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Where Do CEOs Come Up Short?

 

Wednesday, July 31, 2013
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This article accompanies Getting CEO Appraisal Right.

So, how do boards rate chief executive performance?

The 2013 Survey on CEO Performance Evaluations, conducted by the Center for Leadership Development and Research at Stanford Graduate School of Business, Stanford University's Rock Center for Corporate Governance and the Miles Group, sought to answer that question.

In the poll of more than 160 chief executive officers and directors of North American public and private companies, directors ranked CEOs highly in terms of planning and decision making, but cited "mentoring skills" and "board engagement" as the biggest weaknesses among CEOs.

While boards clearly recognize these shortcomings, "the problem is they are not evaluating CEOs against those measures in a meaningful way," said Stephen Miles, founder and chief executive of The Miles Group, in a statement.

Enter the CHRO, says David Larcker, professor of accounting, co-director of the Center for Leadership Development and Research at the Stanford Graduate School of Business and study co-author.

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"There is lots of talk about how these sort of non-financial metrics map into the organization's strategy for CEO evaluation," says Larcker. "Ultimately, you want to see they're folding into the CEO evaluation process in a big way."

To see that happen, HR leaders must help determine which among these factors will be key performance indicators, he says.

"Typical things will be employee measures, customer measures. HR must get serious about measuring these things. Show management that when these numbers move around, they tell you something about future financial results. These aren't just random metrics. They tell us something about the company's prospects for success."

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