Board Evaluations – Be Proactive

Board evaluations must be conducted regularly.

The frequency of board meetings depends on the company’s size and requirements. The problem with most performance reviews is that they are done after the fact, which means that someone is trying to “cast a stone.” For this reason, investors want to see boards evaluate their performance before the actual review takes place to know if any changes need to be made in the way they do business.

How boards perform board evaluations

Effective board evaluations can help gain valuable insights. Board evaluations typically comprise of a set of essential questions, which can be done collaboratively and individually. Additionally, short evaluations can be conducted to ensure the effectiveness of board operations, and more extended evaluations should be done annually to gain insights on more significant aspects such as business plans, financial performance, and board strategy.

The main reason a board evaluation is done is to review board efficiency. Therefore, the first step of conducting an evaluation will be to set expectations of what the board wants to achieve. Having clear objectives with specific goals will help in the later stages of the board evaluation. There should also be a well-defined strategy on who will be evaluated. This generally comprises the whole board, the board committee, individual directors, the CEO, and the company secretary. Brief evaluations may not include all the listed groups.

Evaluations can be performed using several methods and tools such as questionnaires, surveys, self-assessment tools, interviews, polls, and focus groups. Most board committees will choose tools that work best for their company culture and goals of the evaluation. Additionally, whether the evaluation is internal, external, or both, technological tools may be implemented to make the process more efficient and secure.

The skills that boards look for in directors 

Conducting a board evaluation also helps understand the skills that boards look for in directors. Every director possesses a blend of skills and experience that boards look out for, such as industry knowledge, financial management, and risk assessment.

During some evaluation processes, various members are expected to share information about their skills, fellow board members’ performance, and overall board performance. This helps them understand the directors’ skills to the board and what they should look out for in the future. Some types of information that is expected to be shared are:

  • Strategy, risk, and financial performance: This could be reviewed through internal, external, or self-evaluations. Reviewing these skills will help understand the overall board performance and the individual’s understanding and application of these skills.
  • Board composition and structure: An overview of the board and its members helps assess the board’s structure based on the size of the company. Individual assessments could be done to see how board members evaluate each other and if additional members are needed to have a streamlined structure flow.
  • Company integrity, reputation, and culture: A company’s culture and ethics are essential as they play a crucial role in keeping board members motivated. Aspects such as the company’s vision, objectives, and how the current board members align with the organization’s mission are areas that could be reviewed.
  • Management performance and succession planning: Succession planning is a best practice observed by board members and executives to ensure that organizations overcome any transition they may face. Having it as part of the evaluation process helps avoid any surprise exits or retirements.

Evaluations and reviews of the board are vital in maintaining a seamless growth and succession plan when applicable. The process helps boards identify critical gaps they may need to fill and create a list of skillsets they are looking out for in their future selection process. Therefore, it is crucial to know which skills you should focus on in your candidature and how this would add value to the company.

The DiliTrust Governance suite’s Board Portal module includes a board assessment tool that is secure, intuitive, and collaborative. The online portals feature entirely digitized document management, allowing you to evaluate measurable metrics such as minutes, votes, and polls. It optimizes Governance practices making recurring processes such as board evaluations more streamlined, efficient, and secure.