Assuming that the board has clearly stated its expectations for the performance of the chief executive (effective delegation principle 3), has clearly delineated the scope of authority and discretion being delegated to the chief executive (principle 4) and has empowered the chief executive to make decisions within the defined delegated scope of authority (principle 5), it is critical to establish and maintain a system for tracking and evaluating the chief executive’s performance related to the stated board expectations (principle 6).

Ideally, a performance tracking system should be ongoing and not spring into effect only at a designated time for the annual review of the chief executive’s performance.  Better to avoid surprises for the board and/or the chief executive.

This is what the performance tracking and evaluation system looks like in the Policy Governance® model.  As mentioned previously, the board establishes in its Ends policies its expectations about the results to be produced by the organization.  These results are not management objectives but impacts to be produced by the organization on the lives of the people being served.  The board also establishes in its Executive Limitations policies its expectations about operations.  These policies create boundaries between what is acceptable and not acceptable for the chief executive to do or allow.  As long as the chief executive avoids what is not acceptable to the board, what he or she does or allows is acceptable.  Once the board has established its expectations for the chief executive in its Ends and Executive Limitations policies, it proceeds to establish a policy monitoring schedule.  It may have a monitoring cycle of one or two years for reviewing compliance with all Executive Limitations policies though it may opt to review certain policies (such as financial activity) more frequently, even monthly.  Likewise, it establishes a routine for reviewing compliance and progress related to its Ends policies.  The results of the board’s monitoring activity can be summarized periodically (perhaps annually) to provide a comprehensive evaluation of the chief executive’s performance.  It should be noted that in the Policy Governance® model organizational performance and chief executive performance are seen as identical since the chief executive is responsible for the performance of the organization.  In addition, all of the board’s expectations for the organization and chief executive are expressed in its Ends and Executive Limitations policies.  Hence, the board’s monitoring of performance related to its Ends and Executive Limitations policies provides a comprehensive review of organization and chief executive performance.  With ongoing monitoring (and periodic summaries of monitoring reports) board and chief executive have a shared understanding of board expectations and how actual organization and chief executive performance compare with these expectations.  Therefore, no surprises for board and chief executive at annual performance evaluation time.

In our next Tip for Effective Boards, we’ll address the last principle for effective delegation:  recognize positive performance of the chief executive and take corrective action when indicated.

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.