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Board Performance Evaluation: Everything you need to know

Editorial Team
20/02/2020 3:59 PM

Good corporate
governance now calls on Boards to look at their own performance. I have perused
a number of corporate governance codes and practices across the globe and all
of them now encourage board performance evaluations. There are two main reasons
why  these evaluations are crucial:

  1. It
    gives the board an opportunity to reflect on how the board is adding value to
    the business.
  2. It
    allows the Board to address the shortcomings in how the board and individual
    members are adding value to the business.

While Board
evaluations are prevalent in well-managed organisations, the story is different
in organisations with poor governance structures which rarely carry out Board
performance reviews. If you want to know the level of governance in an
organisation just ask how frequently board performance reviews are done?

The Havard Law School
Review, in a paper by EY Center for Board
Matters: How Companies are Evolving Board Evaluations and Disclosures
list the following as
the major focus areas for Board Performance reviews:

  • Board composition,
    including skills and diversity
  • Review efficiencies
    and effectiveness of board leadership
  • Director independence
  • The handling of
  • Information sharing
    processes and their effectiveness
  • Gauge the quality of
    boardroom discussions
  • Asses relationships
    among directors and also the relationship between executive directors and
    the board
  • The strategic nature
    of discussions
  • Board diversity; age,
    tenure, gender
  • Committee
    responsibilities and effectiveness
  • Rotation of Committee
  • Individual director

The best way to carry out Board evaluations is to use an independent
Consultant. The valuation should focus on evaluating the performance of various
facets of the Board operations. The following are some of the focus areas
depending on the objective of the evaluation.

  1. Board Evaluation  - This assessment focuses on the performance
    of the board in terms of how it is fulfilling its role. This is where issues
    like quality of discussions, diversity, adherence to general good governance by
    the whole board are assessed. This can be done through a questionnaire to be
    completed by all Board members. Over and above the questionnaire you may want
    to consider doing interviews with each board member to gain more qualitative
    information. There is also an opportunity to review Board minutes by the
    Consultant to gauge how the Board operates.
  2. Committee evaluation – This assessment
    focuses on the quality of input of each committee into the board decision
    making process. Committee members do a self-assessment of their committee but
    also other non-committee board members are given an opportunity to assess the
    committee. Interviews can also be carried out to dig deeper into the operations
    of each committee and how effective it is.
  3. Board members evaluation  - This assessment now focuses on the
    evaluation of each Board member on pre-agreed competencies important to the
    effectiveness of the board. The member will evaluate themselves and each board
    member will also evaluate each of the board members.
  4. Chairman evaluation  - This evaluation focuses on the leadership of
    the chairman. The chairman will do a self-assessment and all other board
    members will evaluate the chairman. This can also be followed by in-depth
    interviews to gain qualitative data on the leadership of the chairman.

The outcome of the four assessments above is detailed reports which show
current performance and performance gaps. The report may also include action
plans to address the identified performance gaps.

Memory Nguwi is an Occupational Psychologist, Data
Scientist, Speaker, & Managing Consultant- Industrial Psychology
Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 4
481946-48/481950/2900276/2900966 or cell number +263 77 2356 361 or email: mnguwi@ipcconsultants.com  or visit our
website at www.ipcconsultants.com

Editorial Team

This article was written by one of the consultants at IPC

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