Evaluating the CEO, By Stephen Kaufman.

Brief Summary:
The idea in brief:
Kaufman, as the CEO of Arrow Electronics formulated a formal feedback system which
consisted of five dimensions namely Leadership (motivate & energize your staff), 2. Strategy
(implementation), 3. People management ( right people at right jobs), 4. Operating metrics (sale,
performance heading in right direction or not), 5. External Relationships (customers, suppliers).
This system allowed the directors to identify weak spots or mistakes that could not have been
identified by the CEO himself.
The idea in practice:
The Directors, in order to identify any issue, had to follow some steps:
1. Directors met with executive throughout the company.
Each year, each director would meet 3 executives and discuss on the topics selected by the comp.
committee, which focused on company’s strategic and competitive position and culture.
2. Directors shared their impressions with each other.
A night before the board meeting, the directors would discuss about their meeting, if there’s
anything or concern that two or more directors felt about the company, and it would necessarily
be discussed in the meeting held next day.
3. Compensation committee members documented their impressions.
Directors would then discuss their concerns/issues and provide rating to the CEO’s performance
as per the five dimensions along with the self-assessment sent in by the CEO.
4. Directors finalized their reviews.
Here, the CEO would finalize their review along with the approved compensation plan.
5. The compensation and governance committee chairs met with the CEO.
Compensation & governance meeting would then take place to discuss and provide the feedback.
6. The CEO reflected on the feedback.
The CEO would then reflect on the feedback given to him and ensure they had agreed on the
major key points with the help of a memo.
This technique allowed Kaufman to identify his blind stops which could have impacted the
company.
STORY LINE:
When Kaufman became the CEO, he realized that the company had no formal feedback system.
At the year-end meeting, the directors would pop by his office, praise him for his performance
verbally, inform about the compensation approved by the committee and then handover the
envelope containing the details about his compensation and benefits.
Now, the CEO in different job setting, used to evaluate his subordinates very differently, he’d
assess their performance with many other sources, and identify their performance gaps but
everything changed when he became the CEO. The directors, then, only focused on 2,3 financial
measures.
To make things better, Kaufman came up with a feedback system.
What makes a Performance Review Credible?
The assessment starts with the operations and financial metrics and the progress against strategy.
Next is the interaction of supervisor with his/her subordinates in different setting including staff
meeting. Cross questioning is also done to double check whether a certain issue is being faced by
the employees or not. But directors don’t get these opportunities as they only meet their CEO
and other staff annually, or bi-annually. The solution for this is to meet the management
separately in the absence of the CEO.
To handle this situation, a formal feedback system was introduced.
Problem:
No proper feedback system was developed to provide feedback to the CEO in the organization.
This led many companies as discussed in the case study to suffer financially and also losing key
employees.
Alternative Solution:
1. Allow management staff or department head to share their concerns through a forum
2. Mid reviews
3. Background check
4. Questionnaire anonymously
Recommendations:
Team building activities involving the CEO could also take place to bring the employees
together. The CEO himself should hold meetings to get the feedback from department heads and
review the complaint section to ensure that employees are being heard, and to resolve, if, any
issues the employees have with their CEO. Hold a meeting, where dept head can comfortably
discuss matters with the BOD directly.
How this would help:
Now, we understand how important feedback system is, so if possible, in the appraisal of the
CEO or any leading position, there should be a section in the appraisal form, where the dept
heads can rate him on his management or employee handling skills.