The board assessment (also called a board evaluation) is simply an assessment of board performance, typically measured using written questionnaires, in-person interviews, or a combination of the two. Boards may choose to bring in an outside facilitator or conduct the assessment on their own (often proctored by the general counsel or board chair); best practice recommends bringing in a third-party facilitator at least every third year and leveraging secure technology to protect the data collected during the board assessment process.
Board directors should conduct board evaluations because they are a valuable tool for receiving feedback and improving performance across all levels: board, committee, and individual. Ideally, board assessments underpin important board decisions around refreshment, succession planning, and strategy.
In the frenzy of today’s busy board agendas, the board assessment process is too often approached as a check-the-box exercise, which can impact the effectiveness of board assessments. A few best practices for boards to keep in mind:
Develop a Roadmap: At the start, boards need to determine what they want to accomplish with their board assessment process: Are you trying to streamline board and committee processes? Align the board’s composition with a new strategic direction? Identify board education needs? The nominating and governance committee is typically responsible for identifying these goals at the outset, which are then used to determine the appropriate assessment format, facilitator and frequency over a multi-year time horizons. We find that boards may not need to bring in an outside facilitator or conduct in-depth committee evaluations every year, which is why we recommend outlining a board assessment plan three years at a time.
Take Action on Results: This is arguably the most important phase of the board assessment process. How is the board using the evaluation results into improve performance? Sometimes the action taken can be as simple as tweaking a board process, devoting more time to strategy, or creating more opportunities for directors to build camaraderie outside of the boardroom. Other times, board leadership will need to have difficult conversations with a board member who’s underperforming or whose skills and experience are no longer aligned with the company direction.
Communicate Goals & Actions to Shareholders: Institutional investors are also encouraging today’s boards to be more purposeful in their board assessment process. Investors want to know how boards are using evaluations as a feedback loop to inform decisions in board composition and refreshment. Don’t miss the opportunity to tell this story.
With a process as important as board assessments, boards must ensure they’re using the right tools to—not only protect the data, but to visualize the results in a way that allows boards to extract key insights and outline action items.
The Diligent Board Assessment Tool allows today’s boards to conduct evaluations and analyze results entirely electronically through Diligent’s board management software. Not only is the process significantly more efficient than the traditional paper process, but it’s more secure.