Paul Winum, PhD, ABPP, Senior Partner, Practice Leader Co-Head – Board and CEO Services, RHR International LLP, will be speaking at The Boardroom Summit, April 23-25, 2018 in New York City. The event will provide corporate board members with an unparalleled opportunity to share ideas and exchange solutions to today’s greatest board leadership and governance challenges. Click here to register.
Q: Do you recommend boards conduct individual as well as full board evaluations, and, if so, why? What about peer-to-peer evaluations?
A: Yes, most definitely. Directors who serve on boards these days aren’t interested in just showing up to meetings. They want to add value. Performance-oriented people thrive on getting feedback on how they are doing. Board directors are no different. In the past, directors have not often received any systematic feedback about how they are contributing. The assumption is that “no news is good news.” As boards are under increasing pressure and accountability to deliver value to the organizations they govern, individual director feedback as well as full board evaluations will become increasingly prevalent and more rigorous. Peer feedback can be quite helpful to this process if it is done in a respectful and constructive fashion.
“Boards should convey what they are doing to maximize their effectiveness and value through their annual report and stakeholder communications.”
Q: What are practical ways boards can translate evaluation insights into action?
A: The evaluation of boards—and individual directors, for that matter—should be conducted within the framework of what the organization needs the board to contribute. There are several areas in which most organizations want their board to add value. Those include helping to contribute to ideas about strategic direction and how the company can grow; how to protect the organization from risks and threats to the business; how to support the CEO and management team so they can execute well; and helping to make the proper resource allocations to support organic and inorganic growth. The evaluation process should not just be a rear-view mirror exercise about how the board has functioned in the past. The evaluation should focus on how the board and individual directors can add value going forward, with an emphasis on the actions and behaviors the board and board members need to demonstrate to help the company thrive.
Q: How can an outside investor gain comfort that the board is conducting thorough, objective board and/or director evaluations?
A: Boards should convey what they are doing to maximize their effectiveness and value through their annual report and stakeholder communications. A rigorous process that involves an external assessment that results in concrete action steps being implemented is a best practice nowadays and is reassuring to investors.