Improving Leadership with CEO Performance Evaluation: A Guide to Evaluating CEO Effectiveness
Leadership is the cornerstone of any successful organisation. The role of a CEO is pivotal in steering the company towards its strategic goals, fostering a positive culture, and ensuring sustainable growth. But how do we know if a CEO is truly effective? This is where a structured CEO performance evaluation comes into play.
A well-designed CEO performance evaluation is a powerful tool that helps boards and organisations assess leadership quality, identify areas for improvement, and ultimately enhance overall performance. In Australia, this practice is especially important for not-for-profits, government bodies and companies seeking strong governance aligned with AICD principles.
In this guide, I share practical insights on how to enhance leadership through a structured CEO effectiveness evaluation. We’ll cover why evaluating CEO performance matters, what to include in leadership reviews, a clear framework, lessons from high-profile Australian governance reviews, common challenges, and actionable steps to make the process meaningful for both the board and the CEO.
Why Evaluating CEO Effectiveness is Essential
Evaluating CEO effectiveness is not a formality or box-ticking exercise. It is a strategic necessity. The CEO’s decisions affect every facet of the organisation - from financial health and operational delivery to employee morale, stakeholder confidence, and long-term reputation.
Without a clear understanding of how well the CEO is performing, boards and stakeholders risk missing critical signals that could affect the organisation’s future. In the Australian context, where many boards oversee public money, community outcomes, or regulated activities, robust oversight of leadership is a core governance responsibility.
The 2024 Qantas Governance Review illustrated some of these risks in practice. The independent review found that a combination of a dominant, long-tenured CEO, insufficient challenge from the Board, and limited visibility into non-financial issues contributed to significant reputational and customer service problems. The review noted “too much deference” to the CEO and that the mode of engagement between the Board and management did not always facilitate robust challenge. It also observed that the Board had overly extrapolated the Group’s strong safety culture to the broader leadership culture, which was more top-down and command-and-control in style, with insufficient listening and low speak-up outside of safety matters.
Regular CEO performance reviews help organisations in several important ways:
Align leadership with organisational goals - regular evaluation ensures the CEO’s actions and priorities match the company’s vision, strategy, and values. It creates a clear line of sight between the board’s expectations and day-to-day leadership.
Drive accountability - It creates a culture where leaders are responsible for their results and behaviours. Accountability is not about blame; it is about clarity of role and ownership of outcomes.
Identify development opportunities - constructive feedback highlights areas where the CEO can grow, which benefits the entire organisation. Even high-performing leaders benefit from structured development conversations.
Support succession planning - understanding current performance helps prepare for future leadership transitions. It provides the board with better insight into strengths, gaps, and readiness for change.
Enhance stakeholder confidence - transparent evaluation builds trust among investors, funders, employees, members, and partners. It demonstrates that the board is actively overseeing leadership performance.
Surface cultural and non-financial risks early - as the Qantas review highlighted, strong performance in one area (such as safety) does not automatically mean strong leadership culture, stakeholder management, or customer focus across the organisation.
When done well, a CEO performance review strengthens both the individual leader and the organisation as a whole. It also reinforces the board’s role in setting direction and holding leadership to account.
How to Approach Evaluating CEO Effectiveness
Evaluating CEO effectiveness requires a balanced, comprehensive approach. It is not just about financial results or hitting short-term targets. Leadership is multifaceted, involving vision, communication, decision-making, culture-building, stakeholder relationships, and the ability to navigate complexity.
The Qantas Governance Review reinforced the value of broader and more rigorous CEO performance processes. It recommended introducing 360-degree assessments (drawing on input from direct reports, peers, and key stakeholders) together with full Board discussion and engagement, rather than relying primarily on financial outcomes or limited internal views. It also highlighted the need for greater weighting on customer outcomes, reputation, and employee engagement alongside financial measures.
A practical framework that works well for Australian boards includes the following steps:
Set clear criteria - define what success looks like for the CEO based on the organisation’s strategic priorities. This might include financial performance, innovation, employee engagement, stakeholder relations, risk management, customer outcomes, and contribution to governance and culture. Criteria should be agreed in advance so the evaluation is transparent and balanced.
Gather diverse feedback - use 360-degree feedback from the board, senior management, employees, and key external partners to get a well-rounded view. Multiple perspectives reduce bias and provide a richer picture of leadership impact, including areas such as listening, empowerment, and speak-up culture.
