Why conduct a review
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.
Your shareholders and other stakeholders have the right to expect that your board will set that high bar for your board’s own governance and performance. 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.
Significant governance failures in many organisations across the world around the time of the Global Financial Crisis have subsequently led stock exchanges, prudential and other regulators to increase their requirements of boards, including requiring them to assess their own performance and that of individual directors at least annually. Many regulators also require that an externally facilitated board review be conducted at least every two or three years.
Many governments have set similar requirements for entities under their control. Many not-for-profit organisations have done the same, with some adopting the principles and recommendations published by the country’s stock exchange despite no requirement for them to do so.
Benefits of a review
Board Benchmarking believes that better boards lead to better organisations. Not many directors would disagree.
A well-structured benchmarked board assessment will identify areas of strength and areas where improvements can be made across the 20 most important dimensions of a board’s effectiveness referred to below. Hot spots can be identified very quickly and a more detailed analysis in those hot spot areas makes the review process very effective.
The review also sets an important baseline from which the impact of subsequent improvement initiatives can be measured. When improvement efforts are focussed on the hot spots identified by the review, experience shows that boards improve in those important areas and in doing so improve their overall effectiveness.
Board review process
Best practice for board evaluations is converging on the conduct of a two or three yearly independent externally facilitated board assessment. This is normally supported by subsequent annual internal reviews that focus on the extent of improvements achieved in relation to the hot spots identified by the independently facilitated external review.
The external review will normally involve the following steps conducted by a Board Advisory Partner or similarly qualified professional:
- Directors, and executives that regularly attend board meetings, complete a validated, benchmarked Board Effectiveness Survey
- A specialist from a Board Advisory Partner conducts a structured interview for around one hour with each director and executive who completed the survey, probing the areas rated lowest by the interviewee when completing the Board Effectiveness Survey
- The Board Advisory Partner synthesises the results of the surveys and the interviews into the three to five main areas for improvement and writes a detailed report setting out their findings and recommendations
- The Chair is debriefed separately on the results of the benchmarked survey and the findings and recommendations included in the report, prior to a similar debrief of the whole board
- Depending upon the findings and recommendations, subsequent workshops or action planning sessions might be organised to assist the board understand the hot spots and agree upon the improvement initiatives that will be put in place.
Most boards also do some form of limited internal review between the two or three yearly external review. Many use some form of survey process using paper, Excel, Survey Monkey or similar to assist with the survey process. Our experience shows that directors and executives who participate in such processes are reluctant to provide candid and objective responses.
Organisations now have the option of using one of Board Benchmarking’s affordable, validated, world-class, benchmarked Board Effectiveness Surveys instead of the cumbersome and less meaningful internal reviews that they have done in the past.
Board Benchmarking developed the world class WhatWhoHowDo framework for the measurement of a board’s effectiveness more than 15 years ago.
The dimensions used in its framework were refined during early 2020, following a comprehensive review with the assistance of Deakin University, Melbourne. The review established psychometrically defensible dimensions of board functioning, which together with a review of contemporary board literature added greater focus to organisational culture and integrity, organisational purpose, crisis management and the better prioritisation of the board’s time.
In all, 20 dimensions were identified as being important to assess in measuring the effectiveness of a board.
Board Benchmarking benchmarks the overall effectiveness of each board as well as their effectiveness on the 20 most important dimensions for a board’s effectiveness as set out below.