Most, if not all directors, recognise the importance of evaluation. CEOs are appraised to determine performance against organisations’ strategic objectives. Boards expect that CEOs appraise managers’ performance against criteria which include deliverables stated within business plans and budgets. Managers in turn appraise staff against particular tasks, often contained in duty statements. The CEO and other staff evaluate the appropriateness, timing and quality or services provided.
The reason for investing significant effort in evaluation, whether it be of staff performance or service delivery, is to determine what is, and what is not being done well. These findings then lead to actions that focus on how performance may be improved to achieve organisations’ strategic objectives.
With the benefits of evaluation for staff and service delivery in mind, it is often intriguing that such a limited focus appears to be placed upon board and director evaluation, particularly given their role as the body ultimately responsible for what the organisation does.
What follows is a brief summary of three steps a board might follow to establish and maintain an evaluation strategy.
Step 1: Establish objectives (if we don’t know where we are going, any road will get us there)
Achieving agreement on the objectives for board evaluation requires input from all directors. Ownership of the process is otherwise limited, as is the likely pursuit of strategies for improvement.
Objectives should be relevant to the board’s unique current and future requirements. The process for preparing objectives may include delegation of the task to a sub-committee or an individual. The sub-committee or individual might conduct interviews with directors to determine issues of concern. Such issues may include dynamics within the boardroom, Chairperson effectiveness, strategy development and or monitoring, monitoring compliance requirements, succession planning, directors’ skills or the Board/CEO relationship. Draft objectives can then be discussed, possibly modified and finally agreed upon by the board.
An alternative approach to preparing objectives might be to hold a board workshop, either as part of a routine board meeting or more likely at a separate time. Such sessions might be facilitated by someone external to the board.
The end result should be a manageable number of succinct, written objectives that provides clarity of purpose regarding the board evaluation.
Step 2: Choose Evaluation Technique(s)
Tools for evaluating board performance are spread across quantitative and qualitative techniques, used independently or together. Care should be taken when employing either technique as interpreters’ personal views or bias may distort results.
The following provides a brief overview of several tools used as part of board evaluations.
Probably the most commonly used range of tools are quantitative. These include the Binary question, Likert scale and Ranking scale. The binary question is one of the most simple to use as it requires respondents to provide a simple ‘yes’/’no’ answer to a series of questions. For example “Is your Chairperson effective?” Whilst responses to this question can be easily collated and analysed, they provide no information as to why the Chairperson is either effective or ineffective.
Likert scales require respondents to identify, on a graded scale from strongly agree, to strongly disagree, their view about the “correctness” of a statement. An example might be ‘board papers are always received five working days prior to board meetings’. Data collected from this tool is again easy to collate and analyse. This tool provides more detail than Binary questions.
As with Likert scales, Ranking scales require respondents to judge the value of statements. In this case, the respondent may be required to place a numerical value, e.g. 1 – 7 against a series of statements where 1 is most important and 7 least important. Data again is relatively easy to collate and analyse, providing information about the way a respondent prioritises a particular issue.
Unlike quantitative techniques that are based on analysing numbers to gauge “how much”, qualitative techniques are used to answer questions about “how” and “why”.
One commonly used qualitative technique is that of conducting and analysing data obtained from interviews (with either individuals or groups). Interviews are often conducted by a facilitator, achieving a higher level of objectivity than might be achieved were the Chair or another director to perform this task. Information obtained this way can provide substantial detail, not available from quantitative tools.
Another qualitative technique relies on the making of observations from specific events, for example, the nature of interactions between Chair, directors and the CEO during board meetings. Where the board employs an external person to undertake and report on observations, consideration should be given to the impact of having a “stranger” in the room. The impact will, in part, depend on the consultant’s ability to establish a trusting relationship with directors.
Step 3: Discuss Results and Follow Through
Who receives results of the board evaluation will depend upon the objectives established. Where the evaluation focuses on the board’s performance, the Chairperson and/or consultant are likely to provide a summary of aggregated/de-personalised results to the whole board. This could be followed by discussion of the evaluation’s findings, along with planning for actions to improve a specific area(s) of board performance. Where results refer to one or more directors, the Chairperson would arrange to provide individual feedback on the issue(s) identified.
Where an objective(s) related to the Board/CEO relationship or the Company Secretary or Public Officer’s role, then relevant results might also be made available to those officers.
Depending upon the objectives established, the board may also wish to make all or some of the results available to senior management and/or external stakeholders.
The next step is for the board to follow through by establishing its own action plan in light of the evaluations findings. The plan, preferably documented, can be referred to at board meetings to assess progress
The above three steps provide a brief guide to board performance, the outcomes of which often include identification of areas for directors’ personal development, improvements in board decision-making processes, a stronger Board/CEO relationship and quality of sub-committee work.
Where board evaluation is being conducted for the first time, its introduction sends a clear message to staff, the organisation’s members and other stakeholders of its commitment to internal review and improvement. This can be a very strong message regarding the board’s views and expectations regarding its commitment to the principle of “continuous improvement” of itself and for the organisation.
NFP Analysts is a Supplier Member of Associations Forum. For further information contact Stephen Crocker, stephen@nfp.net.au, 02 9413 9999.
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