A Guide to Board, Committee and Director Evaluation

Contents

Why? Getting Started

Who? Choosing a Leader

How? to Apply the Evaluation

Which? Choosing the Criteria

Where? Learning from Others

When? Coordinating the Plan

So What? Adjusting Behaviour

Concluding Tips and Cautions

Why? Getting Started:

Unless we really understand why we should, and are, undertaking an evaluation of the board and its directors, we risk causing division among participants and inappropriate use of results. This fear is perhaps the biggest reason that most boards (approx. 60%) and individual directors (approx. 80%) do not have formal written evaluations despite the fact that most directors (approx. 90%) support them.

Boards of directors, as the directing mind and legal power of the body corporate, are ultimately responsible and accountable for the organization's performance and the accomplishment of its mission, mandate and goals. Most boards are quite active in strategic planning (90%), financial monitoring (99%) and even holding the management accountable for results through formal annual CEO performance evaluations (85%.) It is a logical step to argue that board accountability can only be achieved through a similar form of assessment and evaluation at the board level, at the top of the organization.

Despite the fears associated with board and director evaluation, which can be mitigated through effective methodology and implementation, there are a number of benefits to be gained:

• An accountability mechanism to ensure the board and directors are fulfilling their legal and governance responsibilities
  
• An audit of the co-operative's governance practices and effectiveness
• An assurance to be able to give to members, affiliates, regulatory bodies and other stakeholders
  
• A tangible means to observe the strengths and weaknesses of the board
  
• A way for all members of the board to fully understand what is being asked of them
  
• Standards are raised through the clarification of a functional tool based on performance versus expectation
  
• Identification of skills gaps and therefore training and development opportunities.
  
• Promotion of personal and corporate growth
  
• Input to board succession and renewal process
  
• Opens up lines of communication among directors and with management, building unity and trust
  
• An understanding of what the board has accomplished, and what yet needs to be completed
  
• A commitment from all directors towards the priorities and effectiveness of the board
  
• An idea of the board/directors's own worth
  
• A proper evaluation promotes positive change and builds a road map to success for the whole organization … all governance practices should contribute to the accomplishment of the mission/mandate.

A board may not be seeking to accomplish all of these objectives during an evaluation process, and it is important to clarify which are, and which are not, being included. For example, if the evaluation is meant to provide input to the process of selecting candidates for re-election, the types of questions, the method of delivery and the degree of openness may all vary from a process where the sole goal is identifying training opportunities.

Most of those experienced with board evaluation recommend a more limited scope at first (self-improvement and board development), followed by more comprehensive uses later (governance audit, accountability, input to succession.)

Who? Choosing a Leader:

The next step is to decide who should complete the board and director evaluation.
Select a leader who will co-ordinate and champion the evaluation process. Experience shows that if the evaluation process is led by a single individual from start to finish, the most effective results ensue.

Consider the following alternatives:

• External consultant/professional: particularly for the design and initial implementation stages, a consultant can bring ideas, rigour, experience, objectivity and peer benchmarks to the process.
• One outside director: i.e. someone who is completely independent of management, who has an interest and time to lead the process, and the respect of the other board members (sometimes, but not often, this may be the Chair)
• The Governance Committee: or its Chair are often used to lead the evaluation process, since it is consistent with their scope.

Whatever choice is made, the objective is to find someone who does not have a bias or an axe to grind, and who has both the energy and the respect needed to bring all participants alongside. Bear in mind, there will almost always be some board members and/or executives who are not convinced that performance evaluations are useful at all.

How? to Apply the Evaluation:

Next, decide how the evaluation will be applied. This involves answering several questions. What kind of a tool or questionnaire will be used? Some tools list capability statements and ask evaluators to rate them; others ask questions that respondents are meant to answer. How will we agree on its design? How will it be applied?

