Evaluating the General Manager

Mark Goehring and Carolee Colter | July 15, 2009

143 July – August – 2009

A board evaluating the general manager (GM) of a food co-op…now there’s a process that directors should be able to describe, defend, celebrate and appreciate with little or no ambiguity or hesitation. In a recent online recorded workshop on GM evaluation, Thane Joyal and Carolee Colter laid out these four learning objectives for the workshop and five key principles of management evaluation:

Speak with one voice.
No surprises.
Make the rules at the beginning, not the end.
The GM’s performance = the co-op’s performance.
Give positive reinforcement where it’s due.

An effective GM evaluation flows from an effective board process. The board’s expectations for itself should be written down as the basis for the board’s agreements about how it will conduct itself when evaluating the GM.

Here are two examples pulled from our Cooperative Board Leadership Development (CBLD) sample policies. (See the resources listing at the end of this article for a link.)

Policy Type: Board-Management Relationship

Policy Title: D2 – Accountability of the GM

Last Revised: CBLD Policy Template 2021

The General Manager is accountable for achieving the Ends and operating the organization within the Executive Limitations.

We will view organizational accomplishment of Ends and organizational operation within Executive Limitations as successful GM performance.
We will not instruct or evaluate any employee other than the GM.

Policy Type: Board-Management Relationship

Policy Title: D4 – Evaluating the GM

Last Revised:

The Board will systematically and rigorously monitor and evaluate the GM’s job performance compared to expectations set forth in Board policies.

The Board’s policy monitoring process is the foundation of our annual evaluation of the GM.
1. In [December] of each year the Board will review a summary of the monitoring reports received during the previous 12 months.
2. The Board will invite the GM into a conversation to share other relevant information and clarifications.
3. Based on the review of reports and the conversation, the Board will present an evaluation letter to the GM. That letter will constitute our full evaluation, and it will be delivered no later than [February 28].
We will acquire monitoring information by one or more of three methods: (a) most commonly by internal report, in which the GM discloses policy interpretations and compliance information to the Board; (b) occasionally by external report, in which an external, disinterested third party selected by the Board assesses compliance with Board policies; or (c) rarely by direct Board inspection, in which a designated director or committee assesses compliance with the policy.
We will accept that the GM is compliant with a policy if the monitoring report includes a reasonable interpretation, including clear metrics and benchmarks, and adequate data that demonstrate accomplishment of that interpretation.
1. The Board’s standard for compliance with a policy will be any reasonable interpretation by the GM. The GM’s interpretation does not need to be an interpretation that is favored by individual directors or by the Board as a whole.
In evaluating non-compliance, we will consider the severity, implications, and trends, as well as the GM’s explanation and plan to achieve compliance.
We will monitor all policies that instruct the GM. The Board can monitor any policy at any time by any method listed above but will ordinarily follow the schedule outlined in the Board Annual Calendar.

Four steps

There are four steps to the GM evaluation process (Figure 1):

Have expectations, or pre-established criteria, a.k.a. policies. Write them down.
Have a monitoring schedule for checking compliance and performance during the year.
Summarize results of monitoring process annually to provide a snapshot of the whole process.
Affirm the summary results so the board is well grounded in its decisions and the GM has clear communication from the board on his or her performance.

For fun and to practice, check each of these four steps against the key principles of management evaluation shown earlier, and see which principles apply to each step in the process.

Have the policies that you want and need

Monitor your policies with rigor and reasonableness! Summarize your decisions using an Annual Monitoring Table like the sample in Figure 3 so that it’s easy to see an overview of board actions. This table is a key tool and, with it, the directors do not have to remember, guess, or use their own personal records to see a clear presentation of board decisions relating to the GM evaluation. Be lazy, be smart…keep this table updated during the year!

Designate someone to produce the “official record,” providing the Monitoring Table (see Figure 3) and a memo to the board. A month before the meeting where the summary of board decisions will be reviewed (August in our sample time line), take time in the board meeting to preview the whole process. We suggest a color-coded process map (like Figure 1) and a linear one that shows the process in chronological order (like Figure 2).

At the next meeting (September in our time line), the directors receive the table and a memo that reads something like this:

TO: ______________ Co-op Board of Directors
FROM: ______________, Board Secretary
DATE: xx/xx/xxxx
RE: Ends and Executive Limitation monitoring reports – (dates)
CC: ______________, GM

In my role as Secretary of the Board, I confirm that the attached Annual Monitoring Table accurately reflects the board’s decisions made on monitoring reports from the period July 1, xxxx–June 30, xxxx.

Please see tables attached.

The Annual Monitoring Table basically includes the information that is the GM evaluation: the board’s decisions that have been recorded while monitoring compliance/performance of board’s policies during the year. While the table includes the information, the board should take time in this meeting, usually in executive session, to review the information it has accumulated. Following the executive session, we suggest the board present a letter to the GM summarizing its findings.

