Such reviews are essential not only for compliance and meeting regulatory standards but also for ensuring that the board remains dynamic, responsive and aligned with the organisation’s long-term goals. This article will guide you through the foundational aspects of conducting a board performance review. We'll explore who should undertake the evaluation, what questions should be asked to collect meaningful insights and how the results can be utilised to enhance board performance.
Understanding the nuances of these evaluations will help your board not only meet but exceed expectations, driving your organisation towards sustained success. Whether you are a seasoned director or a newly appointed board member, this guide will equip you with the knowledge and tools necessary to critically assess and improve your board's effectiveness.
What is a board performance review?
A board performance review is a formal evaluation process aimed at assessing the effectiveness and efficiency of a board of directors. This review is critical in ensuring that the board is functioning optimally and fulfilling its responsibilities to the stakeholders of an organisation.
How do you perform a board performance review?
Pick a process
Begin by selecting the most appropriate process for conducting your board evaluation. You can opt for self-created internal surveys, which are cost-effective and simple to set up. Keep in mind that they may not provide enough detail for a complete evaluation and might seem shallow. It is also hard to maintain anonymity and integrity of a fully internal process, which may lead to respondents not being fully transparent. This lack of transparency can result in incomplete or biased feedback, undermining the effectiveness of the evaluation. Alternatively, using digital evaluation tools like BoardClic can offer a more comprehensive and objective way of evaluating the board, providing benchmarking capabilities and a deeper analysis.
Appoint the leadership
The leadership of the online board evaluation process is crucial. According to the Organisation for Economic Co-operation and Development (OECD), the responsibility should fall to either the chair, the lead independent board, or a specific board committee, usually the nominating committee. The chosen leader should be capable of engaging directors fully and extracting valuable insights from the process.
Select the questions
The essence of a valuable evaluation lies in the questions asked. Focus on important issues like understanding board roles, meeting effectiveness, and board dynamics, and avoid asking trivial questions. Create questions that prompt detailed and useful responses instead of just yes or no replies.
Example questions:
How clearly do you understand the role of the board within our company?
How effective do you find the board meetings? Are they fulfilling their intended purposes?
Are board papers and necessary materials delivered in a timely manner to facilitate adequate preparation?
How would you describe the dynamics and interaction among board members during meetings?
How well do you understand the function and role of the various committees within the board?
Has the board effectively identified the skills it needs to address future challenges?
How well informed do you feel about the industry in which our company operates?
How would you assess the diversity of the board in terms of background, expertise and perspective?
How confident are you in the board’s crisis management plan and capabilities?
Does the board allocate sufficient time to discussing and managing risk?
Is there adequate time dedicated to discussing strategic directions and decisions?
How would you rate the strength of the relationship between the board and management?
How strong is the relationship between the board and the CEO?
How effective do you find the chair in leading the board?
How effectively does the chair foster an atmosphere of collaboration and trust?
How well does the chair manage dissent and differing opinions in the boardroom?
Compare with the industry and peers
To gauge the effectiveness of your board, compare your findings against industry benchmarks as well as your peers. This comparison can help you see how your board measures up to others in the same industry and among similar organisations.. You can use tools like Boardclic to get the data and insights you need.
Plan the evaluation
Thorough planning is essential for a successful evaluation. Carefully select the questions and the sequence of the evaluation to maximise the usefulness of the information gathered. Decide who will collect and analyse the data, and how to utilise the results.
Who evaluates and how?
Consider the various methods of evaluation: self-evaluation, peer evaluation and external evaluation. Each has its strengths and can contribute different perspectives to the overall analysis. It is important to establish trust and transparency when using peer evaluations. This helps prevent conflicts and enhances the honesty of feedback.
Trust and transparency are key factors in improving the effectiveness of peer evaluations. Creating a positive environment is essential for receiving honest feedback from peers.
Prioritise which topics you would like to cover
Align the evaluation topics with the interests and concerns of shareholders and other stakeholders. Key areas might include ESG factors, board composition and board dynamics. Focusing on the most relevant topics that impact the board’s effectiveness and strategic direction is crucial.
Analyse evaluation results
Analyse the data from the evaluation to deeply understand the board’s strengths and areas for improvement. This critical step is essential for translating raw data into actionable insights.
The follow-up
Based on the analysed data, develop an action plan to address identified challenges and leverage opportunities to enhance board performance. This plan should outline specific steps to be taken to implement changes effectively.
Put changes into action and evaluate results
Once the action plan is in place, implement the changes and continuously monitor their impact. This ongoing evaluation will help ensure that the board remains effective and adapts to new challenges and opportunities.
This structured approach not only streamlines the process but also ensures that the board performance review is comprehensive, allowing for strategic improvements and more effective governance.
Our take
By using the above steps as a guide, boards can proactively address issues and capitalise on opportunities to improve their performance. The action plan serves as a roadmap for making necessary changes, while ongoing monitoring allows for adjustments to be made as needed.
This approach not only enhances board effectiveness but also fosters a culture of continuous improvement within the organisation. Ultimately, a well-executed board performance review can lead to better decision-making, increased accountability and overall success for the organisation.
Get ahead of the competition with BoardClic's Board Evaluation. Our platform allows you to evaluate your board's performance, effectiveness, alignment, and composition over time.
Pinpoint your board's key challenges, transform these into actionable strategies and benchmark your results against our comprehensive data sets to advance your board's performance.
FAQ
What is a board performance review?
A board performance review is a systematic evaluation process used to assess the effectiveness and efficiency of a board of directors. This review focuses on various aspects such as governance, strategic oversight, fiduciary responsibilities and the board's overall contribution to the organisation. The goal is to identify strengths and areas for improvement, ensuring that the board remains aligned with the organisation’s goals and governance best practices.
Who reviews the performance of the board of directors?
The performance of the board of directors is typically reviewed by a combination of internal and external evaluators to maintain objectivity and thoroughness. This can include:
Self-assessment by the board members themselves, which helps in reflecting on personal and collective performance.
Peer evaluations among board members, which provide insights into the dynamics and contributions of individual board members from the perspectives of their colleagues.
External consultants or independent third parties, who can offer an unbiased view of the board’s effectiveness and compare it with industry benchmarks.
A dedicated board committee, often the governance committee or nominating committee, may also oversee the evaluation process to ensure it is conducted systematically and effectively.
These evaluations are crucial for continuous improvement and ensuring the board’s actions are in the best interest of the stakeholders.
By utilising Boardclic, you can elevate your board’s performance with comprehensive assessments that evaluate effectiveness, alignment and composition over time. This process provides actionable insights to tackle key challenges and allows you to benchmark your results against over 2000 board reviews conducted on the BoardClic platform, ensuring you elevate performance of the board.
Try our demo
Experience our platform in action with a demo version of BoardClic Board Evaluation
Blog
4 July 2024
Optimise board composition effortlessly with BoardClic’s Competency Matrix
In the fast-changing world of corporate governance, ensuring your board has the right mix of skills and competencies is crucial for sustained success.
Blog
27 June 2024
Recent updates of BoardClic’s Question Format Editor
At the beginning of the year, we introduced BoardClic’s Question Format Editor to help you, as a BoardClic user, customise your evaluation questionnaires to better suit your unique needs. We are pleased to see that the functionality has been widely used. Based on user data and your valuable feedback, we are now introducing five new features within our Question Format Editor.
Blog
27 June 2024