How to run secure & effective board evaluations

There’s no question that board evaluations are an important step to ensure that boards are functioning effectively. For publicly trading companies, such evaluations may even be required. However, leading effective board evaluations can often be tricky, and many boards struggle to keep pace with best practices.

In this post, we’ll walk you through the basics and highlight some suggestions and tools that you can use to run more secure and effective board evaluations.

What is a board evaluation?

According to the Harvard Business Review, the purpose of board evaluations is to ensure that boards are staffed and led appropriately, that board members are effective in fulfilling their obligations, and that reliable processes are in place to satisfy important oversight requirements. 

It’s best practice to ensure that board evaluations are done annually so that you can track progress over time. When your board is committed to continuous improvement, you’re more likely to see positive changes. 

In addition to their board and committee evaluations, many boards have started to expand their evaluation process to include director self- and peer evaluations. According to EY, in 2019, 39% of observed Fortune 100 companies disclosed details about director self- and peer evaluations, up from only 24% in 2018. Interestingly, being asked introspective questions about their own performance and board contributions can lead directors to strive harder in their duties. Peer evaluations can also be incredibly useful to individual directors, and can help to promote more authentic board collaboration.

How to conduct an effective board evaluation

While board evaluation methods can vary widely, there are some important considerations that your board should keep in mind. It’s important to determine who will lead the evaluation, what will be evaluated, and how the evaluation process will be conducted and communicated. Let’s dive a little deeper into each of these topics.

1. Decide who should lead the board evaluation

Board evaluations can either be led internally, usually by the board chair or corporate governance committee, or with the help of a third-party expert. It’s also possible to run your board evaluation internally most years, but periodically use a third party. In 2019, 27% of Fortune 100 companies disclosed that they used third-party facilitators to help with the evaluation process every two to three years.

2. Determine your board evaluation goals

Before kicking off your evaluation process, determine what you want your board evaluation to achieve. According to the Harvard Law School Forum on Corporate Governance, you should consider testing whether your board’s composition, dynamics, operations, and structure are effective for your organization and its environment, both in the short and long term. At the end of the day, every board will have different evaluation goals, but the key is to compare your board, committee, and director performance against your agreed-upon goals and requirements.

3. Choose a board evaluation method 

Generally, boards use questionnaires or interviews, or both, to complete their evaluations. Interviews tend to elicit more valuable, detailed, sensitive, and candid director feedback compared to questionnaires, but they are more difficult to plan and execute. 

Using a combination of methods can be more effective to obtain a broad range of feedback, but involves the most planning. One popular strategy is to use one method every year, and to use both every second or third year.

If you’re planning on using interviews, consider who will conduct them. Make sure that your chosen interviewer is well-informed about your organization and board practices, and that they’re highly trusted (even if not well-known) by the interviewees.

4. Consider the security of your board evaluations 

No matter what method you choose to use for your board evaluations, you need to be sure that the platform is secure enough to protect your information. Some popular platforms include Survey Monkey, Typeform, Google Forms, Survey Gizmo, Client Heartbeat, and Survey Planet. However, these platforms may lack the robust security that’s needed to safeguard your confidential board data.

For example, in 2018, Typeform disclosed that they’d been victim of a cyberattack. The cybercriminals were able to download a partial backup of Typeform’s customer database. This meant that each of Typeform’s customers could have up to tens of thousands of their own clients affected too, which amplified the effects of the breach. Typeform’s customers had to notify all of their customers of the breach, and one of Typeform’s large customers, a digital bank called Monzo, reported that 20,000 of its clients were affected.

By the same token, be wary of circulating your board information or board evaluation results via email. Personal email platforms, like the above tools, also lack sophisticated security measures and are prone to phishing attacks.

So what kind of platform should you be using to conduct secure board evaluations? Consider purpose-made board management software. This kind of software allows you to send and complete secure board surveys directly from the secure portal. There’s even the option to keep responses anonymous, track results, and archive past surveys directly in the portal itself.

5. Analyze your board evaluation results

Once you’ve completed your board evaluation, it’s time to analyze your results. Track your progress year-over-year and watch for trends. After you’ve completed your analysis, have your board discuss and agree on action items to address your findings. Then, make sure the board is held accountable for implementing and ensuring the completion of the agreed-upon action items.

In this stage, don’t spend too long in your analysis. Board performance is enhanced when feedback and results are delivered and communicated promptly.

Key takeaways

There’s a lot to consider when conducting thorough board evaluations. However, whichever path you choose to take, consider these four key best practices from Governance Professionals of Canada:

1. Establish the participation of all individual directors to ensure a shared understanding and acceptance of the benefits of the board evaluation.
2. Build a well thought-out, systematic process to create an effective board evaluation timeline.
3. Carefully select board evaluation instruments to ensure that resulting information is valid, efficient, secure, and accurate.
4. Ensure a thorough follow-up to confirm that areas of concern have been addressed and board evaluation information has reached the right people.

