Regulatory requirements require boards to perform annual assessments. To make the most of board evaluations, boards should approach them as more than just a rote exercise that complies with the law and appeases shareholders. Rather, annual board self-evaluations can contribute to organizational, board and individual board director improvements.
Well-composed evaluation questionnaires lead to superior, useful results. Board evaluations highlight the board’s gaps in strengths and reveal staunch weaknesses. Results help boards assess whether their results indicate the need for a change in the board’s composition or processes. Evaluation results should be informative, revealing to the board whether their performance is effective, and where they can improve.
Annual evaluations benefit the board, board directors, the corporation and the shareholders. Overall, the results of board evaluations convey the commitment of the board directors to helping the corporation meet, and hopefully exceed, its expectations.
The Goal of Board Member Evaluations Forms
Boards that approach their self-evaluations with the goal of improving their performance will find that the results will help them identify and overcome barriers to their effectiveness. The best board self-evaluation questionnaires will be somewhat flexible, while providing consistent results that make it easy for boards to compare performance over time. Quality questionnaires should reveal significant differences in the results of past board performances and the performance of the current board.
Regulations require boards of public companies to evaluate their board and main committees every year. Boards may also decide to evaluate individual directors as often as needed for self-improvement. Most experts recommend that boards evaluate their individual directors at least every three years.
Online vs. Paper Evaluation Forms
Boards that have been doing self-evaluations for a long time may be tempted to grab their usual paper templates and give them a quick once-over before sending them out to current board directors. While that’s a quick way to get the job done, it won’t necessarily help the board arrive at the results they desire.
Board directors lead inherently busy lives, and their time is at a premium. Lengthy paper questionnaires are sure to elicit groans among the current board directors. Most board directors tend to view them as cumbersome and time-consuming.
There are benefits to the board evaluation administrator, as well as board directors, in using online board self-evaluation processes. Online board self-evaluations allow the administrator to add, revise and delete questions from the prior year in just a few clicks. Having the prior year’s information readily accessible enables administrators to gain some consistency of information for comparison purposes.
Board directors will appreciate the ability that online self-evaluations provide for them to complete their self-evaluations as quickly and as easily as possible.
For example, Diligent’s Board Assessment Tool, which is part of Governance Cloud, a suite of digital governance tools that are designed with the needs of board directors in mind, allows board directors to complete their self-evaluations with the convenience of using any electronic or mobile device. There’s no need for board directors to skip over questions that don’t apply to them. When they’re finished, they can quickly sign off using an electronic signature.
How to Get the Best Results From Board Member Evaluations
Board directors of public companies will be aware of their duty to complete board evaluations. Even so, it’s helpful to have a board discussion about how board directors perceive their roles on the board and the role of the whole board. These discussions pave the way toward consistency of thought for the whole board and help get a complete buy-in from the whole board for the integrity of the process.
As with most things, advance preparation sets the course for a quality evaluation process that’s also easy and accessible for those who need to respond. Online self-evaluations offer a streamlined process that yields the type of quality results boards are looking for.
In addition to sending out evaluations and assessing the results, annual board self-evaluations give boards an opportunity to elicit feedback from board directors and to obtain suggestions for future operations.
The Main Issues Boards Should Address in Board Evaluations
Boards and board self-evaluation administrators will have no trouble finding commercially produced board evaluation templates. These are a good starting point for many companies as long as boards use them as a basis for customizing questions to the needs of the corporation. Boards can include any number of questions to help them get the best results. Following are some of the more common questions that boards ask:
- Following industry trends and developments
- Building and monitoring strategy
- Acquiring knowledge of products and services
- Supporting corporate culture
- Reading and understanding financial reports
- Assessing whether speech and actions outside the boardroom are appropriate
- Assessing effectiveness of collaborations between board directors and management
- Participating actively in discussions
- Being willing to serve on committees
- Preparing well for board meetings
Diligent’s Board Assessment Tool
As part of the Governance Cloud ecosystem, the Diligent Board Evaluation Tool helps organizations answer these questions by putting valuable board self-assessment data at their fingertips.
The platform allows administrators to set up user-tested questions in multiple formats. A feature that many boards find beneficial is having the ability to incorporate glossaries and supplemental information into the questionnaire. Administrators can also view past evaluation results in just a few clicks. The program makes it easy for administrators to set and change close dates for the assessment and monitor submissions as directors complete them.
Assessing results couldn’t be easier because the program has the built-in ability to automate averages and customize reports with visual graphs, so results are ready for presentations in record time.
The program makes it so easy to administer and review results that most boards find they can easily eliminate the expense of having to hire a third-party evaluation facilitator.
Every aspect of Diligent’s Board Assessment Tool’s functionality has been informed by Diligent’s experience with corporate, nonprofit, healthcare and financial boards worldwide. Quality board evaluations increase shareholder value and help directors to gain insight into the competition. Getting immediate results gives boards the ability to effect immediate, positive change. The evaluation process should excite and recharge the board, and that is more likely to happen when the process is streamlined and painless.
The strength of the board comes in combining the knowledge, skills and expertise of individual board directors. Diligent knows that strong boards deal with crises better when their Board Assessment Tool positions them well when difficult times surface.