Use quantitative and qualitative data - combine measurable outcomes such as revenue growth, KPI achievement, engagement scores, or customer metrics with qualitative insights on leadership style, team morale, decision-making quality, and cultural impact. Both types of evidence matter. Over-reliance on financial results alone can miss important risks.
Schedule regular reviews - annual or bi-annual evaluations keep the process timely and relevant. Consistency helps the CEO and board track progress over time rather than treating the review as a one-off event.
Focus on development - frame the evaluation as a tool for growth, not just judgement. Identify strengths to build on and areas for improvement. A developmental tone encourages honesty and ownership.
Document and follow up - keep records of the evaluation and set clear action plans with milestones. Follow-up is what turns insight into improvement.
Ensure full Board involvement and balanced challenge — the Qantas review emphasised the importance of robust, “tough but fair” debate and challenge rather than excessive deference. Full Board discussion of the evaluation supports this and helps surface different perspectives.
This approach ensures the evaluation is fair, transparent, and constructive. It also helps boards meet their governance obligations while supporting the CEO’s effectiveness.
What Should I Write in a Leadership Performance Review?
Writing a leadership performance review can feel challenging, but it becomes more manageable when you focus on key areas that reflect the CEO’s real impact. Strong reviews are specific, balanced, and evidence-based. They should also address both financial results and the non-financial dimensions that the Qantas review showed can create significant risk if under-attended.
Consider including these elements:
Vision and Strategy - how effectively does the CEO set and communicate the organisation’s direction? Are they proactive in adapting to market, regulatory, or community changes? Strong strategic leadership includes both setting direction and building alignment around it.
Operational Performance - assess the CEO’s ability to deliver results, manage resources, and drive efficiency. Look at both the outcomes achieved and the quality of the systems and processes used to deliver them, including early visibility of emerging operational or customer issues.
People Leadership and Culture - evaluate how the CEO inspires, motivates, and develops the leadership team and wider workforce. Consider retention of key talent, quality of the executive team, the overall leadership climate, and whether the culture supports listening, empowerment, and appropriate challenge. A strong safety culture, for example, does not automatically equal a strong overall leadership culture.
Stakeholder Engagement - review the CEO’s relationships with the board, investors or funders, customers, partners, and the community. Effective stakeholder management includes understanding the full stakeholder matrix and avoiding overly combative or one-way communication.
Decision-Making and Problem-Solving - look at how the CEO handles challenges, risks, and opportunities. Strong leaders make timely decisions, involve the right people, escalate issues appropriately, and learn from outcomes.
Cultural Impact and Speak-Up - consider the CEO’s role in shaping organisational values, ethics, and workplace culture, including whether people feel able to raise concerns.
Example of a leadership review comment:
“The CEO has demonstrated strong strategic foresight by successfully leading a digital transformation that increased market share by 15%. There is an opportunity to strengthen internal communication and create more space for challenge and speak-up to improve team alignment, empowerment, and early identification of emerging issues.”
Using clear, specific examples like this makes the review actionable and meaningful. Vague praise or general criticism is far less useful than evidence-linked feedback.
Lessons from the Qantas Governance Review on CEO Oversight
The Qantas Governance Review offers several practical lessons for boards evaluating CEO effectiveness:
Avoid excessive deference - even a trusted, long-tenured CEO needs robust challenge. The review found that too much deference contributed to issues not being escalated or debated early enough.
Look beyond financial results and one strong cultural area - heavy weighting toward financial performance, combined with limited visibility of customer, reputation, and employee engagement metrics, left gaps. The Board also over-estimated the strength of the broader leadership culture based on the Group’s safety record.
Build in 360 feedback and full Board engagement - the review specifically recommended more rigorous CEO performance processes that include multi-source feedback and active Board discussion.
Improve information flows and early escalation - Boards benefit from clearer norms around when and how non-financial, operational, customer, and stakeholder issues are brought forward, together with options and risk analysis.
Codify expectations for challenge and support - establishing clear “ways of working” between the Board and CEO that balance support with accountability and constructive challenge helps prevent over-reliance on any single leader.
