Why boards need to be evaluated and how to do it

In the world of business, a company's Board of Directors is like the steering wheel of a car – it guides the entire organization. 

Just like how a driver periodically checks the alignment and functioning of their steering wheel, boards need to be evaluated regularly. Let’s discuss why this is so important and how to go about it in a practical way.

Why Board Evaluations are Crucial

1. Keeping Pace with Change: The business world is constantly evolving. A board that was effective five years ago might not be cut out for today’s challenges. Regular evaluations ensure the board remains relevant and effective.

2. Identifying Strengths and Weaknesses: No board is perfect. Evaluations help identify areas where the board excels and where it falls short, allowing for targeted improvements.

3. Ensuring Alignment with Company Goals: It’s vital that the board’s actions and strategies align with the company's long-term goals. Evaluations help check this alignment.

4. Promoting Accountability: Board members, like anyone else in the company, need to be accountable for their performance. Regular evaluations reinforce this accountability.

5. Enhancing Decision-Making: A board that understands its strengths and weaknesses, and works continuously to improve, can make better, more informed decisions.

6. Fostering Open Communication: Evaluations can open lines of communication among board members and between the board and management, leading to more effective collaboration.

How to Conduct Effective Board Evaluations

1. Set Clear Objectives: Before diving into an evaluation, be clear about what you want to achieve. Is it to improve decision-making, enhance board dynamics, or align the board more closely with company goals?

2. Choose the Right Methodology: There are several ways to evaluate a board. Self-assessments, peer reviews, external evaluations, or a combination of these can be used. The choice depends on the board’s size, culture, and specific needs.

3. Focus on Key Areas: The evaluation should cover crucial areas like board composition, understanding of roles and responsibilities, effectiveness of meetings, quality of decision-making, and the board’s relationship with management among others.

4. Use a Structured Process: Whether it’s a questionnaire, an interview, or a workshop, having a structured process helps gather comprehensive and comparable data.

5. Involve an External Party (If Necessary): Sometimes, bringing in an external consultant can provide an objective perspective, especially if there are sensitive issues to be addressed.

6. Ensure Confidentiality: Board members should feel safe to express their opinions openly. Ensuring responses are confidential can encourage more honest and useful feedback.

7. Analyze the Results Thoroughly: It’s not just about collecting data; it’s about what you do with it. Careful analysis can reveal trends, patterns, and insights that are crucial for improvement.

8. Create a Plan of Action: The ultimate goal of any evaluation is improvement. Based on the findings, develop a plan with clear, actionable steps to address identified issues.

9. Communicate the Findings and Plan: Share the results and the action plan with the board and relevant stakeholders. This transparency is key to the process’s credibility.

10. Follow Up and Re-evaluate: Change doesn’t happen overnight. Regular follow-ups to check on the progress of the action plan and re-evaluations are essential to ensure ongoing improvement.

Conclusion

In essence, board evaluations are not just a corporate formalism; they are a critical tool for ensuring that a company’s guiding body remains effective, accountable, and aligned with the company's objectives. It’s about continuous improvement – keeping the board sharp, focused, and effective.

Think of it like a health check-up for the board. Just as regular check-ups can help a person stay healthy and address any issues before they become serious, regular board evaluations help keep the board in top shape, ready to tackle the challenges and opportunities that lie ahead.

By conducting these evaluations thoughtfully and thoroughly, companies can enhance the functioning of their boards, leading to better governance, stronger leadership, and, ultimately, a more successful and resilient organization.

The writer is a member of the Institute of Directors, Ghana and serves on a number of boards. He is an independent Internal Audit Advisor, Enterprise Risk Management Consultant, Board Consultant, and professional trainer.

He is the founder and Chief Operating Officer of Redric Consulting, your trusted partner for comprehensive training and consulting services in the fields of Governance, Risk, and Compliance (GRC).

With a proven track record in Board Consulting, Internal Audit, Internal Control, Compliance, Fraud Risk Management, and Cybersecurity, Redric Consulting empowers your organization and ensures its success.

You may reach out to Frederick on fpaikins@redricconsulting.com