Evaluating the Performance of the Hospital or Health System CEO

November 1993
December 1998 (revised)
November 2003 (revised)
November 2008 (revised)
November 2013 (revised)

Statement of the Issue

Board evaluation of the hospital or health system CEO is an important way to ensure that the CEO understands the board’s performance expectations and receives feedback on the board’s assessment of progress toward their attainment. In an environment characterized by unprecedented challenges, risks and uncertainty, CEOs are faced with new and more complex responsibilities. Concurrently, public and regulatory expectations demand that boards demonstrate higher levels of accountability for core responsibilities such as the evaluation of leadership performance. As a result, the board’s evaluation of the CEO requires a well-designed, ongoing system for measuring leadership effectiveness and the attainment of established objectives.

Policy Position

The American College of Healthcare Executives believes the board of a hospital or health system should evaluate the performance of its CEO annually using the following principles:

  • The evaluation should include an assessment of the CEO’s performance on core leadership responsibilities as established by the CEO’s job description. In addition, prior to the start of the operating year the board should establish a balanced set of well-defined, measurable objectives to be used in evaluating CEO performance.
  • Certain leadership traits such as judgment, communication and diplomacy may require subjective assessment by the board. To the greatest extent feasible the board should evaluate the CEO’s performance based on relevant, multifaceted data relating to performance on community, organizational and individual professional objectives:
    • Community objectives might include initiatives such as reducing disparities in care, addressing access to prenatal care, smoking cessation, early detection of chronic diseases, efforts to educate the community about important health issues, etc.
    • Organizational objectives should reflect attention to enterprise risk mitigation and might include a range of clinical quality, patient safety and satisfaction, operational effectiveness, employee and physician engagement, marketplace performance, and financial indicators.
    • Individual professional objectives might include establishing effective board, medical staff and community relationships; supporting diversity in the organization, promoting ethical behavior, and continuing professional development by participating in appropriate learning and credentialing activities.
  • Providing evaluative feedback for the CEO should be a formal, continuous process involving the board chair or other appropriate board members who confer with the CEO regularly. The board as a whole also should participate by providing feedback through a formal process that collects and collates individual board member assessments of CEO performance, which are considered through documented discussion. The evaluation process should culminate in a formal, annual performance review. Such a continuous evaluation process facilitates timely, meaningful feedback on many aspects of operations and addresses any misunderstandings or gaps in expectations.
  • The evaluation process should enhance the working relationship and information-sharing between the CEO and the board, rather than be a one-directional process. A current CEO position description can be a valuable resource to help guide an effective review.
  • If the board determines compensation in association with the formal performance review, then changes in compensation should be based on an independent, fair market value assessment and should take into account the full range of objectives established as part of the review process and should not be based solely on financial results.
  • As an adjunct to the CEO evaluation process, a board self-evaluation process should be considered. Self evaluations of the full board and individual members constitute important enhancements to the CEO performance evaluation process by assessing the extent to which board members perceive the board provides clear expectations and effective guidance and feedback to the CEO throughout the year.

One of the most important responsibilities of a hospital or health system’s board is the development and implementation of a documented, well-designed, ongoing process for providing feedback to the CEO and measuring progress on achieving objectives. Such a process increases communication between the board and the CEO, which ultimately improves the functioning of the organization.

Approved by the Board of Governors of the American College of Healthcare Executives on November 11, 2013.

Reference

American College of Healthcare Executives, Evaluating the Performance of the Hospital CEO, Third Edition (Chicago: American College of Healthcare Executives, 2003).