The CEO performance appraisal: aligning feedback, KPIs, and strategic goals

In this article, governance experts Steven Bowman, David Greenslade, and Nigel Scott answer questions submitted by the BoardPro community during the webinar Developing CEO KPIs and performance management frameworks. View the webinar recording and resources here, and browse and register for upcoming webinars and masterclasses here.

A well-structured CEO performance appraisal process is crucial for maintaining trust, transparency, and engagement at the highest organisational level. By establishing clear accountabilities from the outset, boards can minimise the risk of disputes and strengthen the CEO's alignment with the organisation's objectives.

This article offers insights on how boards and chairs can collaborate to create fair, transparent, and objective appraisal processes—ultimately boosting organisational success and accountability. It explores who is responsible for evaluating and providing feedback, how to incorporate KPIs into the appraisal, and how to ensure the appraisal aligns with the organisation's strategic direction. 

Who's responsible for the CEO's performance appraisal?

The CEO’s performance appraisal is a joint effort by the chair, board members, management, staff, and, of course, the CEO themselves.

Typically, the board chair facilitates the CEO performance appraisal, leading the process on behalf of the board. The chair also acts as a conduit between the board and the CEO, ensuring the appraisal process is fair, transparent, and aligned with organisational goals. 

So what happens when there are co-chairs? In this case, it’s crucial for them to present a single evaluation to avoid confusion or conflicting directives, says Steven Bowman. “Clear delegation of responsibilities and prior mediation present a unified view to the CEO”. While the chair leads the appraisal, it’s the shared responsibility of the whole board to evaluate the CEO, points out David Greenslade, including the feedback from board members and that of others across the organisation.

“Gathering feedback from the CEO’s management team and staff provides valuable insights into leadership, culture, and operational effectiveness,” says Nigel Scott. It’s then up to the board to balance this feedback with the organisation's strategic outcomes. 

Greenslade explains that feedback about the CEO’s performance, including that from direct reports, needs to focus on leadership behaviours and organisational outcomes rather than personal opinions. Again, it’s up to the chair to facilitate the process to ensure consistency, confidentiality, and alignment with board priorities. 

It’s also common for CEOs to draft a self-assessment as part of their performance review. Bowman recommends that this follow a preliminary discussion with the board or chair to ensure alignment. The board should maintain objectivity and transparency in reviewing and validating the self-assessment.

How to ensure the 360-degree evaluation is effective

One of the most valuable tools in the appraisal process is the 360-degree evaluation, which collects diverse perspectives while ensuring the process remains board-led. Bowman suggests a 360-degree evaluation is most effective when:

• Facilitation is by a neutral third party to ensure confidentiality and fairness
• There’s a focus on leadership behaviours, organisational culture, and strategic impact rather than personal grievances
• It is part of the formal annual appraisal cycle 
• Interpretation of the feedback is done with care to prevent it from becoming anecdotal or misaligned with the organisation’s strategic objectives

Using a template streamlines the CEO’s performance appraisal by providing a consistent, repeatable framework that ensures all key factors—such as strategic alignment, leadership traits, and KPIs—are evaluated fairly. This consistency reduces the risk of bias, clarifies performance data, and makes year-on-year comparisons easier. You can get started with the BoardPro CEO Performance Review Guide and Template here.

How to incorporate KPIs into the CEO performance appraisal process

Strong corporate governance depends on establishing a clear strategic framework, tracking its execution, and adapting where necessary. KPIs play a pivotal role in this process by providing quantifiable indicators of how well the organisation is advancing towards its set objectives—be it revenue growth, market expansion, customer satisfaction, or operational efficiency. Through these clear measures of success, boards can accurately assess whether the company remains on the right course and make informed decisions about any needed adjustments.

Building on the crucial role of KPIs in guiding strategic decisions and measuring organisational success, these metrics also form the backbone of an effective CEO performance appraisal.

