Board assessments measure how well a board fulfils its responsibilities and determine whether key standards and objectives are being met. They are a crucial routine task for effective and efficient boards – yet they’re often underutilized. In this blog post, we’ll outline the benefits of board assessments and detail what goes into them.
Why are Board Assessments Important?
Board assessments provide directors with an opportunity to reflect on their performance, as well as the performance of their peers and the board as a whole. From there, a board assessment provides an opportunity for improvements and clarifications to be made to promote the efficiency and effectiveness of the Board.
What Metrics do Efficient Boards Measure?
Board assessments should consider the board performance as a whole alongside the individual performance of the directors.
Board Efficiency Generally
At the Board level, assessments should consider (amongst other items):
- Meeting frequency;
- Analysis of board minutes and meeting materials;
- Use of corporate governance best practices;
- Degree of consensus on board issues;
- Adequacy and timeliness of the board’s consideration of information received from management; and
- Whether diversity targets are being met or if they should be prioritized.
Individual Director Efficiency and Effectiveness
Individual director participation and effectiveness should also be assessed. Companies should consider (amongst other company-specific items):
- Meeting attendance;
- Preparation for meetings;
- Participation during meetings;
- Communication effectiveness;
- Strengths and weaknesses; and
- Overall contribution to the board.
How Do You Undertake a Board Assessment?
The simplest, but most expensive, method of conducting a board assessment is to hire a vendor or consultant to facilitate the process. Hiring an external party can help the process run smoothly and may help board members feel more comfortable answering questions. It is also an opportunity to receive outside perspectives on how things are going and where improvements may be made. Third-party vendors may also be able to assist with benchmarking against peer companies both within your industry and similarly sized across multiple industries.
Companies may also elect to have directors perform self-assessments or peer assessments using questionnaires or surveys. This option is convenient, allows for the easy comparison of results from year to year, and it’s cost-effective. Drawbacks of this option include that it can be difficult to get buy-in from directors who may see the task as a check-the-box exercise and it may be challenging to get candid responses. Additionally, surveys and questionnaires tend to only offer limited opportunities for feedback.
Another option is for companies to conduct internal interviews, similar to the methodology an external consultant might use. This option allows directors to provide more comprehensive feedback, if they feel comfortable doing so. It is, however, time consuming for the director responsible for leading the assessment and directors may not feel ready to share feedback with a peer.
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