Questions to ask in your board evaluations 

Now that you know how to conduct a board evaluation, what kind of questions should you be asking your directors in your survey or interviews?

While there are endless possibilities here, the key thing to remember is that you want to seek feedback on board composition, performance, dynamics, operations, and structure. 

Relevant topics might include, but are not limited to:

• Analysis of board and committee minutes and meeting materials
• Board governance documents, such as corporate governance guidelines, committee charters, director qualification standards, organizational codes of conduct, and ethics
• Organizational culture, performance, business environment conditions, and strategy
• Investor and stakeholder engagement on board composition, performance, and oversight
• Strategy, risk, and financial performance
• Board composition and structure
• Organizational integrity, reputation, and culture
• Management performance and succession planning

As suggested by the Harvard Law School Forum on Corporate Governance, it’s best for questions to focus on agreed-upon board goals, objectives, and requirements, as well as director qualifications. For example, in a board that lacks a succession plan, you need not ask in your questionnaire whether the board has a director succession plan, because the directors already know the answer. A better approach would be to ask directors what factors or events distracted or prevented the board from discussing and implementing a plan for director succession.

Example questions to ask in your board evaluation

In your board evaluation survey, you can ask questions formatted in a way that directors choose the answer(s) that best express their perspective. For example:

1. Board meeting are conducted in a manner which ensures:
   • Open communication
   • Meaningful discussion
   • Timely resolution of issues
   • Independence from management
   • None of the above
2. Board meetings are appropriate in terms of:
   • Number 
   • Length of presentations
   • Time available for discussion
   • Content
   • None of the above
3. Pre-meeting material is appropriate and is:
   • Useful
   • Timely
   • In an efficient format
   • In the right amount of detail
   • None of the above

You may also choose to include open-ended questions in your survey or your interview. Some examples might include:

1. Do the board agendas include adequate representation of the organization’s strategic plans and priorities?
2. How satisfied are you with the planning of the board’s agendas to address ordinary items and new business items?
3. How satisfied are you with the director’s level of preparedness for board meetings?
4. How supportive is the board in receiving differing perspectives of board members?
5. To what extent do you agree with the following statement: the board needs to reassess or make improvements to the orientation process.
6. Do you agree/disagree that the board has a clear distinction between the role of the board and the board chair?
7. Does the process for evaluating the board chair need improvement? Why?

Example questions to ask in your director self-evaluations

A good way to run self- and peer director evaluations is to rate different statements on a scale from 1 to 10, with 1 meaning “poor” and 10 meaning “excellent.” For example:

Director accountability

1. Demonstrates diligence and prudence in exercising duties as a board member
2. Is prepared for meetings
3. Complies with the organization’s code of conduct
4. Seeks opportunities to increase knowledge

Director function

1. Understands the key measures and metrics for assessing organizational success
2. Understands and respects the role of the CEO
3. Understands and respects the role of other board members
4. Contributes meaningfully and knowledgeably to board discussions and provides valuable input

Fiduciary stewardship

1. Demonstrates an understanding of the key financial metrics of the organization
2. Considers fiduciary stewardship responsibilities in discussions and decision-making

You might also combine these kinds of questions in your survey with some open-ended questions, such as:

1. Do you have any comments or suggestions on how the organization can be run more effectively? 
2. How have your job duties changed during the past year? 
3. What are your expectations for this job during the next year? Are there any areas in which you see a need for improvement? Are there any ways you would like your job to be restructured to better suit your needs or goals? 
4. Comment on the board’s effectiveness in providing guidance and giving feedback, and give suggestions for improvement. 
5. Is there any aspect of your job situation that could be changed to improve your job satisfaction or performance? 
   • Physical surroundings/equipment 
   • Board technology
   • Compensation and benefits
   • Training and development opportunities 
6. How likely are you to offer an opinion different from other board members?

Use board management software for your next board evaluation

Ready to encourage high standards of performance on your board? The Aprio board portal makes director self- and board evaluations easy, secure, and efficient. With Aprio’s survey tool, you can easily:

1. Select which of your board members will participate in your survey
2. Enable anonymous responses (or not)
3. Send out the survey, as well as reminders to complete it, to your board members securely
4. Review summary and source data results in Aprio or export them to Excel for analysis
5. Re-run past surveys with the copy and repeat feature, helping you to compare data year over year
6. View trends over time by storing your surveys in Aprio

What’s more, you can also use Aprio’s survey feature to evaluate your CEO’s performance or solicit quick board votes on meeting dates or other time-sensitive information.

Ready to learn more about how Aprio board portal software can help you run more secure and effective board evaluations? Book a demo today, or check out the top 10 things to assess when evaluating board management software.