Where there is staff in an MBO, responsibility for managing it will be with the ED/CEO. That person will be responsible for managing the day-today operations and will report directly to the board. The ED/CEO will the organization in achieving the board-approved direction and play an essential role in leading the development of the strategic plan, meeting the objectives it establishes and making pivotal decisions. One of the board’s most important jobs is hiring, compensating, evaluating and, if necessary, replacing the ED/CEO.
I can help with the review of executive compensation, which can include base salary, incentive payments and other perquisites. Ultimately, the board’s overriding objective is to ensure that pay is
- effective, in that it achieves the desired goals,
- responsible, in terms of value and cost; and
- defensible, in that it can be explained and justified to members.
Incentive plans should be
- prudent,
- tied to long range goals,
- align with the strategic plan and
- reflect the values of the organization.
I can work with the board or the relevant committee to help set the ED/CEO’s performance expectations and his or her subsequent assessment. Through the committee, it should establish a formal process for measuring the performance at least annually against specific goals and objectives, and for reviewing and approving changes in compensation. The board should be satisfied that the ED/CEO is leading the organization in the direction it has set.
It is a key responsibility of the board to ensure that there are no gaps in the organization’s executive leadership. I can assist the board with its succession planning to guarantee that the organization’s future leadership needs are identified in advance and that a plan is in place to ensure they are met.
In addition to monitoring internal talent, I can help directors to also monitor the organization’s competitors and other players in its industry, including key external talent. It is important for the board to know which of these organizations are high performing and the talent that is instrumental in driving their success.
Conditions may change and circumstances may arise where the senior officer is not right for the times. The decision to replace an ED/CEO is a significant one and one the board, as stewards of the organization, must be prepared to make if necessary. I can help the board with the process and selection of a new CEO.