Why does it seem to be so hard for nonprofit boards to conduct an annual performance review for the chief executive? Why does everyone get so nervous about it? We all know how important it is, but there seem to be road blocks.
The process can often be filled with confusion and even dread. Some boards 
aren’t sure how to proceed or who should conduct the review or how often. So they put it off. Executive directors usually feel frustrated when they don’t receive a regular appraisal. Often no one is satisfied with the procedure or the end result.
It doesn’t need to be so hard. First, let’s understand some of the dynamics that contribute to the confusion and reluctance.
>>Infrequent contact.
Most board members only interact with their ED at board meetings or on specific board or committee projects. They usually don’t see their executive relating to community members, supporters, or staff. Therefore, they may feel ill-equipped to conduct a thorough evaluation.
>>Organization vs. Executive.
Adding to the confusion is that the ED’s review is very different than the appraisals of the staff. Staff members are typically measured against specific behaviors and objectives. Whereas the leader of the organization is measured, in part, by the nonprofit’s progress toward its strategic goals.
>>What to measure.
Board members often aren’t sure exactly what they should be measuring. Should there be goals for the executive in addition to those for the organization? How can we design an appraisal tool that addresses all these aspects of performance?
The Enterprise Foundation accurately describes the performance review as continuous, forward-looking, and clarifying. An effective process will promote the board’s overall approach to fulfilling its mission by ensuring effective leadership.
The following steps and principles will help keep your organization’s annual performance review of your executive director on track, clear, and effective.
>>The review process starts at the beginning and is continuous.
Establishing clear expectations at the time of hire is critical. Be sure you have a concise yet comprehensive job description. Involve the executive director as a partner in setting expectations for his/her behavior and accomplishments as well as organizational goals.
The board chair and executive director act as partners in a relationship based on mutual trust and respect. They communicate with each other regularly and often. There are no surprises. If either party would like to see different behavior from the other it is freely discussed.
Therefore, when it’s time for the formal review each year no one is caught unawares. In fact, the review is more focused on ways the ED and the board can develop themselves so as to create a more effective partnership to move the organization forward.
>>Be clear about who will conduct the review.
It’s best to appoint a small committee to spearhead the appraisal. This can be comprised of the officers or a special committee. Ultimately, the entire board will be involved but the committee will determine the measurement criteria, establish the formal process, and communicate with the ED and the rest of the board. A staff member, such as the HR director, can be appointed to remind the board when it is time to begin the process each year and to provide any guidance or support needed.
>>Know what information to collect and from which sources.
The committee will decide what they want to measure and they will develop an appropriate survey tool to collect information. Blue Avocado, a valued resource for nonprofits, offers an excellent survey tool that can be adapted to each nonprofit’s specific needs. Remember that it’s important to involve the ED in each step of the process.
The tool should have a broad scope so as to assess the organization’s progress and effectiveness rather than a narrow view of just the executive director’s performance.
Many boards ask the ED to complete a self-evaluation which is given to the committee as part of the assessment process. This can provide helpful perspective for the board since they may not be aware of some of the accomplishments.
The committee will also identify the individuals they would like to invite to respond to the survey. For example, respondents can include all board members, senior staff that work directly with the ED, and committee chairs. Some boards use a 360 approach and find it very useful. This can be a little more complex but can also be well worth the additional time and effort.
Ensuring and maintaining confidentiality will be very important if you want to obtain objective responses. It will also be valuable to make staff completion of the survey tool mandatory. Otherwise, you may not receive a high participation rate for various reasons.
>>Keeping the board out of the dark.
What if the staff members are afraid to respond to the survey with their true assessment of the executive because of fear of retaliation? This happens more often than we realize. In this case, how can a board fulfill its responsibility of ensuring the nonprofit maintains a positive and healthy culture for employees?
First, board members must realize that since they only see the executive infrequently they may not have a true impression of the individual’s behavior. Often board members fail to look beneath the surface if they think the organization is functioning well financially.
Without delving into operations, board members can make a point of visiting the office and acquainting themselves with staff. This will increase trust from staff and give the board member a glimpse of the working environment.
In addition, the whistleblower policy should provide staff members with a clear procedure for reporting any serious concerns about the executive’s actions to the board chair. The HR manager is also part of the solution; however, this can be tricky since this person usually reports directly to the ED. The HR manager needs to be able to trust that if s/he reveals derogatory information to the board chair about the executive there will be no negative repercussions.
>>Present the evaluation findings to the executive director.
Once the data is collected, the committee tabulates it and then presents the information to an executive session of the board with no staff present. A discussion of the findings ensues.
The review (including the committee’s compensation recommendation) is then presented to the executive director, usually in a meeting with the board chair or the review committee. The ED may respond to certain points in the evaluation and should be afforded the opportunity to draft written comments for attachment to the final evaluation report. This meeting should generate the outline of a plan for investment in the ED’s further professional development.
Finally, the ED and board chair will discuss performance standards for the new year for both the executive and the organization as a whole. The organization’s goals should be based on the strategic plan.
>>Board evaluations provide additional insights.
In addition to evaluating the ED’s performance every year, the board should conduct an assessment of its own activities and effectiveness. This tool is developed in conjunction with the ED and the board committee. Each board member completes the evaluation of the board as a whole as well as an assessment of each individual board member’s own contribution. The ED also completes the board evaluation. The findings of this evaluation will spark very interesting and valuable discussion.
>>Annual evaluations can spark positive outcomes.
Research by Blue Avocado tells us that 45% of EDs have not had a review in the past year. Often this is due to the confusion explained above. However, if your board follows these general guidelines and adapts them to your specific needs, it will lead to a satisfying and productive experience for your ED and for your board. The most important outcome will be better-aligned expectations and goals for the organization and for the executive.