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Farm Credit Foundations

CEO Performance Management

Best PracticesPresented by: Beth Ostrem, Vice President

Foundations Consulting


Foundations Consulting

• Farm Credit Foundations– A cooperative, not a foundation

• HR expertise in – Performance Management– Compensation– HR Compliance & Best Practices– Job and Organizational Structure

• Executive performance and compensation– 8 years experience with agricultural cooperatives

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Farm Credit Foundations 2

A Board’s #1


4 Key Components of CEO Performance Management

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Develop Goals

Give Feedback

Align Performance & Pay

Evaluate Performance


Developing Goals

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Goal of $3 to $5 million in pre-tax income

Foster development of management succession plan

Effectively manage global ingredient business

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Developing Goals

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Board members were asked to rate the goal on a 5-point scale based on results of $3.2 million in pre-tax income

1 2 3 4 5Unsatisfactory Needs

ImprovementSatisfactory Good Excellent

Directors’ Ratings

Goal of $3 to $5 million in pre-tax income1


SMART Goals

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Time-framedIncludes a deadline

Specific Answers the question: what do we want accomplished?

MeasurableSets clear criteria, numeric or qualitative, of what must be accomplished

AttainableRequires sustained effort or focus, but is realistically attainable

RelevantImportant to the success of the organization


SMART Goals

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Specific – Achieve pre-tax income

Measurable – define level needed

Attainable• Previous year’s pre-tax income• Economic environment• Market share

Relevant• Yes!

Timely• By December 31

Performance Level Pre-Tax Income (in millions)

Excellent $5.0

Good $4.0

Satisfactory $3.0

Needs Improvement $2.5

Unsatisfactory $2.4


Goal Development Best Practices

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Make them clear and measurable

3-5 goals is ideal

Engage the CEO!

Finalized in first 30-60 days


Giving Feedback

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Is Hard!

(even positive feedback)


Feedback Best Practices

• Make feedback timely– Provide constructive feedback in person

whenever possible– Give positive feedback verbally or in writing

• Provide specific examples

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Feedback Best Practices

• Make feedback a part of your Board routine by holding regular executive sessions– Ask questions– Share feedback with the CEO

• Ask for an update on progress against goals – Document the Board’s response

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• How are our Board meetings going? – Are we getting the information we

need in a timely manner?– Is the quantity of information

appropriate and manageable?• How are CEO interactions with the

Board as a whole and with individual members?

• Does the CEO communicate openly?• Is the CEO spending their time in the

areas we want them to be focused on?• Are there any questions or concerns

with CEO or organizational performance?


Performance Evaluation

Input from CEO direct

reportsBoard

TrainingBoard

EvaluationThird Party

Report Preparation

Board Review/Key

Themes

Performance Evaluation

to CEOMeeting with CEO

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Evaluation Best Practices

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Include goals and competencies

Narrative CEO self-evaluation

Feedback from all Board members

Confidentiality

• Goals – WHAT the CEO accomplishes• Competencies – HOW the CEO accomplishes their goals

– Visionary Leadership– Business Leadership– Interpersonal Effectiveness– Talent Management– Board Relationships



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CEO self-evaluation

Feedback from all Board members

Confidentiality

• CEO completes self-evaluation of both goals and competencies– What went well, what could have gone better



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CEO self-evaluation

Feedback from each Board member

Confidentiality• Comments are important• Clear rating scale



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CEO self-evaluation

Feedback from each Board member

Confidentiality



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0 1 2 3 4 5 6 7 8 9 10

Bas

e Sal

ary

CEO Tenure

CEO Base Salary Increases



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Bonuses and

Incentives

Ensure truly variable

Linked to 3-5 key performance measures

Substantial enough to appropriately recognize performance


Key Components of CEO Performance Management

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Develop Goals

SMART goals

Reasonable number

Give Feedback

On-going and specific

Evaluate Performance

Goals and competencies

Self-evaluation

Board comments


Base salary increases

Bonuses and incentives


5.0 = OutstandingOutstanding –Exceeds +

4.0 = ExceedsExceeds –Meets +

3.0 = MeetsMeets –Needs Improve. +

2.0 Needs Improvement

Clear Goals

New format and rating scale

Board Training

EfficientEffectivePainless!


Questions?

Beth OstremVP, Foundations Consulting651-282-8718

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