Board members want to add value and make a difference.
In the newest McKinsey Global Survey of over 1,100 Board Directors, “few respondents rated their boards as effective at most tasks, or reported having good feedback or training practices”. McKinsey concluded from the results that “to be successful, Boards must be effective at individual tasks, maintain a trust-based but challenging board culture that embraces feedback, and aim to improve continuously”.
It takes significant personal commitment to become a Board member, providing expertise, passion and experience to help guide an organization forward. However, if you find yourself on a Board that is not effective or not operating to its full potential, it is easy to become frustrated that your commitment is not having the benefit you hoped it would and that a better functioning Board could lead to a more effective organization. Board self-assessments are a key tool for improving Board performance and helping individual directors improve their performance.
What does an effective, value adding Board look like?
Participating on an effective Board is rewarding; you feel like you are making a difference. But what does high performance look like?
Although there are many components to Board performance, Board members on high performing Boards agree there are several key characteristics. These Board members:
- Share a common view of where they want the organization to be in the future and how it will get there.
- Are confident appropriate processes are in place to develop, review, approve and monitor achievement of strategic priorities.
- Understand the performance expectations of the lead staff person (e.g. CEO, Executive Director); these expectations are clear, documented and performance against these expectations is regularly assessed.
- Are confident processes are in place to identify, evaluate and manage the principal risks of the organization.
- Have a good understanding of the organization’s financial position and confidence in the financial controls.
- Believe Board meetings are effective and time is spent on the right strategic issues.
- Understand the role of the Board overall and their role as an individual Board member.
If your Board is under performing at one or more of these characteristics, a Board assessment can be a useful tool to identify performance gaps and build support for addressing the gaps.
What is a Board Assessment and why do they help?
A Board assessment enables an organization to review the effectiveness of its governance practices, processes and results, as perceived by individual members of the organization’s Board. In a self-assessment, Board members are required to complete one or more questionnaires, on a confidential basis. These diagnostic questionnaires help a Board understand its strengths and weaknesses and provide an opportunity to comment on the aspects of governance that are clear and performing well and those areas which are less clear and may require further attention. Self-assessments are conducted to provide constructive feedback and a basis for continuous improvement in governance practices and Board effectiveness. Board assessments can be targeted to get feedback about overall Board performance, individual member or officer performance, and / or Board committee performance.
Board assessments are typically administered by an independent third party to ensure confidentiality in the process, enabling frank responses and the benefit of the third party’s experience with other Boards. With a follow-up Board development workshop, a forum is provided to discuss gaps and work collaboratively toward addressing these gaps.
Framework clients consistently express the value to their Board of being able to clarify roles, expectations and governance processes when conducting a Board assessment. When clearly positioned as an initiative to encourage continuous improvement, Board members are typically enthusiastic to take some time to reflect on how they can improve their individual contribution and the effectiveness of the entire Board.
Why is there increased interest in Board assessments?
More and more organizations (corporate, non-profit, and public) are conducting Board assessments as a matter of good governance. Over the past decade and a half high-profile corporate scandals, failures, and executive corruption have focused the attention of regulators and the public on the need for appropriate corporate governance standards and practices. Several countries, including Canada, the United States, the United Kingdom, Australia, New Zealand, have implemented enhanced corporate governance rules, codes and guidelines for publicly traded companies to address governance shortcomings. These guidelines introduced the expectation of regular assessment of governance practices with Boards of Directors, Board Committees and individual Directors. Although initiated for public companies, these expectations have migrated to non-profit and public agencies.
Framework Partners is a management consulting firm serving clients across Canada in the areas of governance, strategy, leadership development and research / analytics.
For If you would like to learn more about Framework’s Board Assessment tools and services, please contact John Galloway, Dickson Wood or Alec Milne at 403-261-7077.