Editor’s Note: This article is excerpted from NCFP's CEO Guide, Performance Review: The Complete Guide to Evaluating the Family Foundation CEO, volume 3 of our Family Foundation CEO Leadership Series.

In a 2010 interview study of 60 family foundation chief executives by National Center for Family Philanthropy President Virginia Esposito, most told her they do not receive a formal performance review by their board. But when NCFP interviewed board chairs, most said “yes” when asked if they annually evaluate their CEO. Why the disconnect?

It’s partly a matter of how people interpret the word “formal.” Is it the board chair taking the CEO to lunch at the end of the year and telling her that she’s doing a terrific job? Is it an annual survey of board members who evaluate the CEO against a set of pre-determined performance goals and provide collective feedback orally and in writing? Is it somewhere in between?

Performance review of family foundation CEOs (top paid staff person) can take many forms. It does not have to be a complex, time-consuming process. At its most basic, it’s about asking what you need to know to be successful. The CEO needs to know the board’s goals, and the board needs to know how effectively the CEO is leading the process to achieve them. Ideally, the review is focused on progress toward goals, not on behavior.

“Most of the CEOs interviewed felt that communication would be improved if there was something more formal than what they currently have,” reports Esposito. “Most people pointed to the performance and priority setting being as important as the assessment,” she added. The annual review is an important way to take stock of where the foundation is, where the board wants it to go, and what the CEO’s role in that will be.

Much has been written about how to conduct performance reviews. Most people have experienced an evaluation process at some point in their working lives. Often these processes have been devised for the for-profit sector—where progress can be more easily measured–and adapted by the nonprofit sector. But little has been written about how to review family foundation CEOs specifically. The job carries a unique set of roles and responsibilities including some that are family-related such as supporting effective board governance, working within the family’s culture, representing the family in the community, and engaging in grantmaking in the context of the family legacy.

Every foundation is different, and there are many ways to review a CEO’s performance. If you aren’t doing any kind of formal CEO evaluation now, we hope that the stories, tools, and case studies in the National Center’s new CEO Performance Review guide, and our upcoming Webinar on this topic, will help get you started. If you already have a performance review process, we hope you will find ideas to make it a more productive and satisfying experience for everyone.

Reasons boards should conduct performance reviews

Boards owe it to their CEOs to perform some type of regular performance review. Here are some of the key reasons:

  • Responsibility: it’’s part of the board’’s job. One of the key responsibilities of nonprofit boards is hiring chief executives and assessing their performance.
  • Clarity:  it provides regular opportunities for both the board and CEO to get clear about expectations.
  • Focus: it’’s a way to insure that the CEO is focused on the board’’s priorities and the foundation’’s goals. That also requires the board setting some goals for the foundation, which is another good practice.
  • Feedback:  most CEOs want and need feedback. The process also gives CEOs an opportunity to raise questions, request help, and give the board feedback in return.
  • Guidance:  it serves as an early warning system. CEOs would rather hear early if something isn’’t working well, so they can adjust before things go off the track.
  • Unity:  it forces the board to speak with one voice to the CEO. When there is an objective process focused on achievement of goals, individual board members will be less likely to provide conflicting feedback and pull the CEO in different directions regarding priorities.
  • Development: it’’s an opportunity for a CEO and board to agree on a professional development plan, something every employee can benefit from, so they can stay fresh and grow in their position.
  • Learning:  it’’s a way for the board to learn more about what the CEO’’s job entails. Board members know firsthand how well the CEO works with the board, but have less knowledge of the management and grantmaking responsibilities on their CEO’’s shoulders.
  • Legal:  in the event the board has to terminate the CEO, written performance reviews help the foundation prevent or defend against a wrongful termination lawsuit.

Why the reluctance?

Given all the good reasons to do performance reviews, why do they happen so seldom? In the National Center’s interview study, most CEOs said their board wouldn’t do a performance review if the CEO didn’t initiate it. Some of the reasons for board reluctance cited are:

  • The board is very happy with their CEO so they don’’t see the need;
  • It takes too much time when there are so many more pressing matters;
  • It’’s hard to measure effectiveness. One CEO said that, unlike with her previous job as a nonprofit development officer where she was measured against her fundraising goals, “it’’s harder to measure success in a family foundation, both personally and organizationally.”
  • The board feels uncomfortable giving feedback. They don’’t like to “judge” a person who in many cases feels like a member of their family. (It’’s even more awkward when the CEO is a member of the family!)

“The bond between a CEO and the board can be very affectionate, and people feel awkward about evaluating someone they care about personally,” Esposito said, and that goes double for a family member CEO. One described what happened when she tried to institute a formal review process. She developed an evaluation form, gave it to the three board members and asked them to rate her in various categories. The outcome wasn’t what she’d hoped for. “My father sent me flowers, my mother phoned to tell me what a wonderful job I was doing, and my brother lost the form.”

Along with the interview study, the National Center also conducted an online survey of 200 CEOs in conjunction with The Johnson Center for Philanthropy at Grand Valley State University. One question was: does your board conduct an annual performance review of your work? Only about 37 percent of the CEOs who were members of the founding family received annual reviews.

Jane Leighty Justis, executive director of The Leighty Foundation, has encouraged her family to evaluate her annually. She starts with a self-assessment.

“I take each point in my job description and write a couple of sentences on each of them about how I think I’m doing. Then I put it on the agenda for the annual meeting, we talk about it, and I ask if they have any feedback for me.”

The feedback she has received from this process has been very general, but she believes that the recent inclusion of members of the third generation on the board will offer an opportunity to expand this process and make it more helpful for all.

Even some non-family CEOs have trouble convincing their boards of the value.

“I never get an evaluation,” lamented one CEO with long tenure, “and I’d love one.” She puzzles over why the founder and his family are unwilling to review her. “That’s not how they operate their family business.”

One CEO who heads a large staff and who has a close working relationship with a living donor said his foundation “has a formal evaluation process for everyone but me.” With each staff member, he has an annual “performance reflection” that includes setting goals and measurements for the next year. But the donor doesn’t want to evaluate her CEO. “She says ‘why do I need to do an evaluation of you? I talk to you every day?’” he fills out his own performance reflection form anyway, and gives it to the board, but “if I didn’t give it to my donor, she probably wouldn’t ask for it.”

One CEO who pushed his board to do a review said, “For me personally, not having an evaluation is a recipe for problems. Without one, I don’t have a road map for my professional development and their expectations around grantmaking. Anecdotal feedback isn’t usually helpful. They need to reflect on my performance and the performance of the foundation.”

Another CEO said her annual review “is the only time I ever get to reflect with the board on what we are accomplishing.”