in board relations, or if a CEO’s behavior or action is awry,” Holzer said.
“Everyone wants to hear praise, but leaders also want feedback that can be critical of their work or approach. The last thing they want is to be surprised or feel blind-sided if something at the co-op or in the CEO’s behavior or action is sideways,” Holzer said.
Conducting an effective CEO performance appraisal is ultimately specific to a board’s human dynamics, board policies and strategic objectives, Holzer said. In other words, what works well at one co-op may not be feasible at another.
A formal and procedural approach to evaluations gives CEOs the structure they need in setting and achieving goals, but he cautioned that ideally it does not become an annual review exercise in checklists.
An informal evaluation amounts to ongoing honest, clear, give-and-take feedback that occurs not only between the board officers and CEO but the whole board. Holzer likens it to coaching. “You can’t wait until the end of the game to make changes. You adapt as the game is being played,” he said.
In either case, the result of the evaluation should be a summary of what has already been identified, discussed and addressed — and never a surprise.
The CEO is the only employee a board supervises, Holzer said. “This relationship is crucial and it has to be done right. Neither the board nor the CEO should back away from the responsibility they owe one another.”
Well-performing CEOs who are aware of their strengths and actively addressing their weaknesses are the result of a board that values excellent governance. Ultimately, the healthy and direct dynamics between the CEO and board creates a successful culture for the entire electric co-op, which benefits members.
“Bottom line on the appraisal process? I’ll say it again. No surprises for the board or CEO.”
HOLZER’S RELATIONSHIP TIPS FOR BOARDS AND CEOs
The board should understand that the most important decision it makes is to hire a CEO. [Learn more about the duties of a board in hiring a CEO.]
A CEO wants the board to identify and reinforce his or her positive performance and identify and offer guidance and direction for performance issues that need to improve or change.
A performance evaluation should be a summary of an on-going dialogue throughout the year (coaching) between the CEO and the board.
The CEO evaluation should be a combination of a formal and informal process, which is a reflection of the board meeting process and the relationship culture between the CEO and the board.
A CEO evaluation consists of both qualitative attributes and quantitative measures of the CEO. [For example: Qualitative measurements are not necessarily tied to a specific goal or metric but observable), such as, “Communicates effectively with the board during and between meetings.” Quantitative evaluations are measured by goals and metrics), such as, “Achieved goal of improving ASCI score by 5 points in 2 years.”]
The performance effectiveness and evaluation of the CEO is more than an annual review exercise. It involves the ongoing relationship and respect of the CEO by the board, the employees, the members and by leaders in the community.
It is important that the CEO has a succession plan in place in the event that something happens to the CEO as well as communicating the succession plan to the board.