Why process matters more than a CEO’s personality

IN MANY BOARDROOMS, the conversation around CEO performance often leans heavily on personality. Is the CEO dynamic? In control? Inspiring? While these traits are important, relying solely on them or past success is a governance risk. True accountability must rest on process, not perception. High-performing boards ensure accountability through thoughtful structure, consistent feedback, and a clear understanding of their role. When done well, this becomes a powerful tool to drive alignment, mitigate risk, and enable long-term value creation. Start with a structured process The foundation of CEO accountability is a structured, year-long process, not a crisis response. It begins with clarity on what success looks like. Every year, the board and the CEO should jointly define key performance indicators covering both short-term metrics (such as revenue growth, profitability, and customer metrics) and long-term outcomes (innovation, culture, talent, and ESG). This alignment creates shared priorities and ensures expectations are realistic, measurable, and forward-looking. It also allows for mid-course corrections if needed — due to new opportunities or external shocks. Flexibility does not mean vagueness; it means goals can evolve, but accountability remains. The Nomination and Remuneration Committee (NRC) plays a critical role in facilitating goal-setting and overseeing evaluations. The clarity of its mandate, access to data, and quality of its discussions shape the outcome. Both incentives and design matter Compensation is an important lever, especially when linked to long-term outcomes. Well-structured ESOPs or performance-based incentives align CEO and stakeholder interests. However, the design of these plans is where intent meets execution. Incentives must link to a balanced scorecard — with financial and strategic KPIs. Overemphasis on short-term profit encourages risky behaviour, but overly diffuse goals dilute motivation power and impact. Good incentive design also includes provisions like staggered vesting and claw backs. reinforcing the idea that accountability extends beyond annual bonuses. Well-structured incentives serve not just to reward, but to guide. The power of 360° feedback Beyond numbers, boards must understand how a CEO is perceived internally. This is where 360° feedback can add immense value. Structured, anonymous inputs from direct reports, senior leaders, and peers offer a fuller picture of the CEO’s leadership style, communication, ability to inspire, and openness to dissent. It surfaces early signals of risk, be it disengagement, fear, or toxic dynamics, that might otherwise go unnoticed. But the process matters. Professional, third-party management ensures confidentiality and objectivity. Insights should be shared with the NRC Chair and CEO, sparking constructive, forward-looking dialogue. Exit interviews: What’s not being said Exit interviews are an underused source of insight. Departing senior leaders often carry valuable views on CEO effectiveness and culture. Repeated high-potential exits under similar circumstances should trigger board attention. Exit interviews should not be treated as HR formality. Independent directors — particularly the NRC or Board Chair — should review the findings periodically. Are people leaving because they feel excluded, unheard, or stifled? Or are they simply seeking growth elsewhere? The answers often reflect broader leadership themes. HR: Partner, not bystander For these processes to work, boards must partner with HR. Too often, HR is expected to support the CEO while reporting to the board — creating ambiguity. The solution is clarity. Boards should define who handles each part of the evaluation. For instance, 360° feedback could be managed by HR or a consultant, with results reported to the NRC Chair. This preserves objectivity and avoids last-minute confusion. HR also tracks goals, gathers benchmark data, and coordinates evaluations. With the right mandate, it becomes a governance enabler. India-specific nuances for boards In India, governance structures vary. In banks and NBFCs, regulators often have the final say on CEO appointments, even when boards recommend otherwise. This complicates succession and accountability. In government-controlled entities, the board lacks authority over CEO selection. Here, the board’s focus should shift to monitoring performance, setting expectations, and ensuring transparency. Promoter-led firms bring a different challenge: loyalty can cloud objectivity. Boards must be willing to have hard conversations, anchored in data and long-term interest. Process builds trust; Trust builds performance CEO accountability is not a checklist item. It is a mindset, reflected in the board’s willingness to engage deeply, ask tough questions respectfully, and invest in robust processes. Done well, it builds alignment, strengthens leadership, and increases the likelihood of long-term success. The irony is that the best CEO accountability processes are often unremarkable. They do not make headlines. They unfold quietly, year after year, fostering trust, enabling course correction, and setting the stage for sustained excellence. In a world where leadership is under increasing scrutiny, boards would do well to remember: consistency beats charisma. And process beats personality. (The writer, a former head of Crisil and Omidyar Network India, is the author of the forthcoming book Leadership Beyond the Playbook. Views are personal.) Fortune India is now on WhatsApp! Get the latest updates from the world of business and economy delivered straight to your phone. Subscribe now.

Why process matters more than a CEO’s personality

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