Does your board regularly take an objective look at itself and its relevance to the needs of the company?

The increasing stakeholders’
expectations, difficult economic conditions, pressures of globalization and
increased regulatory requirements have put Company Boards performance on the
spotlight. Boards have recognized that it would be important for them to
continually assess how effectively they are performing their roles against set
objectives and goals.

A Board performs three major
roles in a company. Firstly, it provides direction i.e. sets the strategic
direction of the company. Secondly, it monitors the performance of the senior
management team. Thirdly, a board provides support and advice to the senior
management team. Board evaluation examines these roles of the Board, its responsibilities
and assesses how effectively these are being fulfilled by the Board.

Unless
a board has completely relinquished its responsibility, its performance must
have a significant impact on the performance of the company, particularly over
the longer term. Improving the effectiveness of the board and raising its
performance is important in ensuring the ongoing prosperity and survival of the
organization. If the Board is not as effective as it needs to be in today’s fast-changing
and demanding environment, it will have an impact on the company.

A
comprehensive approach to improving a board’s performance starts with a
fundamental review of the board, what it does and how? This must be done from a
strategic perspective, against the changing background and needs of the
company. The Board Evaluation should explore the following:

1. Board Structure - its composition, constitution, diversity of skills, competencies of the
   members, Board and Committee charters, frequency of meetings and procedures.
   
2. Dynamics and Functioning of the
   Board -  annual
   Board calendar, information availability, interactions and communication with
   CEO and senior executives, Board agenda, cohesiveness and the quality of
   participation in Board meetings;
3. Business Strategy Governance -  Board’s
   role in company strategy;
4. Financial Reporting Process,
   Internal Audit, and Internal Controls - The integrity and
   the robustness of the financial and other controls.
5. Monitoring Role - Monitoring
   of policies, strategy implementation, and systems;

The
results of a board evaluation must be assessed by the Board and consideration should
be given to various ideas and options for improvement and change. The best way
forward can then be agreed and plans made, followed by implementation and
further review. It is recommended that boards use an external expert
facilitator to help in carrying outboard evaluations to ensure objectivity of
the findings. Whatever
appraisal procedure a board adopts, it should identify areas where individual
directors could and should improve their effectiveness.

In addition, every director
should understand his or her specific role and function as part of the board
and be familiar with the roles and functions of the other directors.
Familiarity with a company balance sheet and profit and loss account, sources
and methods of funding, cash flow and other financial parameters is essential
for every board member.

Any board member who is uncertain
of any of these matters should put the time aside for some structured learning,
often in the form of a board induction, courses or workshops. This is a
prerequisite for any person who is being appointed a director for the first
time. In addition to these basic requirements, directors need to develop
certain personal skills, acquire knowledge appropriate to their role and be
constantly aware of the changing environment in which they and the company
operate.

Underperforming directors that
are identified through the board evaluation process should be carefully
counseled. The board improvement action plan, like all performance appraisal
approaches, should include specific and measurable KPIs and the chair of the
board, or a relevant committee of the board should be responsible to oversee
its implementation over the ensuing year. The board’s improvement action plan
forms the basis, or at least the starting point, for the following year’s board
evaluation process.

Carl Tapi is a Consultant at
Industrial Psychology Consultants (Pvt) Ltd, a management and human resources
consulting firm. https://www.linkedin.com/in/carl-tapi-45776482/
Phone +263 (242) 481946-48/481950 or cell number +263 772 469 680 or email: carl@ipcconsultants.com  or visit our website at
www.ipcconsultants.com