Peer evaluation: take the plunge; Yes, it's sensitive, but the practice can provide great value to individual directors and the board as a whole.

• Author: Muschewske, Robert C.
• Position: Boards performance evaluation

ALTHOUGH THE PRACTICE can take a variety of forms, most boards are adhering to NYSE guidelines and are conducting an annual performance evaluation of the overall effectiveness of the board. Few, however, are venturing into the highly sensitive area of peer evaluation. Those that take the risk and do so in a thoughtful and constructive manner find that "seeing ourselves as others see us" can be a highly productive process.

It is often said that the higher one goes in an organization, the less direct performance-related feedback one receives. This is particularly true in the rarefied air of the boardroom, where direct feedback is seen as unnecessary or potentially destructive to the culture of collegiality.

Yes, it is true that most board members are highly capable individuals who are motivated to be as effective as they can be in exercising their fiduciary responsibilities. Nevertheless, there are some board members who have served past their time and should retire, and there are some otherwise capable board members whose stellar performance is marred by a few small things that interfere with their overall effectiveness. On the other side of the coin, there are highly regarded board members who need to be encouraged to play an even stronger role in board deliberations.

A peer evaluation process can take many forms. At one end of the continuum, a process may simply involve a discussion of board members by the nominating and governance committee. At the other end of the continuum is a process that asks each director to evaluate in writing the performance and contributions of each peer.

Whatever form the process takes, it is absolutely essential that at the beginning all board members understand who will see the results. Some boards choose to use an outside third party to compile summaries of the results for each board member "for their eyes only." Other boards have determined that in the spirit of the times, maximum value can be achieved with a transparent process involving full disclosure of the results to all board members.

Some boards choose to develop elaborate questionnaires. Although such forms can ensure that all relevant aspects of performance are considered, the process of completing a questionnaire for each individual board member can be burdensome.

Other boards have found that significant value can be gained by simply asking each member to respond to only two statements for each of their peers:

* I value the following contributions...