Board reviews – assessing executive performance
Whatever the size of an organisation, it will have some kind of feedback mechanism for discussing employee performance. And any organisation sizeable enough to have an executive board will almost certainly have a formal appraisal or performance assessment process. But what about that board?
The board has an essential role in the success of the company, fulfilling key strategic and governance roles that impact on every aspect of the business. So, how to appraise the board? After all, in most setups, performance management is carried out hierarchically, with most employees still assessed by their manager. For the board, this means an externally facilitated board effectiveness review – an opportunity for an independent look at how the board members work together to guide the enterprise through an increasingly complex world and competitive markets.
A recent ICSA report found that almost all of the UK’s largest listed companies carry out an external review every three years. The exact nature of that review may differ from company to company but generally, review results may include board member knowledge and skills, the board’s engagement, strategic direction, leadership, and governance.
Benefits of a board review
At base, a board review is a benchmarking exercise, comparing performance to current best practice. Practical uses include:
- Identifying specific options for performance improvement.
- Resolution of board conflict.
- Helping ease transitions or changes.
- Giving the board a renewed joint focus.
- Boosting board skills.
However, to be clear, no board review should be a box-ticking exercise. The focus and manner of the review should depend on the nature of the company and its board, and its priorities.
One size never fits all
The key is engaging an external reviewer or facilitator that understands your goals for the review. And when it comes to specific questions or approaches, those goals should determine the direction of the review. That said, At Maximum, we’d suggest a solid board review process include the following five stages:
- Stage 1 – getting to know the organisation – The reviewer(s) should take the time to understand the company priorities and culture, using that knowledge to prepare more specific and focused lines of inspection.
- Stage 2 – sounding out individual directors – To get a feel for the actual practices of the board, confidential questionnaires are completed by each board member.
- Stage 3 – getting to know the individual directors – Using the questionnaire as a starting point, issues are explored in appropriate depth via confidential one-to-one conversations with individual directors.
- Stage 4 – reporting back – An initial report and recommendations are reviewed with the primary stakeholders, finalised, and presented to the board.
- Stage 5 – embedding – After Stage 4, the board could say, thank you very much, we’ll take it from here. However, for the sake of both effectiveness and transparency, an independently-facilitated session with the whole board can help focus on recommendations and necessary action planning.
Ultimately, to take a quotation from Deloitte’s guide to board effectiveness reviews,
“The value of an external review process will be heavily dependent on both the scope of the mandate that is given – that is, the readiness of the board to conduct a wide-ranging, no holds barred evaluation – and the capability of the external reviewer to conduct it.”
Finding the right external reviewer
The right independent reviewers will have the knowledge and experience to really understand board’s role, both in principle and in your particular enterprise, not to mention the rigour and willingness to challenge that will avoid a pointless ‘tick-box exercise’. When considering external reviewers, consider the following:
- Able to assess both business outcome and boardroom behaviours, and the links between them.
- Able to secure the board’s buy-in to the process and commitment to the outcomes.
- Has a clearly laid-out and explained process to offer that can be tailored to your priorities.
At The Board Room Effectiveness Company, we have experience of facilitating corporate board reviews, including for the VCSE sector and international boards. If you want or need to know more, give us a no-obligation call on 01582 463465 to discuss how a board review could work for your organisation.