VideoRemember the old vaudeville joke "The food in this place is terrible--and there's so little of it!"?
That about sums up popular feelings concerning top-level performance reviews; they're pointless, and they don't happen often enough.
"I know of very few CFOs who have received performance reviews since they've been in that position," says Jerry McAdams, a national practice leader at Watson Wyatt Worldwide in St. Louis. One former CFO of a $3 billion midwestern concern, who did get reviewed each year, has dismal recollections of the experience. "I think somehow he was embarrassed to do it," the former finance chief says, noting that the boss's whole demeanor changed when there wasn't a specific item on the agenda. The review amounted to the CEO "calling me in at performance-review time and saying I'm doing a great job."
Many chief executives share the view of Bruce Edwards, a former CFO who is now president and CEO of Powerwave Technologies Inc., in Irvine, California. "The CEO-CFO relationship is such that there is constant feedback, so it's a matter of a validation of what has been happening," he says, describing his own review of the CFO as "a quick recap." Formal appraisals "take on a much higher degree of significance with other members of the management team."
Yet a sampling of finance chiefs by CFO magazine suggests this situation may be changing. According to our survey, about 62 percent of CFOs receive annual reviews, and most who do not would like to. Strikingly, some top executives are not just waiting for the CEO to step up to the plate--they are starting to take an active role in designing their own reviews. Their work is helping change the performance review into a detached and interactive process through which CEOs can clarify the finance-department head's objectives, improve follow-through, and point to the personal or managerial skills that need developing.
Here's how some companies are turning what can be a painful, awkward, or pointless routine into a useful exercise that weaves the overall corporate plan into specific, individual targets.
DO IT YOURSELF
One solution is for CFOs to do it themselves. That's the path chosen by Beckman Instruments CFO Dennis Wilson, a recent convert to the efficacy of the performance review. During the first half of his 28 years he spent climbing the ladder at the Fullerton, California, maker of laboratory measurement and research systems, he says, he can't remember getting a single review that was worthwhile. "They covered the 'what' of what we were supposed to do," says Wilson, "but the thing that was missing for many years was the 'how,' the soft part that's a key element in any supervisor's message." But now, he and chairman and CEO Louis Rosso integrate executive reviews--not once, but twice a year--into both annual and long-term strategic planning.
"It's a very, very thorough process," says Wilson. Feedback on his own work, for example, is collected from all internal and external finance "customers," including outside auditors, insurance brokers, and bankers. Wilson drafts an assessment of his performance himself, and then he reads the assessment Rosso drafts for him.
They use three-part forms that are produced by the human-resources department, as they are at many companies. The reviews are used in a Beckman management system that details and analyzes progress in "critical focus areas" and measures each executive's performance in "essential work outcomes." The focus areas are shared with other senior managers. That puts Wilson among the 22 percent of CFOs in our survey who say that some results are shared with senior management.
If a company expects to manage by setting objectives, says CEO Rosso, "then the behavior must begin at the top," with reviews. He avoids any sense of embarrassment by treating top-level sessions as "part of a high- performance culture" at Beckman.
In Wilson's case, one targeted outcome this year involves optimizing earnings, cash flow, and balance- sheet figures, while another aims to develop a better research-and-development measurement system. Past review-target accomplishments include the creation of finance career-development programs that identify and monitor key people and serve in succession planning.
Having just finished a review in July, Wilson is looking forward to February, when he'll again sit down with Rosso to set objectives for the next year. "The way we do things creates much more dialogue," the CFO says, "so reviews aren't just a pat on the back."
"HUNGRY FOR FEEDBACK"
At Owens Corning, the $3.8 billion glass- composites and building-materials company in Toledo, senior vice president and CFO David Devonshire has made a science of benchmarking CFO performance in what he calls a "nine- square grid." This scoreboard has three rows of boxes, relating to shareholder value, the satisfaction of internal and external customers, and a quality listed as "individual dignity." Numerical and other targets are established in each of the nine areas, which Devonshire uses to meet the expectations that CEO Glen Hiner sets out for him at their formal year-end meeting (see "Evaluating by Grid," page 50). "It's a good clear way of measuring the effectiveness... of the contemporary CFO," Devonshire says.
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