Three critical questions you should ask about your board evaluation: you should know what it is you are aiming for before embarking on an evaluation process.

Author:Gwin, Bonnie W.
Position:HEIDR1CK & STRUGGLES GOVERNANCE LETTER
 
FREE EXCERPT

According to the National Association of Corporate Directors' 2011 Governance Survey, more than 90 percent of boards conduct full board evaluations and almost 83 percent conduct committee evaluations. However, the same survey says that less than half of boards evaluate individual directors and only slightly over 10 percent have management evaluate board members as part of a 360-degree review. Further, less than 20 percent of boards use an objective third party to help conduct board assessments.

Boards that lack a robust evaluation process are unable to help directors improve their performance individually and collectively and to address poorly performing directors. In fact, the 2011 Board of Directors Survey (sponsored by Heidrick & Struggles and Women-Corporate Directors, and conducted by Dr. Boris Groysberg of Harvard Business School and researcher Deborah Bell) found that over one-third of U.S. directors think their boards don't know how to deal effectively with poor performers, a potentially disastrous situation for a board and a company.

The lack of fully comprehensive and objective assessments suggests that many boards may be more interested in checking the box that says "Yes, we conducted an evaluation" rather than in answering what we believe are three critical questions they should be asking about board assessments: What kind of board do we aspire to be? How can we control for natural biases? Do we have the courage to act?

Depending on how you answer these questions, you could take your board assessment process to the next level and, ultimately, to the very highest level to become the best performing board possible.

What kind of board do we aspire to be?

There is of course no shortage of advice about how to conduct better assessments: what questions to ask about board composition, agendas, meeting mechanics; what self-assessment questions to consider; and how to conduct interviews with individual directors. But there is a much more important consideration prior to the question of how: Why conduct the assessment?

Are you doing it merely to satisfy requirements like that of the New York Stock Exchange that listed companies assess the performance of their boards annually? Are you doing it with the laudable but vague hope of improvement--better meetings or perhaps inspiring greater contributions by individual directors? Or are you doing it to determine precisely where the board stands in terms of its performance as a board and what specifically you need to do to improve that performance if you're not satisfied?

Best practice today is not merely to start with a generic list of questions or constructing a basic evaluation process, but to first determine the board's aspiration as a group. For example, some boards may find that they are satisfied with assessing compliance and tinkering with board mechanics. Others may aim higher. But in any case, you...

To continue reading

FREE SIGN UP