Board assessment – it can be meaningful and stress free!

Doing a board assessment is considered a leading practice in corporate governance, and is required for public company boards. But many boards fumble through this process, and chances are the exercise is just to “check the box” from a compliance sense.

Are there ways to do a board assessment that is meaningful, and not something the directors dread? The answer is YES! Here’s how some different sized/organized companies might approach assessment. We don’t want to limit anyone’s thinking here, so be sure to read all the way through to determine what approach might work best for your board. Also, don’t be locked-in to what is written here – maybe these ideas will spark your own creativity for achieving a meaningful and stress-free assessment process for your board.

Small companies, family-owned, not-for-profits

Chances are, companies like these don’t have a requirement per se (at least not from a regulator) and so they have a lot of flexibility. One easy option:

Thumbs up / thumbs down – at the end of each meeting, the chair can take a few minutes to ask the directors what “worked” about the meeting, or didn’t work. Were any changes made to the format or materials since the prior meeting, and did these changes work, or do they need to be tweaked.

For example: Was there enough meeting time? Was the agenda appropriate? Did it help to bring directors together the night before for dinner? Were the supporting materials appropriate? Did directors have enough time to voice their points of view? Did all directors feel empowered to share their viewpoint? Also consider other questions unique to your board/company/this meeting. The important thing is to use the process to generate discussion about what works and what could be improved.

Medium-sized companies, larger not-for-profits, more complex family-owned businesses

Every organization in these size categories should have a board governance process in place, and this should include board assessments. And as a company grows it will find it needs more defined processes for its governance, including assessment. The

Chair-and-director conversations – The chair could conduct the assessment by reaching out to directors one-on-one to discuss some specific questions relating to the board’s activities, structure, processes, accomplishments, and any additional areas of potential concern. The advantage to this approach is the two-way discussion leading to a more fulsome understanding of concerns, and possible solutions. Also, directors will feel that they had the opportunity to voice their concerns.

Here is a list of core questions to get this discussion started:

Is the board functioning at its best? Is enough time given to board meetings? How is the meeting summarized at the end? Are open items and action items clearly recognized? Can you suggest changes that might improve functionality?
Is the board in compliance with its charter and articles of incorporation?
Is the board plugged into the company strategy?
Does the board agenda include all items it should include? Do directors have the opportunity for input to the agenda?
Is the board updated between meetings? Is there a regular process for updates? Should there be?
Are all directors carrying their weight? Are they prepared for meetings? Do they contribute to discussions? Are directors knowledgeable about the company, its industry, its culture, and the environment it operates in?
How do YOU (the director) uniquely add value to the board?
What would you (the director) do differently if you were chair?

Larger companies, including not-for-profits and family-owned

Larger organizations need more formalized processes, and that holds true for board assessment. And to be clear, a public company has unique rules around assessment. That said, this process can be managed to work with an already-in-place foundation so it is still meaningful and with reduced stress. Some tactics to consider:

Annual survey – This method of assessment is the one that most companies do. It’s easy because the company can create a survey and directors can complete the survey and turn it in. But I question the usefulness of this method. There is no opportunity for two-way discussion, the questions are probably too broad (because no one wants a long survey), and it becomes the ultimate in a “check the box” approach.

That said, when using a survey, it’s important to change things up a bit, so directors have to think about the questions rather than just check the boxes. In our approach at JPA we work with clients to create a variety of three to five short, impactful surveys that focus on different elements, and rotate their use each year. With this approach trends can still be identified, but it will take more time. Some different topics to consider:

Efficiency and effectiveness of the board
Relationship with management
Board’s approach to risk: risk appetite, balancing, etc.
Board level performance metrics
Effectiveness of the board committees
Effectiveness of the board chair.

Facilitated session/survey

A facilitated session/survey – by an impartial, highly experienced business leader or organizational psychologist will work best. Industrial and organizational psychologists are particularly suited to facilitating assessments because they bring additional skills to the table. For example, a psychologist can:

Assess how the board members work together
Review a process for how the best decisions can be made give the group dynamic
Observe such subtleties as whether or not the CEO is in sync with the rest of the board

These observations – and scores of others that are too subtle for those not highly trained – will contribute to a high-functioning, dynamic board working under governance processes developed specifically for that board. These processes can be developed by governance experts, but the board needs to make its own decisions about the practices it will adopt.

Finally, a facilitated session or survey can get quantitative as well as qualitative information. Using a survey as a discussion starter, the skilled facilitator can ask what drives a particular response, whether positive, negative, or neutral. Bear in mind, though, that neutral responses are the hardest for the facilitator, because it’s not easy to probe when the respondent doesn’t express an opinion. These obstacles will be addressed further in a future blog, so stayed tuned!

Following through

No matter the approach taken to board assessment, it’s important to report back to the board on the result. In some cases, the board will want to record in the minutes that the assessment took place. (Bear in mind that the board’s counsel will likely have specific opinions on what should and should not be recorded in the minutes.) In any case, the board should create an action plan for changes it believes it could make to improve its effectiveness.

Help Needed?

The Board Governance Services team @ JPA is ready to help you manage through all board assessment challenges. You can reach us through our website, through LinkedIn, or by calling John Morrow on 908/432-0576.

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