On Our Minds

Serving on a nonprofit board comes with significant responsibility. Beyond lending your name to a cause you believe in, you become part of the governing and fiduciary body of the organization—legally accountable for ensuring compliance, stewarding resources responsibly, and advancing the mission. That’s no small charge.

The essential role of the Executive Director in execution of a nonprofit’s mission makes the annual review and compensation process one of a board’s most important duties. When approached with structure and care, these conversations strengthen leadership, retain top talent, and set an organization up for long-term success. When they’re rushed or absent, boards miss the chance to build trust, clarify expectations, and prepare for what’s ahead.

Why the Executive Director annual review is critical

The annual review is a cornerstone of performance management, since the ED’s leadership directly determines how effectively the mission is carried out. It’s also one of the most useful opportunities for a board to:

• Ensure it fulfills its governance responsibility.
• Provide the ED with clear, transparent feedback.
• Check in on both organizational performance and how the leader is doing in the role.

That last piece is an essential, but often missed, opportunity. A strong review builds in space to ask: ‘How is the person running the machine running themselves?’ Without it, boards risk overlooking stress, burnout, or early signals that succession planning is needed. The whole institution can feel the impact of that.

Where boards struggle most

The biggest barrier I see is the lack of a plan. Too often, reviews aren’t scheduled, expectations aren’t defined, and there’s no structure in place. In many cases, the process only surfaces at an Executive Director’s request—or when they ask for a raise or signal they’re considering a move. By then, the board is reacting instead of leading.

Three common challenges stand out:

• No shared definition of success. Without agreement on what success looks like, feedback becomes vague or inconsistent.
• Insufficient data. Boards don’t always know what information will actually help them evaluate progress.
• Skipping tactical goals. Instead of setting straightforward expectations for meeting strategic metrics, boards sometimes jump straight to high-level impact measures that take years to realize.

What a well-run review looks like

Reviews should evolve with a leader’s tenure:

• For first-year EDs: Keep goals practical and measurable. Consider milestones like retaining a set percentage of key donors, hitting fundraising targets, closing a new major gift, or maintaining core operational health. 
• For longer-term EDs: Evaluate progress against the organization’s strategic plan. Look at how effectively they are advancing long-term goals while sustaining culture and operations.

To make reviews meaningful:

• Put structure in place. Schedule review dates in advance so the process doesn’t fall through the cracks.
• Align on success. Define what success looks like for the year and make sure both the board and the Executive Director share that understanding.
• Use the right data. Identify what information will be used to illuminate progress and ensure goals and assessments correlate directly to those metrics.
• Invite self-assessment. Give the ED space to share their own view of performance, challenges, and opportunities.

How to strengthen the process

Reviews should build trust, not erode it. A few ways boards can make that happen:

• Communicate directly. Don’t rely on back-channel conversations or informal staff input without transparency. Start with the Executive Director themselves, and if additional perspectives are needed, agree on how to gather them.
• Check in regularly. Mid-year reviews, mentorship from a board member, or even informal monthly conversations can strengthen the relationship and reduce surprises.
• Support growth. Boards aren’t there to be executive coaches, but they can ensure leaders have access to professional development, coaching, and networks that help them succeed.
• Pause before reacting. When an ED raises the possibility of transition, boards should resist the urge to immediately plan the search. First, understand the “why.” Burnout, compensation, or structural issues may be addressed with adjustments that help retain the leader.

Considering compensation

Compensation reviews are a retention tool and a signal of the board’s seriousness about leadership.

To get them right, boards should:

• Benchmark. Look at nonprofit compensation data and peer organizations. And don’t just compare by budget size—consider mission and funding model, too.
• Avoid extremes. Paying well below market risks losing leaders, while paying at the very top can create internal equity issues and raise concerns with funders.
• Share a forward-looking view. Outlining salary progression over several years helps an ED see a future at the organization.

Fair, competitive, and sustainable compensation keeps leaders motivated and reduces disruptive turnover.

Keeping succession planning in view

While succession planning doesn’t have to be part of the annual review itself, it should always be informed by ongoing dialogue with the ED.

That means asking questions like:

• Who on your team could step in, even temporarily, if you had to step away?
• What kind of leader does the organization need for its next stage of growth—the same skills you bring now, or something different?
• How are we cultivating internal talent so the organization isn’t caught off guard by a transition?

Too often, boards assume a trusted deputy (like a beloved COO) is the natural successor. But not every strong second-in-command wants—or is suited for—the Executive Director role. And sometimes the issue isn’t continuity at all, but whether the organization needs a different kind of leader for a new context. A leader who was perfect for growth from point A to B may not be the right fit for getting from B to C.

By making succession planning a standing part of board conversations, and informed by the learnings of the annual review, organizations avoid crisis-mode transitions and give themselves the best chance of long-term success.

The takeaway

An Executive Director’s review is a chance to strengthen the partnership between boards and leaders, provide clarity, and chart a sustainable path forward. By approaching them with structure, transparency, and foresight, boards fulfill their governance role and set their organizations—and their leaders—up to thrive.
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On-Ramps is a search and consulting firm that serves mission-driven organizations in the social sector. We are deeply committed to helping create diverse, equitable, and inclusive workplaces. Together with our clients, we thoughtfully consider and address these topics throughout every step in our process. 

Want to talk about ED reviews, retention, or your hiring needs? Reach out to Rob Mayer at info@on-ramps.com.