The best performing boards are the ones that focus on constant improvement and continuous learning.
But boards need to be aware of their own strengths and weaknesses in order to govern effectively. That’s why it’s key for boards to self-evaluate in a variety of areas to determine where changes need to be made in order to improve board performance.
In this post, we’ll provide an overview of the most common methods used for board evaluation, explore the factors that affect board performance, and share best practices.
Before you can improve, you must first evaluate your current board performance. Here are a few methods that you can use.
Some boards choose peer assessments and individual board performance reviews. Some boards conduct evaluations through surveys, and others may choose to hire a third party to conduct formal interviews. Whatever method you choose, remember that, when done properly, a board performance assessment is not a report card for the board or for individual directors. It is, as leadership consultants at Spencer Stuart highlight, a tool for continuous improvement and learning.
Whatever method and factors you choose to evaluate, consider Spencer Stuart’s key principles for deriving the highest value from a board assessment:
Finally, remember that the evaluation process should be repeated regularly, and at least annually, to be most successful.
According to research, there are four factors that affect board performance. These factors are:
Let’s dive into each of these elements in more detail to see how to improve board performance.
Possibly the most important element of improving board performance is making sure that both the board and management team understand their respective roles. The relationship between the executive team and the board is crucial for organizational success, and without clear roles, the relationship can flounder. That’s why it’s critical to open the lines of communication and agree upon clear role expectations.
Problems may also occur when boards are too involved in operations and not enough in strategy. According to research by McKinsey, organizations that involve their boards in more strategic dialogue have increased board effectiveness.
In addition to monitoring how decisions align with the organization’s strategic direction and legal compliance, boards should also be involved in creating an organization’s mission, providing fiscal oversight, CEO selection and evaluation, and self-management. Boards need to be constantly looking towards the future and identifying key performance indicators (KPIs) in partnership with the management team.
The structure of the board involves board size, the number of formal positions that exist, and the number and purpose of committees. Procedures, on the other hand, are the rules or guidelines around board member terms, board meeting attendance, frequency of board meetings, format of agendas, onboarding, and director performance evaluations.
Although there is no “one size fits all” solution, there are some general best practices. With clearly defined roles, individual directors can be made accountable and are more likely to come to meetings well prepared. Boards tend to work best with no more than 15-16 members and minimal formal positions. Sometimes, compulsory attendance at meetings encourages director engagement, and sometimes it just masks other problems. Meetings longer than 3 hours tend to be too long, but meetings that only last 30 minutes are generally too short.
Having a system for training, development, and evaluation is also a best practice. When new members join the board, make sure that they have access to all background information. Each year, assess each board member’s performance with formal surveys or another form of evaluation process.
Routinely evaluating the composition of the board, not just the performance of the directors, is important to ensure that the skills and experiences of directors meets the shifting needs of the organization.
Diversity is a hot topic when it comes to board composition. However, there’s only mixed evidence linking diversity to board performance. That’s why it’s important to consider diversity beyond ethnicity, gender, and age. When recruiting new board members, acknowledge the importance of professional diversity, commitment to the organization’s mission, and broad skill sets.
Skill set inventories and assessments can be helpful to define what each board member provides and where gaps exist. Behavioural competencies such as managing conflict, problem-solving, effective listening, and diplomacy should also be considered, as these qualities will influence the relationships around the board table – both between directors and with management.
Board culture can have an enormous effect on how a board operates. Board culture defines the formality of board meetings, as well as the board’s openness to change, acceptance of diversity, commitment to taking action, and convictions on roles and responsibilities.
Board culture is determined by the board’s leadership, which is usually the board chair and CEO. The board chair affects the content of board agendas and influences the strategic leaning of the board. The chair also facilitates board meetings, and his or her abilities have a huge impact on the involvement of introverted directors, keeping meetings on track, and inspiring commitment. The CEO, on the other hand, has a big influence on whether the board can play a strategic role for the organization or not, as they control access to information.
Your board portal software can support performance evaluations for individual directors and for boards as a whole through online confidential surveys, where data is easily collected and summarized for interpretation. Given board information is archived in a board portal, the technology also supports a macro assessment of board performance over time.
In addition, board management software like Aprio provides a platform to track and oversee board processes, which many board members struggle with. For example, you can use Aprio to easily assign responsibilities and track completion of tasks, which helps to keep board members accountable and board leaders organized during and after a board evaluation, as well as during the course of regular board duties.
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