News stories in the media about poor leadership and a toxic culture at well-known organisations are becoming increasingly commonplace. Some standout more than others due to the nature of the allegations.
Today’s volatile, competitive world has little tolerance for the impact of ineffective boards and the resultant poor board performance. The negative impacts of an ineffective board on reputation, employees, customers and the value of the company in the mind of wider stakeholders has spread beyond the boardroom.
A significant contributing factor to a substandard board is the absence of an effective board review process. Assessments of their boards and individual directors is good governance practice but this critical process needs to be approached in a professional and serious way that addresses the context of the board, the organisation and the sector.
Too many directors view the evaluation of the board and directors as a “tick box” exercise, and yet another task to strike off from the governance to do list. This “quick fix” approach, rather than a long term journey of performance improvement, will not drive board effectiveness – something which is even more important in today’s challenging business climate.
What Does A Good Board Evaluation Look Like?
A good board evaluation considers the role clarity, composition, processes, culture, behaviours and dynamics of the board. Ideally, it should be carried out by a suitably qualified external consultant every three years with the intervening years providing an opportunity to track progress.
To be objective and of value those that lead the review process should be independent and impartial. If the evaluation is led by a serving member of the board, someone conflicted by recruitment interests, or with a perceived agenda of selling consultancy or training services, there is a risk that they will bring their own agenda and beliefs. This risks the board hearing what they “want to hear” not what they “need to hear” and the assessment may not add as much value or be credible, perpetuating a poor board performance.
The independent assessor who’s selected needs to be qualified and experienced in understanding the construct of the board, the dynamics of the board and how to spot opportunities to improve its effectiveness. Importantly, it will ensure that the person who evaluates the board or a director is credible and therefore trusted and respected.
Effectively implemented board reviews are about far more than compliance. They provide the opportunity for reflection, assessment and questioning of whether the board and its performance are fit for purpose. An experienced third-party assessor understands this and helps to deliver a culture which is performance focused, and supplies data to support improvements in their performance, enabling them to refine their approach.
The starting point for a good board review is to have clarity about the objectives. Then the board needs to decide who is going to be assessed (board, individual directors, committees, chairs), and what will be assessed, and who will contribute to the evaluation (e.g. board, executives, shareholders?).
Stage One: Gather Data
The first stage of data gathering is to review documents to analyse the way the board works, to gain a better understanding of the history of the board and assess how the board has handled decision making, board processes and recommendations from previous evaluations.
The next step is to create and forward online surveys to all participants in the evaluation. These will be tailored by the independent reviewer, reflecting what is being assessed, the purpose and strategic objectives of the business, and the behaviours, skills, knowledge and impact of the board. It’s important to point out that too many board reviews consist solely of a survey delivered over a board portal or on a survey platform. These “tick and flick” exercises provide data but no clarity about the reasons for the results.
Surveys provide detail on how participants have answered questions, but interviews are a critical quality control to gain insight into “why” participants have a particular view and to discuss board performance and development opportunities that are poorly communicated in a survey. The critical element of an interview by a suitably qualified, independent interviewer with relevant board experience to add “flesh on the bones” of the survey and gain insight on the reasons behind a particular response is a crucial part of effective board reviews. The best approach is to obtain a comprehensive collection of qualitative and quantitative data to deliver a 360-degree performance review. Importantly, it also enables the board to evaluate behaviours, dynamics and ways of working, and move beyond specifically assessing performance against key performance indicators.
Stage Two: Present Findings To The Board
Once the survey and interviews are complete the report produced will identify any divergence between the director’s views on the board’s performance and in meeting their broader objectives. This way the board can spot strengths and opportunities to enhance performance and personal development. Crucially, the report will ensure that there is no ambiguity and confusion over the roles of directors, which can have a negative impact on board effectiveness and decision making.
An independent, third-party expert with a good, consistent process of data gathering and reporting can add significant value to board evaluations. Too many internal board evaluations lack the discipline of a board workshop and a written report.
Stage Three: Follow-Up And Implement The Required Changes
The most common failure in a board evaluation is the lack of follow up with the actions to improve performance. Post review, credible actions with clear ownership should be regularly revisited to monitor progress and a strong performance, whether this is for an individual or the entire board. If these don’t happen the work of the assessor and the board will have been in vain.
In these volatile times it’s vital to source an experienced, independent third-party assessor to manage the entire board review process and help deliver an effective, high performing board that avoids the pitfalls that poor leadership can bring.
About the author - John Harte is the Managing Partner at Integrity Governance where he 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.