It’s essential to base the CEO’s performance on the organisation’s strategic goals, rather than individual biases, says David Greenslade, and there are three key ways to do this:

1. Focus on and align agreed KPIs and strategic outcomes

While the strategic plan provides the vision for the organisation, annual KPIs offer the actionable steps to achieve it, divided into measurable milestones. Clear KPIs for the CEO are critical for linking performance to measurable outcomes, and, with the focus on outcomes rather than activities, the CEO has the autonomy to execute their role without the risk of micromanagement from the board.

Regular reviews of KPIs ensure they remain relevant in evolving contexts, such as when an acting CEO is appointed. This would require the board to tailor the KPIs to the interim role, focusing on short-term priorities and maintaining stability. Routine check-ins also ensure accountability and progress.

CEO performance appraisals also provide an opportunity to evaluate other areas of performance that are natural parts of the organisation’s life cycle. Reviewing a CEO’s performance during crises provides critical insights into their leadership and decision-making. Assessment can include how effectively the CEO navigated challenges, communicated with stakeholders, and maintained stability during periods of uncertainty. 

2. Use objective frameworks to eliminate subjectivity

While KPIs track specific measurable outcomes, OKRs (objective key results) incorporate ambitious objectives that push the organisation to excel. Assessment of OKRs is essential to make sure the CEO performance appraisal drives organisational success, says Steven Bowman. “The OKR framework is a powerful tool for aligning CEO performance with organisational goals as it requires clear, specific objectives and measurable KPIs that foster focus and accountability”.

3. Remind board members of their governance role to act in the organisation’s best interest—always

Board members serve the organisation by setting and following a clear strategy, keeping an eye on performance through agreed KPIs, and quickly addressing any issues that arise. Together with transparent, data-driven CEO performance appraisals, the board can stay on track, foster a culture of accountability, and encourage ongoing improvements both with the CEO position and across the organisation.

It’s also important to remember that while sharing KPIs with the wider executive team or staff can build trust and alignment, it also introduces risk. Bowman cautions that misinterpretation, undue pressure and confidentiality breaches of sensitive KPIs can occur, often without intent. “Boards should assess whether transparency adds value without risking the evaluation process,” he suggests.

How to balance strategy and the CEO performance appraisal

A board’s attention should always be on broader strategic outcomes rather than operational elements of an organisation, and it’s the same when conducting the CEO’s performance appraisal, says Nigel Scott. “Ensure that feedback during the appraisal highlights how the CEO’s efforts advance the organisation’s mission, vision, and goals, and not their micromanagement of operational details”.

When these expectations are met, then there’s the subject of performance remuneration. For non-profit organisations, Bowman points out it’s important that performance remuneration aligns with:

• The mission and financial capacity of the organisation
• Measurable outcomes that advance strategic goals
• Transparency and fairness, to maintain stakeholder trust

Non-financial rewards, such as leadership development, additional leave, and public recognition also serve as effective incentives in the non-profit sector.

A comprehensive CEO performance appraisal process—guided by structured KPIs, multi-perspective feedback, and a clear focus on strategic outcomes—strengthens both leadership effectiveness and organisational health. By establishing transparent frameworks, ensuring alignment with strategic goals, and balancing feedback from across the organisation, boards can promote a culture of accountability and continuous improvement, ultimately driving mission success.

Our governance experts

Steven Bowman

Steven Bowman, managing director of Conscious Governance, brings extensive experience in board reviews and strategic planning. He has held senior executive, CEO, and board roles in the USA and Australia and authored or co-authored over 14 books on governance, strategy, risk, and leadership.

David Greenslade

David Greenslade is the founder and executive director of Strategi Group, which specialises in compliance, training, auditing, and advisory services for the financial and professional services industry. He serves as a director, advisory board member, and consultant to various financial services businesses.

Nigel Scott

Nigel Scott is a professional director with a successful executive career in banking and wealth management. He is passionate about growing privately owned New Zealand businesses and serves as a director and shareholder in various private enterprises. Nigel strongly believes best practice governance is essential for businesses of all sizes and sectors.