Here are some leading practices for consideration:

• Take the time to get both the tool right, and to get sign-off and active support from everyone involved, down to the last director and executive who will be involved.
• Consider 360 degree feedback: where a complete circle of people in authority levels around the individual or board complete the tool (e.g. executives as well as board members complete board evaluations; all board members complete peer evaluations)
• Include a variety of performance levels: inputs, activities, and results (outputs, outcomes and impacts) in the tool
• Include a variety of response options: yes/no answers (most useful for identifying gaps); numerical ratings (e.g. 0 to 5 is easiest for most people; most useful for comparisons and rankings) and open-ended qualitative feedback (most useful for suggesting changes.) And an opportunity to indicate "not known" or "not applicable" as well.
• Keep the tool fairly simple and straightforward, not complex or onerous
• Each question should deal with one performance or capability area only

There are various delivery mechanisms as well:

• Written responses (faxed or mailed to a central point): the simplest and easiest approach
• On-line questionnaires: a little tougher on the respondent (and technical proficiency and availablity is essential - bear this in mind), but much easier on the processor!
• Face-to-face interviews: more time intensive, and requiring more tact, yet more likely to elicit deeper diagnostics and real critiques.

Decisions also need to be made about whether to evaluate individual directors, and if so, to use self (where each individual evaluates only themselves) or peer (where each individual rates all others) evaluation. Most agree to take this one step at a time: begin with the board as a whole, later adding straight-forward questions about director preparation, attendance, skills and participation. Move to more complete self-assessments, then only once everyone is comfortable with the process, adopt a full peer assessment instrument or tool.

Which? Choosing the Criteria:

Decide which things the board and directors should be evaluated on.

• Begin with the organization's mission, values, goals and strategic plan: these should each be included as key performance areas in the questionnaire.
• Factor in the legal duties and powers (Acts and Bylaws), fiduciary and stewardship roles, terms of reference and other known expectations of the board, committee or directors. These will prompt questions or capability statements for the tool.
• Narrow the list down to the "must do's", the high priority areas the board should do right.

Where? Learning from Others:

Take the time to review and learn from what leading organizations, inside and outside your sector and your industry, are doing in evaluation:

• Read articles, publications, periodicals and trade publications for best practices in board and director evaluation.
• Talk to other organizations about their performance measurement and evaluation systems: what is working and what advice do they have? Our experience shows that most are willing to be open in sharing their forms and experiences.
• The person identified to lead the process should consult broadly internally with all directors and the CEO, listen and communicate about the right tool/instrument, criteria/questions, scope and delivery mechanism to be used.

When? Coordinating the Plan:

Plan when to evaluate:

• Align the cycle of evaluation with the overall governance cycle (including the planning and performance management cycle) of the organization. This is often a multi-year strategic cycle with annual (and sometimes quarterly) rolling updates. Tie the right type of evaluation to each step.
• Many corporations often conduct an annual self-evaluation by the board and a more extensive and rigourous performance evaluation by an outside consultant every second year.
• Informal evaluations should be conducted as a supplement to more formal annual (or multi-year) evaluations; this ongoing monitoring creates a more cohesive flow of progress throughout the course of a year, identifies issues earlier, and builds confidence in the system.

So What? Adjusting Behaviour:

Perhaps the least well done of the steps, yet the most important in the long run: taking corrective actions.

These tie back to the original objectives of the program: now is the time to reap the benefits:

• Give shareholders, affiliates, regulatory bodies and other stakeholders assurance that the board (and directors) have undergone a rigourous accountabilty and evaluation test.
  Identify skills gaps and undertake/resource training and development opportunities
• Often, the Chair takes the lead in communicating and coaching individual directors in filling identified performance gaps.
  If this was an original (agreed-upon) objective, use results to feed into the board succession and renewal process (find ways to communicate or educate those involved to be more likely to re-elect strong performers)
• If board and directors are not fulfilling their legal and governance responsibilities, institute appropriate changes
• Use results to feed into next year's planning process, objectives, priorities, even resource allocation to ensure accomplishment of what has not yet been achieved successfully

Concluding Tips and Cautions:

Key learnings from our experience include:

• Board evaluation is best implemented iteratively
• Beginning with informal, verbal evaluations, and moving to formal, written forms,
• Beginning with the board as a whole, then to individual directors
• Self-assessment before peer evaluation
• Align with and tie into milestones and overall corporate plan
• Disclose the process publicly, to members and other stakeholders, but not the results