Board Evaluation and Assessment
Board Evaluation is not an exact science. If done poorly, it can be disruptive to the board. However, when it is conducted in a professional manner, it can be both informative and assist in building a more effective board of directors. The process requires the support of the leadership as well as the active involvement of the members of board members.
The individuals who conduct the evaluation and the manner in which it is carried out are critical to its success. Board evaluation is a key component of good corporate governance, especially considering the ever increasing demands on directors.
There are various methods of conducting a board evaluation; most involve one-on-one discussions with individual members utilizing some type of standardized questions and format.
There are various methods of conducting a board evaluation, most involve one-on-one discussions with individual members utilizing some type of standardized questions and format.
Oversight
The process can be the responsibility of:
- The Chairman of the Board
- The Chairman of the Governance Committee
- An independent third party
The Process
The simplest type of evaluation is a two-page form filled out by each director self-assessing their own performance. At a minimum the summarized response usually is “I did a satisfactory job.” In our opinion, this type of evaluation is a misleading waste of time.
A professional and worthwhile board evaluation process should involve each board member meeting separately with the responsible party ideally in an informal face-to-face format with standardized questions and critical time for candid comments. We recommend that the results are not publicly attributed to a specific individual.
Records of the interviews can then be submitted to the Chairman of the Board individually or in a summary format perhaps with recommendations for action. The results of the evaluation can be distributed physically or presented orally. All records should remain the confidential property of the board. Often a roundtable discussion of the findings by the entire board is a worthwhile exercise in terms of ensuring clarity and demonstrating support for the valuation.
Why Daly & Company
Intellectually the members may agree that a board evaluation is a worthwhile exercise but still see it as an intrusive and time-consuming undertaking. An experienced and professional third-party such as Daly & Company utilizes only experienced board members to manage evaluations will be more independent, have no political agenda and be much more likely to encourage the all-important candid discussions.
The time to conduct an evaluation is not in a time of crisis but on a scheduled basis either annually or semi-annually. This allows the members to identify and solve problems early on while building a stronger and more responsive board in an orderly fashion. The professionals from Daly & Company combine not only the technical knowledge of how to conduct an evaluation, but have the hands-on board experience to provide that critical “value-added” component.