Most boards know that it is the right thing to do a regular assessment of their own performance and effectiveness. It is also required by many local stock exchanges, federal, state, corporate and prudential regulations.
Here are five popular ways boards review their performance and effectiveness, and our take on what a “best practice” board review looks like in 2021.
1. Fire-side chat
The old fashioned fire-side chat between Chair and directors was the most widely used review process in years gone by, but its time has come and gone.
If the board is to set a high bar and the appropriate tone at the top for its own character and performance, much greater rigour and objectivity is required.
The other problem with the fire-side chat is that the views of one director are likely to influence the views of another. Also, directors are much less likely to be candid about their individual and collective shortcomings in a group setting.
2. Internally facilitated survey
Another widely used approach in days gone by, and an approach that we still come across today, was the internal survey. Often the Chair would take charge of the survey or it would be delegated to another director or the company secretary. Survey questions were often cobbled together from examples found online. Respondents were asked to complete the survey on paper, via Excel or using a basic online survey.
Once completed the facilitator of the survey would prepare a data report summarising the director responses. As well as being prone to error, this process often meant that directors were less likely to be candid as they knew their fellow directors and the Chair could have access to their responses. Also, because there was no benchmarking it was likely that readers of the report would misinterpret the results.
The Chair often leads a discussion about the matters included in the report. This method is still probably the most common way that boards carry out their reviews in Australia and around the world.
3. Externally facilitated survey without professional advice
Until recently this approach was rare because very few externally facilitated surveys have been available without the professional advice of the organisation that sells them. Further, many survey reports from such organisations are not benchmarked and accordingly were prone to misinterpretation.
Board Benchmarking recently launched a validated, benchmarked Board Effectiveness Survey that can be acquired online for between A$1,850 and A$6,450. The survey is administered by Board Benchmarking and a resultant benchmarked report is provided to the Chair or other nominated party soon after the survey has been closed.
Because the report is benchmarked, hot spots are quickly and easily identified.
4. Externally facilitated survey with professional advice
There are hundreds of firms that offer an externally facilitated survey and professional advice. Most only do a handful of board reviews each year amongst other services they provide.
Insync, trading as Board Benchmarking, is one of very few firms, if not the only firm, that offers a validated, world-class, benchmarked Board Effectiveness Survey to all sizes and types of organisations across the globe, with the option of support from a growing global network of Board Advisory Partners.
Additional support can include helping to interpret and act on the results, assisting with director and executive interviews, writing separate reports and executive summaries, debriefing the chair and/or the board, and facilitating workshops, action planning sessions and the like.
5. Full externally facilitated review, including a survey, interviews and a written report of findings and recommendations
Most large listed, private, government and not-for-profit organisations now carry out a full externally facilitated review of their board every two or three years.
Those reviews normally include:
- A validated, benchmarked survey that is completed by directors and by executives that regularly attend board meetings and a comprehensive benchmarked report, often with the inclusion of an optional Director Effectiveness Module
- Structured interviews of around one hour with all directors and selected executives who completed the survey
- A written report synthesising the views of interviewees and the benchmarked results into the 3, 4 or 5 main issues and recommendations for improvement
- A debrief of the chair and then of the full board on the report and recommendations
- Ongoing assistance and advice on how to implement the recommendations made. This may include board workshops and other facilitated interventions to improve the board’s performance and effectiveness.
The review can also include a review of board and/or committee charters, agendas, packs and minutes and observing the board in session although these review procedures are often only done when required following completion of the main review.
What does best practice look like in 2021?
If you want to set high standards for your organisation’s performance, start by setting a high bar for the governance and performance of your board.
The use of a validated, world-class, benchmarked Board Effectiveness Survey is one of the most important foundation stones for a thorough and objective externally facilitated board review. Conducting a regular board evaluation also shows that your board is serious about finding new and better ways to work together and is committed to continuous improvement.