By Catherine Engmann
A few months ago, a friend who I have worked with on various consulting projects sought my advice. He wanted to understand the best way to approach a board evaluation for a company that he was undertaking a financial consulting project with.
While my friend is an excellent financial consultant, he has no experience in board evaluations. I was therefore surprised that the Chief Executive Officer – let us call her Judith – had asked him to conduct one.
I asked him what outcome Judith was hoping to achieve and was told that she believed that it would be a good thing to do as the company had never conducted one. She had founded the business herself, appointed the board and was now furthermore legally required to conduct one based on regulations governing their industry.
This led me to consider some mistakes boards make when conducting a board evaluation. I will share my top five.
One: Avoiding the “Why”
Board evaluations allow boards to identify strengths and opportunities, as well as what needs to change in order to improve performance. Many boards approach annual evaluations as a “box-ticking” mechanical exercise rather than a value-adding process. A board evaluation should result in clear objectives for the board and insights into greater board effectiveness.
In the absence of a clear “Why”, most boards go through the motions of conducting an annual evaluation without much thought about the specific areas that they would like to address. This dilutes the effectiveness of it and results in an evaluation that adds little or no value to the organisation.
Two: Limiting it to a Governance Assessment
Some boards confuse a board evaluation with a governance assessment and therefore often do not set enough time aside for it – again possibly because it is viewed as box ticking.
The annual evaluation process is an ideal time for the board to reflect on the past and where it is going in the future. A full and effective board evaluation should include a review of governance documents, committee charters, board meeting agendas and minutes as well as observation of a board meeting.
It goes further than just that though. It should also explore how individual directors perceive:
- Effectiveness of the board as a whole.
- Quality of individual contribution.
- Value of current board processes.
- Relationship dynamics between board members, management and directors.
- The board culture.
- Potential board development needs.
To get maximum value from a board evaluation, Sirdar recommends that interviews are held with all directors to gain both their qualitative and quantitative views on board effectiveness – with an additional focus for the chairman.
Our director interviews are conducted by experienced boardroom consultants who understand boardroom issues. Using an external facilitator, such as Sirdar, ensures objectivity when conducting interviews as directors are more candid with a third party than they would be with someone internal conducting such a review.
Three: Ignoring Board Composition
It is important that boards have adequate diversity of thought, experience and skill so as to benefit from different perspectives and avoid insular thinking.
Sirdar’s board evaluation process leverages the complementary Contribution Compass Profiler which explores board members’ natural energies. This insight helps us to understand the most dominant energy in the boardroom, how this shapes or influences decision-making, and the profiles of directors who ought to be appointed to the board next. Boards that do not see the value of addressing board composition as part of their evaluation miss out on an opportunity for balanced decision-making.
Four: Rushing the Feedback Session
Very often, board evaluation feedback to the board is squeezed in as a 20-minute agenda item at the end of a busy day of board and committee meetings.
Boards should ideally set aside half a day for a board workshop to debrief the evaluation and agree which findings should be prioritised for action.
Five: Lacking follow-through in Recommendations
Board evaluations often result in lengthy reports and a set of recommendations which are seldom reviewed again after the board debrief session.
Mapping out key items to be addressed, timelines and responsibilities is critical to the success of the board evaluation session. In fact, boards should ensure that their board meeting includes a standard agenda item addressing the implementation of recommendations arising from the board evaluation.
Board evaluations require commitment from boards and board members. The initial participation in interviews and questionnaires requires focused reflection – without this, gaining robust insight is unlikely.
The real work – and reward – comes from the action guided by the roadmap.
Why not follow through on the required actions given the amount of time that is invested upfront? After all, no directors have time to waste – and all have stakeholders to answer to.