Does Your Board Know How Well (or Not) It is Performing?
- Posted by Paul Zilz
- On September 25, 2019
- Board Self-Evaluation
In the process of governing, boards should invest time in properly setting, evaluating, and ensuring achievement of the strategic, future-focused benefits the organization is supposed to produce for targeted recipients at a specified worth (Ends, for shorthand). Instead, boards are often distracted by operational incidental information This distraction not only hinders the organization from achieving what it should be achieving, but it can consume valuable time the board could otherwise invest in evaluating its own performance to ensure it is fulfilling its governance roles well.
Jannice Moore, President of The Governance Coach™, has written extensively on the importance, content, and process of board self-evaluation, and the following briefly summarizes a few of her significant observations. More details can be found in the Board Self-Evaluation Toolkit.
Board self-evaluation is the process by which the board regularly re-examines its collective and individual performance and reaffirms its commitment by identifying plans for improvement.
From an ethical perspective, this is an important task your board should undertake. As a board, you are entrusted with the stewardship of resources on behalf of someone else – your moral ownership, which may include legal owners, if your organization has any. That places a moral obligation on you to use those resources most effectively. You need to be able to show accountability for the organization as a whole. Is it achieving what it ought to achieve within the board-established boundaries of ethics and prudence? Since your board is supposed to set the direction for the organization, if your board is not doing its job, the whole organization suffers.
Your board itself, not the CEO, is responsible for its own development, job design, self-discipline, and performance. Therefore, self-evaluation is a significant way your board assures itself and those on whose behalf it governs that it takes accountability seriously.
Since your board’s governance process policies should address the following content areas, which are not exhaustive, these areas become subject to your board’s self-evaluation:
- Board linkage with your ownership: Has your board clearly identified those to whom it is accountable as owners? Has your board developed deliberate methods of regularly listening to your owners’ values regarding what benefits are to be produced by the organization for whom and at what worth (Ends)? Does your board share with the owners how it has used the information it collected from them? How effective are these methods?
- Clarity of delegation: Has your board actually set organizational Ends? Has your board reviewed and if necessary, refined those Ends in light of ownership perspectives and other Ends-related board education? Has your board adequately considered areas of material risk by defining in policy what activities and circumstances are NOT acceptable for the CEO to do or allow, even if they helped achieve the Ends?
- Empowerment and accountability: Does your board have an explicit policy regarding how it delegates to the CEO? Does your board speak with “one voice,” that is, through written policy? Does your board give instructions only to the CEO or do board members or the board as a whole meddle in areas that have been delegated to the CEO? Does your board receive regular reports from the CEO that provide evidence of achievement of the expected results, rather than merely descriptions of activities? Does your board thoughtfully assess these reports? Does it expect the reports to include:
- the CEO’s reasonable interpretation, including the standard that will be used and the level of achievement on the standard that would demonstrate compliance, as well as rationale for why they are reasonable?
- Actual evidence that demonstrates achievement of that reasonable standard?
How will you know when your board’s self-evaluation is well done? When the self-evaluation is:
- Positive: It helps your board clarify what its strengths are.
- Constructive: It helps your board clarify specific changes that it should make to improve its governing effectiveness.
- Educational: It helps your board understand the gaps in its knowledge of governance and make plans to improve.
If your board is going to improve its governance effectiveness, it should engage in robust self-evaluation. Don’t be satisfied with the “same ol’ same ol’” way of conducting board business. Re-think your role as ownership one-step-down as opposed to management one-step-up and recognize the significant role board self-evaluation plays in developing an effective and accountable board. For assistance in building your board’s strength in governing, contact us here.