If pressed to identify one topic my governance clients have been most challenged by over the past 12 months, I would unhesitatingly say the internal CEO monitoring report. CEOs struggle with what to put in their report and board members struggle knowing what to look for when reading and accepting them. Today's blog kicks off a series of entries on the topic. Check in for the latest entry soon. I promise I'll start writing more frequently (especially if I get some positive feedback from readers). I'll start the series with some thoughts on the report's operational interpretation sometimes called the CEO's Interpretation but first...

An internal CEO monitoring report is a critical tool the board uses to assess organizational performance. Did the organization achieve the external results defined by the board? Did the organization avoid situations the board defined as unacceptable in terms of such things as financial health, asset protection, treatment of clients and staff, etc.? The CEO is asked to provide detailed reports that offer the proof necessary to show the board she is was in compliance during the period being monitored. These reports have four critical elements: 1) a restatement of the exact policy language 2) the CEO's operational interpretation of that policy 3) the data that proves the organization is in compliance (or that it isn't!) and 4) the signature of the CEO verifying the report.

A properly executed report's operational interpretation is explicitly stated, measurable, and justified. Here is what I mean:

Explicitly stated requires restating, in rich detail, what the board's policy language means within your specific organization not insulting their intelligence with dictionary definitions of words and phrases. If an association's End policies stateand "members have adequate meeting space" your interpretation isn't "a room that meets their needs". It's not about synonyms.
Measurement is a critical element because the responsibility for determining what to measure rests with the CEO – and most boards I work with are anxious to have this information. What are you measuring? How? This must be included for each key aspect of each policy.
Reasonableness information gives the board assurance of the rationale the CEO used to justify the operational interpretation and often the method of measurement.

Here is an example of a solid (and hypothetical) operational interpretation:

Policy:
Members have adequate meeting space.

Operational Interpretation:
Using a site inventory, 100% of our facilities in North America will have at least one meeting space with seating for a minimum of 20 people, electronically "smart" capabilities, sound proofing, and visually privacy by January, 2013. This fits with the standard sited in the Society of Association Management's 2010 survey of member service criteria and the priorities from our customer satisfaction survey results from 2009.

Can you spot each of the necessary elements in this example? Good. Now take a few minutes and examine a few of your recent reports. Is there room for improvement?