CEO performance appraisal: review and recommendations.

CEO performance appraisal (PA) is very valuable to an organization, but the chances of obtaining a PA of high quality decrease as executive responsibility increases. The realities of CEO PA are that it: (1) is inevitable; (2) is creative and complex; (3) involves politics; and (4) has a significant effect on the organization and the executive. PA is conducted for legal and social requirements, to enhance communication, to provide opportunities for improvement, and to relate performance to compensation. This article discusses several problems with chief executive officer (CEO) PA and the contemporary approaches that seek to improve it. Three fundamental areas for evaluation are identified: (1) organizational success; (2) areawide health status; and (3) professional role fulfillment. These provide an outline for successful healthcare PA. In addition to a discussion of the strategic considerations behind a successful CEO PA system, several recommendations are offered for the implementation of the annual evaluation process. The final goal of CEO PA is to link its results to CEO incentive compensation. It is strongly recommended that some portion of the CEO's salary directly hinge on his performance in two critical areas: organizational effectiveness and community health status.