From Evaluation to Action

This is the second of a series of four Savvy Director articles dealing with various aspects of board and director evaluation. The first article in the series, “From Compliance to Improvement,” explored various approaches to the board evaluation process. The third and fourth in the series will deal with individual director evaluations and meeting evaluations.

“The truth is that every director wants to serve on a great board. Every Board Chair wants to lead a great board. Every Chief Executive Officer and senior team wants to work with a great board. What’s often missing is a vehicle to shift a board from good to great and maintain a great board’s vibrancy.” – Beverly A. Behan

If you’ve read our first article in this series, “From Compliance to Improvement,” you’ve probably realized that the board invests a great deal of its time, effort, and resources into the evaluation process. How do we, as directors, ensure that this investment yields the results we’re looking for – a way for the board to keep improving its performance and effectiveness?

From analyzing the findings, to reviewing the report, to action planning and monitoring, the board must continue to drive the process forward. The board needs a champion to make sure that the board identifies the highest priority issues and develops the mechanisms to address them.

To that end, the board develops an action plan, identifies the required resources, assigns tasks, develops a timeline, and monitors progress.

And so it goes until the next time …

Reviewing the Results

The survey’s complete, the interviews are done, the results are in! There’s a temptation to jump right in. But taking the time to carefully analyze and really understand the results is a critical step.

It’s easy to tabulate survey results, then bask in the glory of high scores without considering their implications. On the surface, high scores might suggest effectiveness, but they could also mean that the process focused on areas of strength instead of opportunities, or that board members are focused on current functions instead of the future.

To interpret numerical results, it’s important to note not just averages but ranges. A broad range of responses might indicate a lack of consensus, and a single outlier might indicate a dissenting director. It can be valuable to explore the dissent and uncover the differences of opinion that tell a more complete story.

A robust analysis focuses not just on numerical scores from a survey, but issues and themes emerging from one-on-one interviews. A skilled third-party facilitator will be able to distill the myriad of comments into a coherent whole, taking into consideration not just the content but the tone of the responses, the organization’s current circumstances, recent events that may have contributed to director sentiments, and how it all lines up with the company’s strategic goals.

Once synthesized, the report is usually shared first with the board chair and governance committee chair, then with the governance committee, then with the full board – often in an In Camera session.

Based on their review of the results and subsequent discussion, the board should consider whether there are gaps between where the board currently stands and where it strives to be. The assessment can reveal a variety of issues, ranging from operational complaints about meeting length or agenda design, to larger, thornier issues about the board’s role in strategic decision-making, gaps in competencies on the board, or weaknesses in the board-management relationship.

Where to Focus

In our previous Savvy Director article, “From Compliance to Improvement,” we shared the five areas for evaluation as presented by Kieran Moynihan, Managing Partner at Board Excellence, in our April Savvy Saturday discussion of board evaluations. (If you’re a DirectorPrep member, you can check out the Savvy Saturday presentation and slide deck here. You’ll need to be logged in to access it.)

Those five areas are governance infrastructure, performance and focus, conformance and oversight, dynamics and culture, and board engagement. The issues that surface through the evaluation will no doubt fall into one or more of these five areas. By focusing on these important areas, an evaluation process can lead to all sorts of performance improvements.

Here are just a few examples that boards have shared. With these examples as a jumping off point, you should be able to identify and prioritize ample opportunities to improve your board’s effectiveness following a board evaluation.

• Improved meetings that focus on strategic priorities and allow time for in-depth discussion.
• Holding In Camera sessions at every meeting.
• More robust discussions about risk.
• Streamlined meeting materials that highlight the most important information.
• Enhanced presentations that add insight to written material.
• More discussion of current topics like ESG and human capital management.
• Changes to board structure or committee oversight responsibilities.
• Increased focus on board composition and succession planning.
• Expanded director search and recruitment practices.
• Changes in director term limits or retirement ages.
• Enhanced director orientation programs.
• More frequent opportunities for director education.
• Improved communication between meetings.
• More time for informal director gatherings.
• Changes to company and board governance documents.
• Improved evaluation process.

Taking Action and Following Up

Once the board has identified its priorities, action planning and follow up is typically delegated to the governance committee. But keep in mind that a really ambitious plan might require more focus. In that case the board might want to strike an ad hoc committee or task force to drive the process forward to completion. Depending on the nature of the work, support may be provided to the committee by the CEO, the corporate secretary, or members of the senior management team. And in some cases, the board might even choose to engage an external consultant to support its work.

The committee establishes a timeline for each action item, monitors activities, and reports progress to the full board. The following year’s evaluation then becomes a key tool for measuring progress on intangible items.

Key Success Factors

Remember that the whole purpose of conducting a board evaluation is not just to find out where the board currently stands, but to define a path forward for continued improvement in the board’s performance.

