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What is a board evaluation?
A board evaluation is when someone examines the workings of a board and its members along with its effectiveness, the quality of its decision making and strategy, and its relationship with the executive management.
In today’s volatile business and corporate world’s, carrying out a board evaluation is a good idea. You need to know if your board is firing on all cylinders.
Evaluations offer the CEO, the chair and the directors valuable insights and provoke discussions into how the board can be more effective.
This guide looks at the process of carrying out a board evaluation.
What is a board evaluation?
A board evaluation is when an evaluator from the outside examines the board along with its effectiveness, the quality of its decision making and strategy, and its relationship with executive management. It involves looking at the performance of each director and the various committees and how risks are managed, along with the various internal controls and financial reporting.
Such evaluations are conducted in phases, and these phases can be outlined as follows:
- Meetings between the chair and CEO
- Agreement on objectives
- Presentations to the board including joint presentations between the chairman and independent evaluators
- Detailed assessment and review of board papers over the last 12 months
- The completion of a questionnaire by board members along with individual interviews with each member
- An initial report and feedback meeting
- Presentation of the overall report and a presentation by the board evaluator including recommendations and follow up actions
- An annual evaluation cycle should then be established
Before conducting an evaluation, it is essential to clearly set out its purpose and design the structure.
Questions should be well thought through to achieve the objectives of the evaluation. Surveys and interviews can be employed.
Analysis of the data gathered during the evaluation process should help decision making going forward.
It would be helpful to have the expertise of an independent or external consultant in analysing this data.
Some of the information which should be under review are the job descriptions of the board, its mission, its recruitment practices, and how it executes plans.
To be most effective, a board evaluation should be objective, and the board should embrace its finding and recommendations.
What are the benefits of a board evaluation?
The benefits of an evaluation include reinforcing the board’s commitment to excellent corporate governance and improvement, developing a measurable plan for continuous improvement, and understanding current strengths and weaknesses.
Such evaluations are vital to ensure board effectiveness with improves corporate governance.
Board evaluations can also ensure good succession planning is in place and address any opportunities for improving diversity and compliance.
A successful board of directors adds a lot of value to an organisation and its stakeholders, and a board evaluation process can help ensure the board’s success.
To be most effective, a board evaluation should be objective, and the board should embrace its finding and recommendations.
Board members can sometimes complain that there is not enough time to discuss future strategy and value creation, while as much as 80% of the time at board meetings can be spent discussing past developments. A board evaluation offers an excellent window through which future changes may be addressed.
To sum up, a board evaluation should be a process that sets out clearly what the board wants to achieve in the future. It should set the tone and culture of the organisation going forward and establish expected behaviours.
Who carries out or conducts a board evaluation?
There are many providers of external board review and evaluations in the market, such as Board Excellence.
Before hiring an external board evaluation provider, ensure they have a strong track record in delivering external board evaluations.