The board of directors in any organization holds many important roles and responsibilities. The board’s strategic, advisory and supervisory tasks carry significant responsibility for the direction, oversight and long-term success of an organization. They approve strategies, oversee risks and performance, advise and challenge management, make significant decisions and ultimately hold management accountable.
But how often does the board turn the lens on itself?
Regular board performance evaluation is an important part of good governance. Its purpose is not simply to confirm that the board meets, receives the necessary papers and fulfils its formal responsibilities. A meaningful evaluation looks at how well the board actually works and whether it adds the value the organization needs from it.
A meaningful evaluation looks at how well the board actually works and whether it adds the value the organization needs from it.
An effective board evaluation should examine both structures and behaviors. The following are some of the issues to consider:
- Are the board’s composition and competencies appropriate for the organization’s current strategy and challenges?
- Are diversity, equity and inclusion in balance in the board?
- Is the board work well planned and structured?
- Are roles and responsibilities between the board, chair and management sufficiently clear?
- Does the board receive the right information, in the right form and at the right time to make informed decisions?
- Are there processes in place for reporting suspicion of misuse or irregularities?
The evaluation should also look at what happens around the board table.
- Is enough time devoted to strategic issues, or are meetings dominated by operational reporting?
- Does the leadership of the board chair support the board work?
- Is there genuine discussion and constructive challenge?
- Are different perspectives heard?
- Does the board ask difficult questions while maintaining a relationship with management based on trust and respect?
- Does the board follow up on its decisions and hold itself and management accountable?
These questions go considerably further than whether governance structures exist on paper. They help establish whether governance works in practice.
Board effectiveness should also be assessed against the environment in which the organization operates today.
Board effectiveness should also be assessed against the environment in which the organization operates today. A board that was well equipped for the organization’s needs five years ago may not necessarily be equally well equipped now.
AI is a good example. AI increasingly affects strategy, operations, information management, risk, workforce planning and decision-making. Board evaluation therefore provides a useful opportunity to examine whether the board has sufficient understanding to govern the organization’s use of AI.
This does not mean that every director needs to become an AI expert. It does mean that the board should be capable of asking the right questions. Does it understand where and how AI is being used? Are responsibilities and decision-making authority clear? Does it receive sufficient information about opportunities and risks? Are appropriate safeguards and human oversight in place? And is AI being considered as part of the organization’s wider strategy, risk management and governance rather than as an isolated technology project?
Board competencies and practices need to evolve alongside the organization they govern.
The same principle applies to other significant changes in the organization’s operating environment. Board competencies and practices need to evolve alongside the organization they govern.
An assessment may identify that the board needs deeper expertise in a particular area, better information from management or more time for strategic discussion. It may reveal unclear boundaries between board and management responsibilities, ineffective meeting practices or a tendency to revisit decisions without resolving them. It may show that succession planning needs attention or that the board would benefit from greater diversity of experience and perspective.
These findings should not disappear into an evaluation report.
A useful evaluation concludes with a small number of concrete development priorities.
A useful evaluation concludes with a small number of concrete development priorities. Responsibilities should be assigned, progress followed and agreed improvements incorporated into the board’s annual work. Some changes may be simple, such as redesigning board papers or restructuring meeting agendas. Others may require board training, changes in composition, clearer delegations of authority or a more fundamental discussion about the relationship between the board and management.
The next evaluation should then be able to ask not only what needs improvement, but what has improved since the last one.
Boards can and should reflect on their own performance regularly. Self-assessments, discussions led by the chair and feedback between directors can all contribute to continuous development.
Periodic external evaluation adds another dimension. An independent evaluator can challenge established practices, identify issues that may be difficult to raise internally, compare formal governance arrangements with how they work in practice and bring experience from other organizations. Combining regular internal reflection with periodic independent evaluation can therefore provide a particularly useful picture of board effectiveness.
Regular board evaluation also sends a wider message. A board that is willing to examine its own performance demonstrates that accountability applies at the top of the organization as well.
Communicating that board performance is regularly evaluated can strengthen confidence towards the organization.
Organizations do not necessarily need to publish detailed findings. But communicating that board performance is regularly evaluated, and that the board acts on the results, can strengthen confidence among shareholders, members, employees, partners and other stakeholders.
Good governance is not achieved simply by having the right structures in place. It requires those structures and the people operating within them to remain effective as the organization and its environment evolve. Regular evaluation of what works and what doesn’t is necessary.
LeadMWell can assist you in board evaluations to ensure that your board is performing its duties in the best possible way providing most value to your organization.