Never has the glare of the spotlight been more squarely focused on Boards of Directors. Governance is an increasingly hot topic and a spate of corporate scandals around the world has turned up the heat. Renewed rigor is being called for in everything from accounting and communications to strategy and sustainability – not only in the corporate world but throughout government and not-for-profits as well.
In response, many Board members are asking, “How good is our governance and how can we assess it?”
Why evaluate?
There are many reasons to evaluate your Board, for example:
- to identify missing governance functions;
- to build a common understanding of governance;
- to weld the Board together as a team;
- to provide an agenda for shot or longer-term improvements.
The purpose of an evaluation should shape the kinds of questions that are asked, determine the commitment of resources, the time frame for execution and the nature of follow-through program.
A good starting point is to decide what kind of Board you want. What do your circumstances call for? Do you simply need an oversight Board that keeps an eye on how things are running? Do you expect your Board to be proactive, playing a strategic leadership role? Is it an advocacy Board with an important government relations function?
A Board is only as good as its people. Is there a vision of the kind of Board you require and can that Board be achieved with the people now in place? Should your evaluation contemplate a longer-term program where the Board composition will change? Who is driving the evaluation? Will its proponents be around long enough to see that change through?
The Three “P’s”
There are three areas where the searchlight of review might be directed:
Participation questions probe the involvement of the individual Board member. By law, members have fiduciary responsibilities – the duty of care, the duty of loyalty – which they are expected to discharge. An evaluation could look such matters as whether members fully understand their responsibilities and whether they discharge the tasks they take on.
Process and system questions examine how the Board itself operates. For example, what role does the Board Chair play in formulating the Board’s agenda? Are Board meetings collegial, constructive? Does the Board focus on issues related to its governance responsibilities, or is its time consumed with side issues or staff briefings “for information”?
Questions related to the organization’s governance system could also examine terms of reference for committees, policies regarding matters like conflict of interest or the role of the chair.
Performance is concerned with the results or outcomes of Board activity. For example, does the Board contribute effectively to the formulation of the organization’s vision and strategy? Does it exercise meaningful financial oversight? Is the Board adding value through its work, or is it just baggage the organization has to carry?
How to Evaluate?
Two basic ways of collecting information are through interviews (by phone or in person) or through questionnaires.
Questionnaires are appealing. They are inexpensive and quick. They have a wide reach and the results can often be quantified, which facilitates comparisons and provides an aura of objectivity to the results. However, people sometimes fill out questionnaires by giving answers they consider appropriate. They do not necessarily get at subtle but important problems such as factionalism, conflicts of interest or interpersonal rivalries.
Interviews allow for a deeper probe into governance issues. They can elicit nuances and provide opportunities to examine complex issues. However, they do take more time than questionnaires. Much depends, too, on the skill of the interviewer.
Collecting information is not enough. All-important is the question, how will the evaluation results be used? A well-thought-out process can build Board cohesion and motivate performance, while a mishandled process can lead to friction and a decline in interpersonal relations on the Board. How the information will be used should be carefully planned before any evaluative activity is launched. An outside facilitator or coach can often be helpful in this regard.
The Role of the Board Chair
The Board Chair plays a pivotal role in any initiative that will have a significant bearing on the organization’s governance strategy or structure.
The Chair also has a particular responsibility to be clear on how the results will be considered. A good chair will have a view as to how the whole evaluation process can be used to shape the Board and guide it toward a higher level of performance.
In Conclusion…
The evaluation of Boards is gradually making its way into the growing library of standards and principles related to sound governance. It is being increasingly recognized as an “exemplary practice” for progressive Boards.
Tim Plumptre, President, Institute on Governance
