“There are things we know we know, those that we know we don’t know and those that we don’t know, we don’t know” – a slightly summarised version of Donald Rumsfeld’s (in)famous response at a news briefing in February 2002 – it is difficult to believe that was 20 years ago!
To set the tone for this article, I want to express that board evaluations are about improvement and not about judgement. They are not intended to criticise or admonish a board for its performance or to single any individual directors out.
Evaluations are an invaluable tool – a not-so-secret weapon – for any board to use to get to grips with where they currently are, where they want to be, and how to get there.
While board evaluations typically highlight aspects regarding your board’s performance that you already know or may be aware of, these may not have been written down or captured in an actual document and presented to the board before. This could mean that issues relating to board performance are tacitly implied or alluded to, or perhaps even discussed to some degree, without ever actually being dealt with because they do not make it onto the agenda. What an opportunity!
Secondly, the evaluation can identify areas that the board is unknowingly or unintentionally overlooking – this could be related to compliance, regulatory aspects, foundational aspects and mandatory requirements. The result is often recommendations and remedial actions to address aspects such as the board charter, statutory filing, board composition or director rotation to mention only a few.
An effective board evaluation will also provide insights into the “softer” aspects – those not related to the business – that a board needs to consider. Board and organisational culture, board member performance, and relationships between the board and all of the stakeholders in the business are just some examples.
Effectiveness via Two Avenues
A board evaluation should be conducted on a qualitative and quantitative basis to gain effective insight.
The quantitative approach provides context while the qualitative approach provides content.
A skilled evaluator can look at both aspects and ultimately provide a report as well as feedback and recommendations which a board can practically implement over a period of time.
The most valuable outcome of a board evaluation is a set of recommendations which provides the board with a roadmap that seeks to find the correct balance between what works for us as a business versus best governance practice.
When the scale is “tipped” in either direction a board is unlikely to be either efficient or effective.