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:
- It
gives the board an opportunity to reflect on how the board is adding value to
the business. - 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
meetings - 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
compositions - Individual director
effectiveness.
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.
- 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. - 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. - 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. - 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