Common approaches to Board Evaluation
For many corporate and nonprofit organizations alike, the need to evaluate the Board of directors, the strengths, weaknesses and skills gap at any given time, is critical to managing its effectiveness.
The purpose of a Board evaluation and self-assessment is to allow Board members to better understand their own roles and responsibilities and how they can more effectively fulfil their obligations.
Common Board evaluations are typically based around a director rating their personal performance, the Board rating itself as a collective body or a combination of both these approaches.
After the Board evaluation is completed, the results are compiled and analyzed to determine if the responsibilities of the Board are being met and where improvements are needed. Usually, this handled by an experienced external governance facilitator before a report with recommendations is delivered to the nonprofit Board for reflection and action.
The evaluation process is designed to develop the Board’s team-building skills, provide a structure for problem-solving and increase accountability within the organization. It also allows for a forum in which honest conversation can help flesh out common grievances, before proactively finding a common solution.
In many cases, the main instigator of a Board evaluation process is the Chair (usually if there is an issue they want to bring to light), the nonprofit CEO (usually when it is part of a general governance update) and sometimes funding agencies or key stakeholders (usually in response to a perception of underlying governance problems).
Why do we need to evaluate the board?
Board evaluations are becoming more commonplace as Directors seek ways to fine-tune their decision-making, manage potential shortfalls and comply with governance best practice.
The objective of a Board evaluation and self-assessment is to help improve the work of the Board and move it to the next level of performance.
The purpose of a Board evaluation and self-assessment is to allow Board members to better understand their own roles and responsibilities and ways in which they can more effectively fulfil their obligations.
Below are three simple strategies that will help your Board achieve incremental improvement, year upon year, and become even more effective than it currently is.
Strategy 1: Conduct a Governance & Operations audit prior to evaluation
A strategic governance and operations audit is conducted in conjunction with the Board evaluation.
An independent person (usually the evaluation facilitator) spends some time with the CEO and/or General Manager to investigate if any specific areas have prompted the Board evaluation.
If big issues exist, the facilitator is made aware of them up front. At the end of the evaluation, their analysis may then properly address the issue which will assist the Board in finding a strategy forward.
The evaluation facilitator then looks for evidence of Board processes. This paperwork includes Board compliance and operational issues that directly affect the governance of the organization.
When conducting the Governance and Operations audit, it is useful to identify whether the proper policies or procedures actually exist. If they do exist, do any of these need amending to reflect current objectives of the organization?
This also helps the Board determine the root cause of any key issues which are disrupting the organization. (This information is then used to cross-check with Board members evaluation ratings soon after.)
Strategy 2: any time you ask for a rating, ask for evidence that supports that ratings
A typical board evaluation is based around Directors rating themselves, their individual performance against a matrix of skills, or the Board as a collective rating their effectiveness as a whole across various areas.
While this approach is helpful, it is prone to reflecting personal biases. For example, if each Director rates their performance as "excellent", but rate the performance of the collective Board as "poor", what is this information telling you?
If all these Directors have superior performance individually, then surely a Boardroom comprised entirely of brilliant Directors should produce work that rates off the chart?
Remember, the purpose of the Board evaluation is to help the Board and its members improve. Asking for evidence that supports a certain rating will not only temper the rating identified in the mind of the Director, but provides the facilitator with a greater depth of information to work from.
Strategy 3: Develop a Board work program based on the Board evaluation results
One of the most common complaints about Board evaluations is that they did not result in any significant changes. In order to keep the Board focused, one of the key strategies to use in a Board work program that specifies which recommendations are to be undertaken, who is responsible for ensuring that it occurs, and when that recommendation should be implemented.
This provides formal accountability and a project plan for the Board, which is more likely to result in the recommendations being acted upon.
Why we need strong corporate governance now more than ever
One of the major issues facing Boards today is the tendency towards prescription and conformance with relation to governance systems, rather than conscious governance that adds value to the organization. A sophisticated and thorough compliance and governance system is only as useful as the people who are responsible for that governance. In other words, no amount of compliance or governance systems will compensate for Board members who do not consciously govern!
The processes of governance and the systems that Boards should put in place are well documented. It is now time to move on to the delivery of the insight, passion, enthusiasm, excitement and energy that should be the right of every Board, and the contribution of every Board member.
Today’s members and stakeholders are increasingly holding companies responsible for a companies performance, which has lead to a shift in ensuring companies have truly strategic governance and an ethical strategy in place to guide core organizational activities. Business ethics can determine the security of an organization's profits and reputation in the marketplace, as well as act as a source of business-driven innovation.
All too often, deficiencies in corporate governance are only discovered after companies file for bankruptcy. Advanced Board Governance is about asking: what would it take to conduct even more profitable business, what are the right questions in this situation and how can we create more expansive decisions? This is the gift of good governance.