Good Governance: Are Assessments a Waste of Time or a Valuable Process?      

It’s interesting the response you get when you ask whether a board conducts director assessments. Some say, “Why bother? We never use the results anyway.” Others have a well-established process and use the information gathered in different ways. Board assessments can uncover performance gaps that could be holding the organization back. The central purpose of the board evaluation is to continuously improve directors’ ability to govern effectively. 

Organizations and their directors who view board assessments as a positive, value-added experience understand that good governance is a journey, and assessments help steer them in the right direction by revealing what they are doing well and what can be improved.

The board assessment process is a critical step in building a strong board framework. Done well, it provides boards with a fantastic opportunity to monitor their progress and renew their commitment to doing their best work for the organization. Done poorly, it can turn into a routine exercise that tests the board’s patience and creates little or no value. The desired outcome should be to create an ongoing process that leads to continuous improvement in the governance leadership of the organization. 

Assessment Tools

Several tools are available for developing the assessment process to maximize the return on investment. That’s a key point: Organizations and boards need to look at the board assessment as an investment in good governance and the improvement of their organization and not as an expense or waste of time. The various assessment tools include survey questionnaires, structured one-on-one interviews, direct observation of board and committee workings, peer-to-peer evaluations, and focus groups. 

In the past and even today, organizations would implement a generic questionnaire, gather the data, attend a presentation on the findings (maybe), then put the feedback away and forget about it rather than developing an action plan or using other tools to further expand on the information gathered. 

In my experience, the most effective approach is to develop a process that uses several methods to gather data and build a strong baseline with a longer-term commitment to measure results—and combine that with putting in place an action plan for board development and improvement. 

Possible Benefits of Assessments

There are several benefits a board can realize from putting in place a board assessment process:

• Board assessments boost organizational performance. Many issues that organizations face can be traced to a failure in governance, such as ineffective strategy, the wrong leadership, poor policies, and bad or no financial controls. These are all deficiencies that, caught early through assessment, can be corrected.
• Board assessments enhance board effectiveness. Assessments can help ensure that each director has the required skills to be the most effective and that, the board as a whole represents a diverse array of experiences and perspectives.
• Board assessments provide assurance organizations are well-governed. At a minimum, the board should disclose that evaluations have taken place and in some cases, specific details and action steps may need to be shared with key stakeholders.
• Board assessments focus on the sometimes forgotten “G” of “ESG”—environmental, social and governance strategies. Assessments can reveal whether boards have effective control of the organization, including whether they’re acting ethically and independently.
• Board assessments are increasingly required. For example, listed companies in Canada are expected to disclose the process by which the board, its committees and individual directors are regularly assessed. More and more accrediting bodies in the not-for-profit sector are also requiring boards to be evaluated as part of the accreditation process.

How to Create an Effective Board Assessment Process

1. Define the purpose and goals. Clearly articulate the objectives of the board assessment process. Determine what you want to achieve, whether it’s improving board performance, enhancing board governance, focusing on director skills to determine gaps and assess training needs, or better alignment with organizational goals. This will help in determining the methodology to use.
2. Determine how the assessment will be administered. Who will lead the process? Who will conduct the evaluations? Usually, the governance committee or a management support to the committee leads the process. In many cases, a third party is brought in to help design the process, conduct the assessment, and analyze and present the results to the board.
3. Select assessment tools and methods. Decide on the assessment tools and methods that best fit the objectives and needs of your organization. Some common methods include surveys, interviews, self-assessments, peer assessments and focus groups. To gain a comprehensive view, it’s good to use a combination of methods.
4. Create a timeline. Develop a timeline for the assessment process, including when assessments will take place and when results will be reviewed and acted upon. Regular assessments, such as annual or biennial are typical.
5. Establish confidentiality. Ensure that the assessment process is confidential to encourage honest and open feedback. This is best done by using third-party facilitators or anonymous surveys.
6. Develop and administer the assessment process. Design clear and specific assessment questions or criteria that align with the board’s roles and responsibilities and the organization’s strategic goals. The focus should be on individual and collective performance. Distribute the assessment tools to the board members and encourage them to be constructive and honest in their responses. Gather and analyze the assessment data to identify trends, patterns and areas requiring improvement. It’s important to look for both strengths and weaknesses.
7. Feedback and reporting. Provide feedback based on the assessment results to individual board members and the board as a whole. Highlight areas for improvement and recognize areas of strong performance.
8. Action planning and monitoring. Work with the board to develop an action plan to address identified areas for improvement. It’s important to assign responsibilities and establish a timeline for implementing changes. Monitoring the progress of the action plan and assessing the impact of the changes on board performance and governance practices is key.
9. Evaluate the assessment process. Whether you have a regularly scheduled assessment in place or you’re conducting one for the first time, it is important to gather feedback and evaluate the process. This follow-up can only help to improve the process in the future for better results.

It’s important to keep in mind that a considerable amount of planning is required to establish and conduct a successful board assessment. Remember that a successful board assessment process is not just about identifying weaknesses but also celebrating strengths and fostering a culture of continuous improvement. In the end, it should contribute to better governance, decision-making and the overall success of the organization.

Taras Nohas, CMC, MBA, ICD.D, CCD, is principal and senior consultant at TN Governance and Strategy. He can help put together a purposeful and strategic approach to an organization’s board governance ensuring directors perform at their best and bring more to the table. For more information, contact CUES at p&S@cues.org.