Board directors are the strategic leaders in an organization. Because this role is crucial, they must regularly evaluate strategies to ensure they fulfill their duties and drive the organization toward its mission.
For corporate boards, nonprofit boards , hospital boards, and others, conducting an annual board assessment not only keeps the ship on course, it also proves critical to improving overall board effectiveness and accountability.
However, the assessment results are only as good as the quality of your evaluation process.
This article covers the following:
A thoughtful board assessment measures how well a board fulfills its responsibilities and meets certain standards or objectives. It also keeps the board’s long-term strategy in focus, identifies gaps in skills and functionality (a board skills matrix helps with this), and offers fresh insight into what’s working — and, more importantly, what’s not working.
Put simply, a board assessment tells you how you’re doing. Are you staffed appropriately? Are you leading effectively? Are you asking the right questions and offering constructive feedback? Are you organizing board meetings for maximum productivity and the honest exchange of ideas? Are you conducting business with transparency? Is everyone contributing, staying engaged, and working together to achieve common goals?
A board self-assessment requires more than simply checking the appropriate box on a board of directors questionnaire to meet regulatory requirements. It involves seeking information in a variety of ways to truly understand the board’s capabilities and preparedness to meet the challenges faced by public and private organizations. Most board member evaluations ask questions about:
Directors face mounting pressure from shareholders and regulators to demonstrate effectiveness. Board assessments examine composition, structure, and performance to reveal whether the board is competent.
As boards position themselves to work through new and old challenges, a thoughtful board evaluation helps members gain insight on how well the board and management team function together, improves alignment on key issues, and strengthens the overall effectiveness of the board’s policies and procedures.
Demonstrating a willingness to conduct a board assessment with transparency also shows a board’s strong commitment to fulfilling its governance responsibilities.
The New York Stock Exchange requires an annual board member self-evaluation for boards of all publicly traded corporations. Many influential investors also demand that public, private, and nonprofit organizations conduct a board assessment before investing.
When a board clarifies the individual and collective roles and responsibilities of its directors through an annual nonprofit board evaluation or public company board appraisal and performance process, it becomes more effective and:
Board evaluations vary and should be tailored to your board’s unique needs for the best results. Here’s a typical step-by-step procedure for conducting a board assessment.
The first step is to establish your assessment process.
Common evaluation methods include:
The most common board evaluation template is the written board of directors questionnaire. Be sure to update questionnaires each year to reflect your organization’s current environment, and always check to make sure the prior year’s recommendations have been achieved.
Use well-structured questions that draw out meaningful feedback. To achieve that, your interviews, peer reviews, or director questionnaires should focus on critical aspects of the board (more on this in step 3).
One-on-one interviews can be conducted by the independent chair/lead director for your board assessment, or by a third party. Personal interviews allow for follow-up questions and for directors to elaborate on answers in further detail.
Next, identify who will coordinate the process. Some organizations appoint the board chair to lead the assessment. Others prefer independent third parties to make the evaluation unbiased.
The types of questions asked in a board assessment vary from one organization to the next, and each must be customized and prioritized to gain the most useful and valuable feedback. Make sure your questions are clear, direct, and focus on core board duties and oversight functions. Topics include:
Sample questions include:
To find relevant assessment topics unique to your board:
After the board assessment, disclose a detailed post-evaluation summary to shareholders or investors. To help streamline future assessments, ask participants how the process was and how to make it even better. You can leverage voting and approval technology or secure messenger to solicit feedback.
For an unbiased process, consult with a third-party advisor. They can implement the whole procedure, develop assessment questions, conduct 1-on-1 interviews, and analyze feedback.
Independent consultants make the assessment objective because they have no ties with the organization or the board. Additionally, experienced third parties offer fresh perspectives into the whole process for better assessment results and improved action plans. In addition, directors may be more open when speaking with an outside consultant.
