Tip #14 Recognize Positive Performance of the Chief Executive and Take Corrective Action When Indicated
In our last Tip for Effective Boards, we focused on the sixth principle for effective board delegation to management: track and evaluate the performance of the chief executive in relation to the board’s stated expectations.
In this month’s communication, our focus is on the seventh and final principle for effective board delegation to management: recognize positive performance of the chief executive and take corrective action when indicated.
When the tracking and evaluation of chief executive and organization performance reveal non-compliance with board expectations, it is critical that the board take action. Such action can include the following: officially recognize that non-compliance has occurred, require that the chief executive address the non-compliance issue, and require a follow-up report to the board regarding performance related to the area of identified non-compliance. Depending on the severity of the issue or issues of non-compliance, more serious action steps can be taken by the board including disciplinary action up to and including termination. On the other hand, the board should recognize that temporary or ongoing non-compliance in one or more policy areas may relate to ambitious compliance targets and/or environmental factors over which the chief executive may have limited if any control.
Similarly, when the tracking and evaluation of chief executive and organization performance reveal compliance with board expectations or even performance beyond stated expectations, it is also important that the board take action. Chief executive compensation may be increased in accordance with board policies and practices (for example in conjunction with an annual evaluation) as financial resources permit. However, whether or not compensation is affected, it is important for the board to provide official recognition of compliant or even exemplary performance and show its appreciation for the efforts and achievements of the chief executive.
As described previously, the Policy Governance® model of board operations includes a system of ongoing tracking (and summative evaluation if desired) of chief executive and organization performance. Such a system allows for timely board reaction to performance data and effective responses to compliance and non-compliance with board expectations.
With this communication, we have competed our discussion of the seven principles for effective board delegation to management. We hope you have found this series on effective board delegation to be interesting and helpful. In the following Tips for Effective Boards we will turn to other board governance topics. If there is a topic you would like to see addressed, please let us know.
For reference, the seven principles for effective board delegation to management follow.
Seven Principles for Effective Board Delegation to Management
- Be clear about the recipient of board delegation to management.
- Embrace the “group authority” of the board with delegation to the chief executive coming from the board as a whole. (This principle and the following principles assume the board is delegating to a chief executive.)
- Clearly state the board’s expectations for performance of the chief executive.
- Clearly delineate the scope of authority and discretion being delegated to the chief executive.
- Empower the chief executive to make decisions within the defined delegated scope of authority.
- Track and evaluate the performance of the chief executive in relation to the board’s stated expectations.
- Recognize positive performance of the chief executive and take corrective action when indicated.
For more information about Policy Governance®, go to www.BoardsOnCourse.com/policy-governance.