Executive Evaluation · Executive Performance & Leadership Review
Executive Performance and Leadership Evaluation
What is executive evaluation?
- The question isn’t the rating, but whether we’d entrust them with the role next year
- Three axes: business, organizational management, and leadership
- Criteria not agreed at the start of the year are just cover for personnel decisions
Designing executive evaluation separately from employee evaluation changes the question being asked. Employee evaluation asks 'How well did you do the work assigned?'; executive evaluation asks whether we will entrust this business and organization to this person next year as well. So it is less about assigning ratings than about building the basis for decisions on tenure and assignments. Most executives are fixed-term appointees under a mandate relationship, not employees under labor law, so the biggest difference from employee evaluation is that results connect directly to contract extension.
There are usually three evaluation axes. Business performance is measured by the results of the executive’s organization, such as revenue, profit, and market share; organizational management looks at people metrics such as key talent retention, successor readiness, and engagement scores. Leadership and values in practice are assessed through upward feedback, multi-rater assessment, and the views of fellow executives. If business performance is weighted at 70% or more, executives who burn through people for short-term results survive; conversely, if the leadership weight is too large, accountability for results blurs. Many companies adjust around 50/30/20 to fit the business. The evaluators are the CEO and senior executives; HR only compiles the materials and does not evaluate. There is a big difference between companies that have a process for giving the executive feedback on the results and those that do not; an executive who receives only a contract notice without feedback can’t know what to change next year.
The most common failure in practice is an executive evaluation that ends as a year-end scorecard. Looking only at December numbers can’t tell an executive who cut costs in the second half to hit profit targets from one who invested for next year. An executive evaluation without organizational management metrics means you discover the loss of key talent the year after the evaluation. Also, using multi-rater assessment results directly in tenure decisions has a side effect: executives go easy on their direct reports. It is safer to use the assessment for development and treat it only as reference material in tenure decisions. If criteria change every year, or if executives are evaluated in December on criteria never shared with them at the start of the year, the results won’t be accepted and the evaluation becomes nothing more than cover for personnel decisions.
Inwoo LeeExpert in leadership, communication, and performance management
John KimInstructor John Kim, CEO of Nanum Consulting and author of “B2B Marketing Design”Executive evaluation took hold as the board’s practice of reviewing management performance under corporate governance merged with pay-for-performance compensation systems. As Korean companies came to treat executives as fixed-term appointees under a mandate relationship, evaluation carried more weight as the basis for deciding whether they stay.
Consider a hypothetical case. Company A, a mid-sized manufacturer with 1,200 employees, had evaluated its 18 executives every December on business results alone. Under the division head who received the top rating last year, 5 team leaders left within a year, and the division’s first-half results this year fell 22% from the previous year.
- The CEO asks the HR executive, "Team leaders are all leaving the top-performing division, so what did the evaluation actually look at?" Managing Director Cho of HR then proposes reweighting the executive evaluation: 50 for business results, 30 for organizational management, and 20 for leadership.
- The organizational management axis includes key talent retention, whether a successor candidate is named, and engagement scores. In January, each of the 18 executives agrees on this year’s criteria in writing, so no one is evaluated on different criteria at year-end.
- The leadership axis is filled with upward feedback but used only as reference in tenure decisions, and Managing Director Cho states clearly at the executive meeting that it is for development: "If we cut people by score, executives go easy on team leaders."
- After the November evaluation, the CEO holds a 40-minute results meeting with each of the 18 executives. For division heads with strong business results but low retention, the CEO makes a successor development plan a condition of tenure.
- The following year, resignations among team leaders under these executives fell from 11 to 4, and executive roles with a named successor candidate rose from 5 of 18 to 14.