Continuous Improvement In The Boardroom

Friday 22 September, 2000

by Terry Kilmister

Most boards regularly evaluate the effectiveness of their CEO and expect their CEO to employ effective performance management throughout the company. But who evaluates the effectiveness of the board?

There is increasing recognition that governance and directorship require the same attention to continuous improvement as management. Unless the board is operating effectively as a group and unless individual directors are able to bring their skills, experience and wisdom to the boardroom table and have these well used, the board cannot guarantee the level of oversight and contribution required to add real value to the company.

Just as there is no ‘one best way’ to carry out performance appraisals at the operational level, neither is there one best way for the board to assess its performance. However there are some general guidelines that reflect emerging good practice. The following principles reflect elements of agreement among writers and practitioners about board performance assessment:

• Self-evaluation is the most appropriate method for board performance assessment. Quite simply, there is no one else who sees enough of the board at work to be able make judgements about performance effectiveness.
  
• The criteria for performance assessment should be consistent with board-agreed practices, protocols and outcomes, written or implicit (preferably written).
  
• Written questionnaires are widely used to allow individual directors to privately make their own assessments.
  
• The questionnaire should address both structure and process issues. Boardroom dynamics are as important as board composition.
  
• Directors must feel comfortable with the questions they will be required to answer. Ownership of the process of assessment is essential if a successful outcome is to be achieved.
  
• Peer and self-evaluation are increasingly regarded as essential components in the process.
  
• The CEO should be invited to separately comment on board performance as the CEO and as a director.
  
• The Chairman should provide strong leadership but should not dominate or assume ownership of the assessment process.
  
• The Chairman should receive feedback from directors on his/her performance in this role.
  
• Analysis of the results should be followed by a specially convened board session at the which the results of the assessment are discussed and appropriate follow-up action agreed.
  
• An independent corporate governance consultant can add value to the process by assisting the board to design and administer the questionnaire and to facilitate the follow-up discussion.
  
• The objective of the process is to identify strengths and weaknesses so that appropriate collective and individual development programmes can be designed and implemented.
  
• To be successful the process requires honesty and rigour.
  
• There should be a pre-agreed process for helping non-performing, or poorly performing directors to improve their performance or step down. 

Source:ceoonline.com