Your board is responsible for ensuring your entity delivers public value.
To do this, it is important that you manage your CEO so they perform well.
There are 2 aspects to managing your CEO’s performance:
Here are some tools and approaches you can use to set expectations for your CEO’s performance.
KPIs are statements you can use to evaluate if your CEO is doing a good job.
They make it clear to your CEO and board what your entity’s priorities are now and in the next 1, 3 and 5 years. This should be guided by your entity's business and strategic plans.
Aim for 4 to 6 KPIs that cover your board’s biggest priorities, with smaller KPIs that go under these if required.
Good KPIs often use the SMART method:
Your KPIs also need to:
A performance plan is an agreement developed by your CEO and board that lists the priorities and outcomes the CEO needs to focus on.
It should also include a development section with a focus on leadership.
Your board can use this plan to assess your CEO’s performance against the board’s priorities.
Every plan is different.
To develop your CEO's plan, you can tailor this example of a performance plan for Victorian Public Service executives to your CEO's role.
Update the plan every year to reflect new strategic directions, risks and opportunities.
But be realistic in how long it can take for a CEO to deliver outcomes.
In addition to the performance plan, make sure you consider the following:
A performance plan alone won’t stimulate or steer your CEO’s performance.
Along with plan, your CEO should regularly:
Only put the accountabilities and outcomes your board thinks the CEO should focus on the most.
Don’t put detailed descriptions of all your CEO’s accountabilities in the plan. These belong in their position description and employment contract.
When you assess the performance of your CEO, don’t just focus on what’s in the plan.
Look at all of their accountabilities, behaviours and other relevant factors.
This is especially important if you make a significant decision on their performance, such as an extension or termination of their employment.
As the CEO is in charge of your entity’s operations, it's important for your board to establish a strong working relationship with them.
This is a 2-way relationship:
Your board is responsible to support them as follows:
Give your CEO feedback regularly.
Make it informal, focus on what’s working well and what your CEO could consider doing differently.
Your board may support and mentor your CEO, particularly if:
Your board may also assist the CEO to establish relationships with other leaders.
Your CEO should keep their knowledge and skills up to date.
Your board can prompt the CEO to identify what development they need. This may include executive workshops, conferences, coaches or mentoring.
These can help the CEO maintain their knowledge of your entity’s industry and leadership in the public sector.
Your CEO can also develop specific skills such as speaking to the media or leading in an emergency.
Opportunities for professional development help to attract and retain CEOs.
We recommend your board formally assesses your CEO’s performance at least once a year. Use the key performance indicators and performance plan you created.
As part of the process, your CEO should also assess their own performance.
When you look at the evidence of your CEO’s performance, consider:
Here are some themes you can focus on:
What has your CEO done to ensure:
What has your CEO done to ensure:
Use evidence from several sources to assess your CEO’s performance, including your CEO’s regular reports to your board.
Consider:
See if you can link your CEO’s actions, decisions and behaviours with outcomes your entity achieves in its corporate or business plans.
Consider the accuracy, breadth and timeliness of the CEO’s advice, formal reports and other interactions with your board.
Look at how your CEO leads your entity in the use of public funds, compliance with relevant laws and managing risk.
Assess how your CEO leads your entity in terms of your entity’s culture and employee development.
Key metrics include:
Look at how well your CEO manages your entity’s employment risks.
Consider occupational health and safety incident reports and assessments, and staff grievances.
For insight on your CEO’s leadership, evaluate your executive team’s skill composition, stability and performance.
Specifically, look at the areas of organisational design, delegation and risk management (especially succession risk).
Employee engagement gives you insight into your CEO’s personal style and the kind of organisational culture they promote.
Get information on employee engagement and opinions about your entity in its People matter survey results.
Consider the breadth and quality of your CEO’s relationships with others.
This may include departments, stakeholder groups, peers, professional networks and unions.
Seek feedback from stakeholders.
These may include CEOs of other public sector organisations, ministers, senior employees and community groups.