Following are four different scenarios for a GM evaluation. Each would have its own Annual Monitoring Table and corresponding letter from the board. Showing all four complete tables here would take too much room, so we have summarized the data for each and provided highlights of the boards’ letters. (See the listing at the end of the article for a link to a workshop presented May 5 by CLBD, with close-up views of the actual Annual Monitoring Tables for each scenario.)

Sample letters

These four sample letters from four co-ops each begin with a very brief overview of the table. The actual table is included for only the first hypothetical scenario, Golden Grains.

All is well at Golden Grains!

In this high-performing co-op, the board accepted all monitoring reports during the year with a determination of compliance. Now the board takes the opportunity of the GM’s evaluation to give positive reinforcement for a job well done.

Congratulations. As you already know from the Annual Monitoring Table, the board decided that you were in compliance of all board policies during the period July 2007–June 2008.

The progress reported in the Ends report was fantastic!

In addition, we appreciate the extra effort you put into keeping the board informed of important developments via the “FYI—no action needed” reports in our meeting packets.

We appreciate the effort you put into our successful board/GM relationship.

Overall, we are more than satisfied with your performance this year!

But all is not well at Bear Market

Here the board is well aware of the GM’s non-compliance. On Ends, Financial Conditions, Planning and Asset Protection reports, the Annual Monitoring Table showed either noncompliance or monitoring reports not accepted by the board. Notes on the table stated “Action plans yielded no results,” “Retained earnings eroding,” and “Severe noncompliance issues.”

As you know from the Annual Monitoring Table, the board agreed with you that you are out of compliance on Financial Condition and Asset Protection policies. In addition, the board did not feel adequate progress was made on the Ends policies.

Six months ago, you submitted plans which, if realized, would have brought you back into compliance with the Financial Condition policies and contributed toward compliance on the Ends policy.

The data in your recently submitted monitoring reports on Financial Condition have shown little or no improvement. The financial situation of the co-op is continuing to deteriorate, and you have not come up with a plan that effectively addresses the situation.

The board has decided to place you on 90-day probation effective today. If terms of probation are not met you will be subject to termination. See attached terms of probation.

Sometimes the GM evaluation is the catalyst for the board to realize it’s been asleep at the wheel—or at least that it has been too passive about asking the GM for what it wanted over the past year. Here are two scenarios where the board “wakes up and smells the coffee.”

The board wakes up at Wake Up Co-op

Like at Golden Grains, the board at Wake Up Co-op accepted all monitoring reports during the year. During the review meeting, however, this board realized the Ends report that they accepted was very weak. The letter reflects their role in the relationship and informs the GM of its expectation for improvement.

As you know from the Annual Monitoring Table, we have accepted all of your monitoring reports, including the Ends report at our August board meeting.

In reviewing the Ends report that we accepted, we see now that it provided inadequate interpretations and data for us to rely on to fulfill our accountability obligation. The board accepts responsibility for its previous decisions but does want you to know that we’d like to receive a midyear report on our Ends policies in February.

In February, we expect to see improved thinking about delivering on our Ends, including specific goals that you intend to measure for demonstration of accomplishment. The Planning report is also due in February, and in that report we expect to see a clear connection between plans and Ends, as called for in our board policy on planning.

The monitoring reports on the other policies were satisfactory. We appreciate your efforts on those and your continued service to the co-op!

Letter from the board: Smell the Coffee Co-op

At this co-op, the GM had submitted reports for Financial Conditions, Emergency GM Succession (two months late) and Member Equity and Benefits (two months late), but no other policies. Even with no report, the board voted to find the GM out of compliance with Communication and Support to the Board.

The board found it difficult to complete your evaluation. As you know, your evaluation is based on an ongoing monitoring process based on board policies. Even though no Board Communication and Support report was submitted in August, the board found you out of compliance with that policy.

As you know, the Annual Monitoring Table shows that, with the exception of Financial Conditions, you failed to submit the required monitoring reports or submitted them well past the scheduled date.

The board has revised the monitoring schedule and attached it for your review. In advance of the deadline for the next meeting packet, please inform the board chair of any modifications to this new schedule you feel are necessary.

In six months, we will review your progress on submitting reports according to the revised schedule. Until that time, your evaluation will remain incomplete and your compensation will remain as is. We suggest you get some help on your monitoring reports!

Finally…

In the January–February 2008 Cooperative Grocer, we proposed a process for setting GM compensation. Since that article was published, many co-ops have started using this process with good results.

In the timetable chart (Figure 4, see pdf version of this article) we show how the annual GM evaluation process fits into the longer five-year cycle for setting GM compensation described in our earlier article.

CBLD Library Resources

All of the following can be found in the CBLD Library:

GM Evaluation: online recorded workshop, including examples of monitoring tables referred to in this article.

Acting on GM Monitoring Reports: online recorded workshop

Setting a Process for GM Compensation: online recorded workshop

CBLD Sample Policies

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