These lessons apply well beyond large listed companies. Smaller not-for-profits, government bodies, and health services can face similar dynamics when a CEO has long tenure or strong operational credibility in one domain.
Common Challenges in CEO Performance Evaluation (and How to Address Them)
Even well-intentioned processes can face challenges. Common issues include:
Lack of clear criteria - without agreed measures of success, feedback can feel subjective. Address this by defining criteria early and linking them to the strategic plan, including both financial and non-financial elements.
Over-reliance on financial results - financial performance is important but incomplete. Balance it with leadership, culture, customer, and stakeholder measures, as the Qantas review recommended.
Uncomfortable conversations or excessive deference - Boards sometimes avoid direct feedback, particularly with a long-serving or high-performing CEO. A structured process, clear criteria, and, where helpful, an independent facilitator can make these conversations more constructive and “tough but fair.”
Limited follow-through - insights are valuable only if they lead to action. Agree specific development actions and review progress at a later date.
Bias or incomplete feedback - 360-degree input helps, but it still needs careful interpretation. Look for patterns across multiple sources rather than relying on single opinions, and ensure the process captures culture, listening, and speak-up dynamics.
Addressing these challenges improves both the quality of the evaluation and the likelihood that it will drive real results.
Practical Tips for Conducting a CEO Performance Evaluation
To make the CEO performance evaluation process effective, here are some practical tips:
Prepare in advance - collect all relevant data, reports, and feedback (including non-financial metrics) before the review meeting so the conversation is informed and efficient.
Create a safe environment - encourage open, honest dialogue without fear of reprisal. Psychological safety supports more accurate feedback and better speak-up culture.
Be objective and balanced - focus on facts, behaviours, and outcomes rather than personal opinions or style preferences. Include both support and constructive challenge.
Use a balanced scorecard - incorporate financial, operational, leadership, customer, reputation, and stakeholder metrics so the review reflects the full scope of the role.
Encourage self-assessment - ask the CEO to reflect on their own performance as part of the process. This often surfaces useful insights and builds ownership.
Set SMART goals - Ensure follow-up actions are Specific, Measurable, Achievable, Relevant, and Time-bound.
Leverage external expertise when useful - an independent consultant can provide valuable perspective, design the process, facilitate the conversation, and help reduce deference dynamics, especially when boards want an objective, professional approach. It is good practice to incorporate an external CEO performance review at least every 3 years.
Involve the full Board - ensure the evaluation is discussed and owned by the Board as a whole, not handled solely by the Chair or a Committee.
By following these tips, organisations can turn CEO evaluations into a powerful tool for leadership improvement rather than a compliance exercise.
The Role of the Board in CEO Evaluation
The board holds ultimate responsibility for overseeing the CEO’s performance. This includes setting clear expectations, providing support, ensuring robust challenge, and conducting a fair evaluation. In practice, the Chair often plays a key coordinating role, while the full board contributes to the criteria and final assessment.
A well-run process also strengthens the board-CEO relationship. When expectations are clear, information flows early, and feedback is constructive, it reduces ambiguity and supports better decision-making throughout the year. The Qantas review underscored that collegiate relationships are valuable, but they need to be complemented by active debate and challenge.
Moving Forward with Confidence in Leadership
Improving leadership through a structured CEO performance evaluation is a journey, not a one-time event. It requires commitment, transparency, and a willingness to learn and adapt. When done well, it empowers CEOs to lead with clarity and confidence, while giving boards and stakeholders the assurance that the organisation is on the right path. Lessons from reviews such as the 2024 Qantas Governance Review reinforce why rigorous, multi-dimensional evaluation of CEO effectiveness matters - particularly around culture, stakeholder outcomes, and the balance of support and challenge.
If you want to explore how to implement a robust CEO performance evaluation process tailored to your organisation’s needs - whether you are a not-for-profit, government body, health service, or company - consider partnering with experts who understand the nuances of leadership assessment and governance. An independent, well-designed process can add significant value.
Strong leadership is the foundation of lasting success. Investing in evaluating and improving CEO effectiveness is an investment in your organisation’s future.
Kylie Johnson FCPA FGIA MAICD is Principal Consultant at Sadhana Consulting, specialising in board performance reviews, CEO evaluations and governance for government, NFP and corporate boards across Australia. To discuss a CEO performance evaluation or book a discovery call, visit sadhana.com.au.
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