A 360-degree survey is when you ask a range of people who have worked with your CEO to give feedback on what they think of their performance.
Use the insights from the survey to look at your CEO’s character, reputation and impact across your entity.
Depending on the scope of the survey, the results may also provide insights on networks and partnership organisations.
Your board must address poor behaviour by your CEO.
Poor behaviour can:
If you don’t address poor behaviours, their impact can escalate quickly.
CEOs exhibiting poor behaviours may be good at concealing them from those they report to. Ensure you use a variety of methods to investigate.
Here are some of the common types of poor behaviour to look out for.
Illegal behaviour can include fraud, theft, assault, other crimes, sexual harassment and discrimination.
You may want to investigate this further and refer to authorities if:
Bullying is repeated, unreasonable behaviour directed at an employee or group of employees that creates a risk to health and safety.
You may want to investigate this further if:
Your CEO may show they’re undermining the government when they consistently contradict or dismiss policy directions of the government.
You may want to investigate this further if your CEO:
Your CEO may show signs of being a high conflict person when they create problems and disagreement, rather than solutions and agreement.
You may want to investigate this further if your CEO:
Your CEO may show signs of recklessness if they act impulsively and without evidence or consideration of options and the law.
You may want to investigate this further if your CEO is unable to provide a rational explanation for decisions they’ve made.
Your CEO may act in ways contrary to these values or public sector employment principles.
The values and employment principles support employee wellbeing and public trust in the integrity of your entity.
If your CEO is new to the public sector, they may not be familiar with the public sector values or employment principles. Take steps to ensure they are.
You may want to investigate further if your CEO doesn’t implement policies on:
Your CEO may show signs of inappropriate competitiveness if they seek to achieve results by preventing others from achieving results.
You may want to investigate this further if your CEO:
Your CEO may show signs of rigid thinking if they consistently promote past actions and strategies as being superior without considering whether they apply now.
You may want to investigate this further if your CEO can’t accept the value of new ways of working.
Your CEO may be inappropriately micro-managing staff if they consistently give detailed instructions to employees on how to do a task, instead of letting them work out how to do it.
You may want to investigate this further if your entity’s employee engagement survey results show employees don’t feel empowered to do their work.
Your CEO may display disrespectful behaviour if they are consistently rude or dismiss people who want to communicate or contribute ideas or expertise.
You may want to investigate this further if your entity’s employment data shows:
Your CEO may show signs they’re disengaged or disinterested in their role if they don’t take action or accept responsibility for what they’re accountable for.
You may want to investigate this further if your CEO:
Here are 6 ways you can summarise a CEO’s performance and actions your board may take as a result.
This result means the CEO has:
Your board doesn’t need to take any actions and can ask the CEO to continue performing as they have.
In cases of high performance, the board should consider how to incentivise and retain the CEO. In most cases, public entity executives are not eligible for bonuses.
This result means the CEO has:
However, due to changes in your entity or environment, the CEO will need capabilities they don’t have now or need to strengthen.
Your board can ask the CEO to:
If changes to your entity or environment require significant changes to the nature of the CEO role, consider if a work value assessment under is required under the Public Entity Executive Classification Framework.
This result means the CEO has met their KPIs, but not because of their own decisions, directions and behaviours.
For example, other people in the CEO’s management team may have been performing CEO tasks, or the results were due to a relatively easy period.
Your board can:
This result means the CEO has:
Assess if the behaviour provides cause for your board to terminate the CEO’s employment.
If the behaviour isn’t sufficient to terminate their employment, work closely with your CEO to correct the behaviour. This may involve mentors, coaches and other development activities.
Rewrite the CEO’s KPIs to make it clear what type of behaviour your board expects.
This result means the CEO hasn’t met their KPIs due to circumstances outside their control.
For example, due to a funding cut or change in the laws that affect your entity.
Your board can look at the extent to which your CEO’s decisions, directions and behaviours in this situation were justified, in light of their employment contract.
This result means the CEO:
You board can:
Read the advice about the removal of public entity executive bonuses.