Who Reviews the CEO?

In the corporate model, the shareholders (owners of the business) elect the board of directors. The board of directors do strategic planning involving succession planning and exit strategy as well as set policy (including performance goals and mileposts) and appoint the executives. The executives execute policy (marketing plan and operating plan) to meet the mileposts and goals set forth in the strategic planning adopted by the board of directors. The executives (especially the chief executive officer) report to the board of directors and are reviewed based on their ability to meet the mileposts and goals of business operation set by the board of directors.

This is a tried and true model. It works. But what about the owner-managed business, when all these different roles, such as owner, director and CEO, may be all one person. The entity may not even be a corporation but a limited liability company or something else. It is pretty incestuous. It can be like reporting to a mirror.

We all need to report to someone. There is a reason why we have teachers, coaches, and direct reports (managers). Most managers feel that at least an annual review is essential to keep an employee on track. What does the owner-director-chief executive officer of an owner-managed business have in the way of a review? Perhaps there is a spouse or a family member who is involved, but there are usually difficulties with the influence of other non-business issues and problems.

At the very least, the owner-managed business organization, even if it is a limited liability company, should have something like a board of directors to which the chief executive officer reports, even if the chief executive officer owns all of the company. It can be an advisory board if need be, but the essential act is the chief executive explaining what goals were met or not met and why not. It is an essential and humbling exercise. (Humility being one of the least recognized and most important aspects of leadership.) If it is helpful to have your employees report and review, shouldn't you as the owner-director-chief executive officer also report on your performance and be reviewed?