In today’s turbulent world undertaking board reviews is a vital part of good governance practice. As well as enabling performance to be assessed they provide an opportunity to move beyond basic compliance to pose the standout question “how fit is the board for the future?”
Unfortunately, reviews of the board and individual directors are too often undertaken as a tick box exercise. They are viewed as yet another task to strike off from the governance to-do list.
When implemented effectively reviews are far more than about compliance. They offer the opportunity for reflection, assessment and questioning of whether the board and its performance are fit for purpose.
Best practice reviews are those that focus on powering performance and are undertaken regularly to prompt a periodic re-examination of how fit for the future the board or director is. After all, funders, investors, donors, regulators, the chairman, and in fact all directors, want to have assurance that the board has the capacity, capability and culture to be effective, with best practice governance processes in place. This includes having confidence that the board is adding value while effectively meeting their objectives.
This poses the question – how can you be certain that the board as a whole, along with individual directors, are operating effectively? The answer is to commence an assessment to be aligned with the values and purpose of the company, which are firmly embedded as a robust, repeatable value adding process that they – the board – lead. It simply can’t be a token effort to justify putting a tick in a compliance box.
The next question is how can board and director reviews that power performance be effectively delivered?
Prior To A Review – Understand The Context
Before any review it is vital to know the context of the board, organisation, leadership and sector. Also, consider the desired outcomes you want the process to deliver, the value it will add to the company, board and each director, that will aid the organisation to meet its objectives.
Stage One: Gather Data
The first step of the evaluation process is to review the relevant documentation. This requires examining documents about board establishment, function and processes. This information gathering should include board papers, agendas, minutes, workplans, committee charters or terms of reference.
When appraising individual directors it needs to consist of documentation relating to their appointment, induction and development. The documents examined should also include the strategic, business and development plans, along with data obtained from any previous reviews, key performance indicators, cultural assessment or third party evaluations. The insight provided from this wealth of information enables directors to gain a better understanding of the review history of the board or individual, and assess how the board has handled the recommendations from previous evaluations.
The next phase involves online surveys being generated and forwarded to all on the board. These must be personalised, reflecting the purpose and strategic objectives of the business and an assessment of the behaviours, skills, knowledge and impact of the director or board. If an individual director is reviewed these surveys must also be completed by their direct reports.
It is imperative that the survey contains questions that identify how effectively the board is operating, which should highlight the non-value creating work of the director being evaluated, along with those on the wider board. Typically called the “white noise” of the board this non-value creating work saps productivity, frustrates participants and wastes time.
As part of the online survey all participants should confidentially rate every area of the director’s and the board’s performance, and also raise any development needs.
It’s experienced board reviewers who have a stable of tailored and generic questions that allow a balance of survey tailoring and customisation, according to the goals of the review.
Surveys on their own are not enough. Interviews must be carried out post surveys to put flesh on the bones of what has been fed back, and provide a psychologically safe and confidential opportunity for issues that could not be effectively covered in online surveys to be explored. It’s an approach that delivers considerable value and quality assurance. However, interviews need to be managed by a trusted interviewer who is experienced in board dynamics and effectiveness.
While it is time consuming to gather data in this way, it’s the best approach to acquire a comprehensive collection of qualitative and quantitative data to deliver a 360-degree performance review. The board can then move beyond specifically assessing performance against key performance indicators, to evaluating behaviours and ways of working.
It also provides an opportunity for an objective review of achievements, behaviours, development needs and deliverables, which helps to power the performance of those on the board. Additionally, by taking this approach, you lessen the risk of an emotional, personality direct assessment, by infusing rationality and objectivity.
Any evaluation must be candid, impartial and strictly confidential with the “psychological safety” of the director paramount. This can result in confidential and sensitive issues being identified as part of the review. Information such as this needs to be carefully considered when it comes to determining the insight to make public at the reporting stage. It’s essential confidentiality is respected.
It is important to note that while some boards propose a board meeting observation as part of their review process, this significant investment in time and expense is of questionable value when the attendance of an observer will often alter the behaviour of the board.
Stage Two: Reporting
Once the data gathering is complete it’s time to present the findings to the board. Such a report will identify any divergence between the directors and the person being evaluated regarding their performance, as well the board as a whole with their performance in meeting their boarder objectives. This enables the board to spot strengths and opportunities to improve performance and personal development.
This report brings clarity on deliverables moving forward, which could include training to aid upskilling, for example, or additional mentoring. It’s an approach that ensures both the director and the board are aligned with the company values and strategy.
Reporting in this way ensures that there is no ambiguity and confusion over the roles of directors, which can have a damaging impact on board effectiveness and decision making. Instead, directors will have clarity on what their role entails and the value they need to bring to the board, which is critical in today’s volatile world.
Stage 3: Follow-Ups & Accountability
Accountability is where the review process commonly goes wrong, because too many boards implement a review then don’t have follow-ups.
Regular “pulse checks” based on the feedback from the assessment must be undertaken throughout the year by the chairman and the board to guarantee progress and a strong performance, whether this is for an individual or the board as a whole. Waiting to have a formal review twelve months later is not conducive for an effective board.
As well as help the board to clarify how to better support a director to improve their performance, an assessment may encourage them to replace the individual with a new director. This may be the best way to ensure the board has the best person in place to assist them in driving long term business success, and that the organisation effectively delivers on the business strategy. It’s why there has to be a succession plan in place for such an eventuality.
An effective review is a vital part of the selection lifecycle of a board member, which includes succession planning, appointment, induction, review, development and a successfully planned exit.
Independence And Credibility Of The Assessor
It’s often assumed by directors that the company secretary or the chief counsel are well placed to lead the review process, because of their superlative legal and governance knowledge. However, they often lack the depth of insight into the dynamics and culture on the board.
Very few professionals really understand the construct of the board, let alone how to spot opportunities to improve board effectiveness. Careful research is therefore required to source an assessor suitably qualified and experienced for the task. Doing so ensures whoever undertakes a review of the board or a director is trusted and respected.
For optimum results with board and director reviews it’s vital that those undertaking them are independent and impartial, and not conflicted by recruitment or other consultancy roles with the board. There must be no agenda or the evaluation process won’t be objective or of value, and the performance of the board will not be optimised.
The best solution is to bring in a highly experienced, independent third party assessor with a strong track record in effectively reviewing directors and boards, to ensure a valuable evaluation process that drives board performance.
Undertaking reviews that power the performance of the board, and individual directors, is a very important part of the governance process. The way forward is not a hasty review of KPIs and past performance to tick a governance box.
The entire process demands a long term commitment by the board to deliver thorough qualitative and quantitative data gathering, an effective reporting process and regular follow-ups, along with appropriate support. These should ideally be led by a highly experienced, independent third party in implementing such reviews. It’s an approach that will optimise individual director and overall board performance, which will help to ensure long term business success in these challenging times.
About the Author - John Harte is the Managing Partner at Integrity Governance and leads a global team that is focused on making boards more effective. A boardroom expert working with multinationals and SME’s, he provides practical, impartial advice to directors, business owners and CEO’s to help improve performance. He is a regular speaker and thought leader on board effectiveness, practical governance and business disruption. John grew up in a family business and his extended family run fifth generation businesses and he has also served as a board member, chairman and adviser to many family firms. He also worked within Mars, a globally recognised family business for the best part of a decade.