Board Assessments: How to Evaluate Your Board of Directors
What is a Board Assessment?
A board assessment, also known as a board evaluation, is a process used to evaluate the effectiveness and performance of a company's board of directors. The purpose of a board assessment is to identify areas of strength and weakness within the board and to make recommendations for improvement. The assessment typically involves a combination of self-evaluation by the board members, as well as input and feedback from other stakeholders such as management, shareholders, and external experts.
A thorough board assessment ensures that the composition of the board is consistent with the vision and strategy of the company. A comprehensive board assessment begins with a review of the company vision and strategy. From there, a thorough skill matrix assessment should be performed on existing board members to identify gaps in board capabilities relative to the company’s vision and strategy.
What is the process of a Board Assessment?
The process of a board assessment varies depending on the organization, but it generally involves the following steps:
- Establishing an assessment framework: This involves determining the criteria and standards that will be used to evaluate the board's performance, such as corporate governance guidelines and best practices.
- Self-evaluation: Each board member completes a self-evaluation, assessing their own performance and that of their colleagues.
- Surveys and interviews: Surveys and interviews are conducted with other stakeholders, such as management and shareholders, to gather feedback on the board's performance.
- Compiling and analyzing the data: The data from the self-evaluations, surveys, and interviews is compiled and analyzed to identify areas of strength and weakness within the board.
- Report and recommendations: A report is prepared that summarizes the findings and makes recommendations for improvement. It serves as the roadmap for continuous improvement.
Who conducts a board assessment?
Are board assessments required by law?
The Benefits of Conducting a Board Assessment
A board assessment can benefit the board and the company in many ways.
1) Improve Board Effectiveness
A board assessment can help identify areas where the board is performing well, as well as areas where improvement is needed. This can help the board to focus on areas that are most important and make changes to enhance their performance.
2) Enhance transparency and accountability
A board assessment process that involves input and feedback can increase transparency and accountability. By gathering feedback from management, shareholders, and other stakeholders, the board can gain a better understanding of how its performance is perceived by others.
3) Facilitate communication
A board assessment can serve as a catalyst for communication between the board and its stakeholders. This can help build trust and improve the relationships between the different groups.
4) Identify best practices
Board assessments leverage benchmarking, identify best practices and industry standards, that the board can adopt to improve its performance.
5) Facilitate compliance
Many industries have regulatory compliance standards related to corporate governance. A board assessment can help a company to identify any gaps in compliance and take steps to address them before any issues arise.
6) Improve decision making
A well-functioning board is essential for good decision-making. A board assessment can identify any issues that may be hindering the board's decision-making process and make recommendations for improvement.
7) Provide a roadmap for improvement
A good board assessment report should provide clear recommendations for improvement. The board can use this report as a roadmap for enhancing their performance.
8) Promote productive debate
An effective board can debate issues effectively to prevent the trap of groupthink or boards dominated by strong personalities.
9) Establish a baseline for board renewal
An effective board establishes a culture of renewal consistent with the growth of the company. A board assessment helps the board understand and recognize when a director’s skill set is no longer consistent with the company’s strategy. It can also eliminate the need for age and term limits.
A board assessment is a critical part of corporate governance. The report provided by the assessment provider helps the board identify areas for improvement, enhance their performance, and maintain the trust of their stakeholders.
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Tom Tischhauser
About Tom
Tom Tischhauser is the founder and principal of Wynstone Partners, an executive coaching firm working with high impact leaders and company boards. The charter of the firm is to improve business performance through the development of key leaders. Tom’s P&L, general management, and functional experience, provide the strong background leveraged in leadership development. Global business, expatriate, and M&A experience complement his leadership and business skills. Tom and his team work closely with executives using everyday issues as vehicles to improve performance.
Tom has been a featured speaker for many business, university, and community events and has coached individual leaders and teams from the US, Europe, Latin America, Asia, and the Middle East. He is a former board member for Kimball Electronics (KE) and Kimball International (KBAL), and currently sits on the board of FinTurk, Inc. Tom holds an engineering degree from Cornell University.