Board self-evaluations are of interest to more than just the board directors. Investors, stakeholders and regulators are also looking for assurance that boards are committed to enhancing their own effectiveness. Board self-evaluations help to shape governance principles. Most recently, some of the topics that boards should focus on include high-profile examples of board oversight failures, board evaluation requirements in the United States and in other countries, quality board compositions that factor in gender inclusion and diversity, and the capability of the entire board to address uncertainties, risks and opportunities in the current, highly complex environment.
Planning for an Effective Board Self-Evaluation Process
The first step in planning for an effective board self-evaluation process is for the board to discuss and come to a consensus on the particular goals and objectives that will adequately demonstrate that they’re performing at top capacity or will clearly reveal their deficits so they can formulate a plan for improvement. Boards should take note that the self-evaluation process is more than just a means of assessing whether they’ve collectively and individually met their duties and responsibilities. By contrast, the evaluation process should be rigorous enough to test the board’s composition, dynamics, structure and operations.
The second step in planning for board self-evaluations is to decide who will lead the process, what they will evaluate, how they will conduct the process and how they plan to share the results.
Determining the Lead on Board Self-Evaluations
The lead group or person in charge of conducting the board self-evaluation process has a strong bearing on the results of the process. Many boards charge their nominating and governance committees with the responsibility for identifying and evaluating board self-evaluation samples. The board chair may also be involved in the process of selecting questions to appear on the self-evaluation and customizing self-evaluation samples so that they get the most useful results.
The BoardEffect board management system has a helpful survey feature that boards can easily use for their self-evaluations. The evaluation committee can change the formatting for the questions and answers. Completed surveys can be stored electronically on the system and be used as self-evaluation samples for the future. Using BoardEffect’s survey tool allows many boards to complete the survey process without needing to hire or enlist the help of an independent third party that comes with a high price tag.
Deciding Who to Evaluate
Boards should consider various factors when deciding who to evaluate. Public companies that are listed on the New York Stock Exchange are required to conduct board and committee evaluations and to disclose the results. Governance that guides public companies often becomes best practices for all other organizations.
In addition to doing board and committee evaluations, some boards find it useful to periodically conduct individual board director self-evaluations or peer evaluations.
How to Prioritize Topics for Evaluation
With so many topics up for consideration, how do boards narrow the list of topics for evaluation? The first place to start is with an analysis of the board and committee minutes and associated materials. The board’s main governance documents, such as their committee charters, board director job descriptions, and the organization’s policies including the code of conduct and code of ethics, are also good places to start. Other big topics for consideration include board dynamics, strategy, risk management, financial performance, operations, oversight and organizational culture.
Taking a Focused Approach to Evaluation Questions
Boards have the option of using survey questions or doing director interviews, or both. In deciding what questions to ask, it’s important that boards not ask questions to which they already know the answer. It’s not helpful or efficient to ask a board director whether they attended all board meetings or whether they fulfilled their duty to serve on a board committee because you already have that information. Cut to the chase and ask direct questions about board and director performance. Write questions with the end goal in mind. Ultimately, you want high-quality, valuable and practical feedback.
Consider the Value of Individual Director Interviews
Survey questions reveal a lot. When surveys are combined with interviews, as conducted by a skilled interviewer, the result is usually more detailed, sensitive and candid. Answers that board directors give during interviews help to clarify and explain answers that are difficult to answer according to a “yes” or “no” or that provide a rating scale. Interviewers should be well-versed on the company, highly trusted and skilled at asking probing questions and building on them to get at the true intent of the director being interviewed.
Peer Evaluations and Individual Director Evaluations
Some companies are increasingly finding peer evaluations to be quite valuable. Peer evaluations are informative tools that can set the stage to improve director skills and performance and promote authenticity among board directors. Board directors should go into peer evaluations with the mindset that it’s an opportunity to get coaching and guidance from their peers.
The benefit of individual director evaluations is that they motivate and inspire board directors to think about their own performances, causing them to strive for better individual performance.
Wrapping Up the Board Self-Evaluation Process: Disclosing the Results
There are no self-evaluation samples that guide boards on how to present the results of the evaluation or how to disclose them. Nevertheless, remember that the focus of the evaluations is on the effectiveness of boards. Most importantly, consider the types of actions the board can implement to improve effectiveness. How can the board improve the board orientation process? How should the board change its composition to serve the organization more effectively? Will the answer to this question require changes in the director search and recruitment practices? How can the board give more time to big issues like strategy or risk management?
Boards can also choose their own way of reporting results and recommendations. Graphics are always a good way to present results. A simple summary of the results is also acceptable.
The New Hampshire Center for Nonprofits developed an online Board Self-Assessment Questionnaire that is objective and easy to use. You’ll find many more self-evaluation samples and templates online or from various organizations. It matters less which one you use than just getting started.