In evaluation of CEO, the board of director’s role, to its shareholders is to ensure that they choose the right CEO for the company and guarantee that the CEO propels the company forward, because failure to do so results to the general detriment of the company. In order to attain this goal the board of directors need to conduct a thorough recruitment, for the right personnel for the top job in the company. The board also needs to constantly evaluate the performance of the CEO (Kaufman, 2008).
Evaluating the chief executive officer involves collecting different views from many sources and assessing performance from different angles. However, such kind of evaluation should not be based on the financial aspect only. Evaluating a Chief executive based on financial management is very erroneous and should not be used as a measurement to determine the CEOs compensation package.
According to Kaufman (2008), companies should form committees of few independent directors who would then carry out an annual evaluation of the chief executive officer. This involves looking into the companies financial statements as well as the its internal environment .It also involves feedback on the Chief Executive Officers’ performance from other top executives in the different levels of management of the company. Another way is by looking into the state of the companies’ culture, strategies, competitive edge, and its general operations; this would directly indicate the performance of the chief executive.
The committee would then create discussions based on the five dimensions of the chief executive officers’ performance that is; the leadership, strategy and techniques, operating metrics, relationships with external environment and the human resource management.In analyzing the CEOs strategy its important to consider its implementation process, that is whether the company supports wholly the strategies and techniques used for implementation purposes .In the analysis of its operating variables such as, productivity, liabilities, profits, the number of sales and the production of quality products whether they are in accordance with the companies goals and objectives .
In his evaluation of strategies against those of competitors it is important to consider whether its sound and will cause the company to gain an edge over the competitors, it also involves taking into account the relationships with the customers, suppliers , the government and the general public. Thus, make sure that the CEO is connects to the external environment. In evaluating the human resource, the committee seeks to ascertain whether the CEO has placed the right people in the right jobs. Whether there are enough employees to ensure the goals and objectives of the organization are realized.
Kaufman, S.(2008) argues that what makes a performance review for both the CEO and his underlings credible, is the ability of a CEO to go into the working field and witness first hand how his her employees work. Any evaluation of the top executive starts with the financial and operational metrics then advances against his strategy. However, the financial aspect does not show the key management qualities or attributes while the operational matrices is tailored to show the best results of the company.
For reference purposes, the committee should also send self-assessment questionaire to the CEO based on the five key areas, that is leadership, strategy, and human resource management and operations matrix. However, such questionnaires have a maximum of five pages. In interviewing other officials in the company, the committee should probe on the critical issues. One of the benefits of the above-mentioned strategy is that it exposes the flaws of the CEO in a clear and concise manner, as well as other problems the company may be facing. For instance, a highly abusive CEO who highly compensates his employees, in order to silence them may be easily exposed by use of the above named strategy (Kaufman, 2008).Bullish behavior should not be encouraged among CEOs since it affects the employees’ performance and affects the company negatively. According to Kaufman, S. (2008), chief executives need to have the right attitude in dealing with their underlings. A great CEO must acknowledge that he is not perfect and the opinions of his subordinates count.
In conclution, evaluation of the CEO is meant to strengthen the similarity between the goal, objective, and all in all the mission of the company and those of the CEO. The purpose of evaluation is to facilitate CEO improvement in terms of delivery of goals of a company.