So, what are the key success factors that maximize your chances of a really useful, productive board evaluation? We’ve combed through the resources and compiled the following list, starting with a board champion.

“The most essential component of an effective board evaluation is a champion.” – Beverly A. Behan

A board champion. Even if the board is relying on a third party, the champion must be an independent board member – usually the board chair or governance committee chair. Without that credibility and internal drive, the board is unlikely to take the process seriously or commit to an action plan. The board champion has to drive the process — involve the right people, ask for directors’ time, schedule time on the agenda to discuss the results, and ensure that the board follows up on the issues. They manage expectations, act as a resource for directors to turn to with concerns, and may even have to deliver feedback to individual directors.

Confidentiality. The annual board evaluation process must be designed to encourage directors to be frank and open in their responses. If directors are not confident that the input they provide will be kept confidential, they will be reticent to provide that input – particularly in writing.

Clear objectives. Clarifying objectives and defining the scope of the assessment helps to avoid a situation in which the board is using the process just to put off dealing more directly with uncomfortable situations. Reaching consensus on what board members aim to accomplish through the process promotes their willingness to invest time, energy, and candor, and helps the board champion set the tone and clear up misconceptions.

Tailor-made. To be most effective, a board assessment must be tailored to the company’s current business context and include any relevant issues. Template questionnaires and canned interview scripts won’t do the trick – although they can serve as a starting point.

Director buy-in. Without the commitment from the board as a whole and directors individually, an assessment is unlikely to yield the desired results, and may even turn out to be counter-productive.

Perspectives from senior management. Although it’s still not a widespread practice, seeking input from the CEO, the corporate secretary, and the rest of the senior management team broadens the perspectives in key areas such as board-management relations. As regular board observers, these executives often have very thoughtful feedback about what the board does well and what it could do better.

Beyond compliance. While a board may be complying with everything it is supposed to do, these activities may not yield the kind of results that improve outcomes for the organization. Directors’ behaviors may be preventing the board from being the strategic advisor that management needs or may be limiting the board’s influence. In effective evaluations, directors are asked for their assessment of everything from board composition and organization, board processes, roles and responsibilities to communication, boardroom dynamics, the board-management relationship, and the quality of boardroom discussion.

Commitment to action. Boards have to be open to the results of the assessment and be prepared to deal with the findings. Some boards spend little or no time on discussing the findings. In addition to leaving issues unresolved, this lack of follow-up can generate cynicism about the process and the board leadership’s commitment to improving effectiveness in the future.

What can a Savvy Director do?

Wondering how you can contribute to the success of your board’s next evaluation? Maybe you should be that sorely needed board champion who drives the process forward.

You could start by asking some of these great questions to spark the discussion around the board table.

• Did our last evaluation enable the board to identify and prioritize actions to improve our performance?
• Do we have a common understanding of what we mean by “board effectiveness”?
• Should we consider adding an element of ongoing assessment to our annual evaluations?
• How can our evaluation process be refreshed and strengthened to enhance board performance and meet stakeholder expectations?
• How can we ensure our evaluation process drives full participation and elicits meaningful information and candor?
• Should we consider using a third party to provide objectivity, improve the process, and produce actionable results?
• Does our evaluation address how we can achieve stronger board dynamics?
• Is the timing of our evaluation process properly aligned with other events such as orientation and education programs, director recruitment, succession planning, and stakeholder engagement?
• How do we make sure the evaluation addresses the elephant in the room?

Your takeaways:

• Make sure the evaluation results are thoughtfully analyzed and presented to the board in a way that supports identification and prioritization of issues.
• Improvement opportunities will likely fall into one of five focus areas: governance infrastructure, performance and focus, conformance and oversight, dynamics and culture, and board engagement.
• If the action plan is truly ambitious, the board could consider striking an ad hoc committee or task force to focus on it.
• A Savvy Director who acts as board champion may just be the most important success factor in an effective evaluation.

Resources:

• Available only to DirectorPrep members (you need to be logged in to access it.) Board Evaluations: Savvy Saturday with Kieran Moynihan. DirectorPrep.com. April 2022.
• Board and Director Evaluations: Innovations for 21st Century Governance Committees. Beverly A. Behan. © 2021 Board Advisor, LLC.
• 10 Best Practices for Board Evaluations. Lena Eisenstein. BoardEffect. November 2021.
• The Annual Board Evaluation. Carol Hansell. Hansell McLaughlin Advisory Group. December 2015.
• Improving board effectiveness: Five principles for getting the most out of a board assessment. Alice Au. Spencer Stuart. January 2012.

Thank you.

Scott

Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online hub with hundreds of guideline questions and resources to help directors prepare for their board role.

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