Board Evaluation Template

Nicholas J Price
One of the best things that's come from the new security exchange regulations is that it has caused boards to see the value in performing board evaluations. In many cases, it's also motivated them to take it seriously and give the process the integrity and due diligence it requires to result in improved board performance and increased engagement.

The process of board evaluations or self-assessments should be more than a requirement or a standard governance tool. Boards need to look beyond the compliance component and discover the value that lies at the end of the assessment process. Self-assessments should evaluate how well the board works currently and how they can work more effectively together in the future.

At the close of board evaluations, board directors should expect to find that their relationships with the CEO and managers will improve, board directors will be better engaged, and the board will have three to five solid takeaways for improvement.

Setting Up the Process

The setup of the process is just as important as evaluating the results. Boards should decide on what issues they want to explore, what tools or processes they will use to conduct the assessment, and how they'll handle the results.

Every board is unique and faces unique challenges. To be effective, the design of the self-assessment should reflect that uniqueness. The board may want to explore the board's structure, processes or both. The board should decide whether they're looking for quantitative results or qualitative results. Answers to these questions will help point boards in the right direction as to which tools to use and how to proceed.

Boards will also need to decide whether they will pursue an entire board self-assessment, individual director assessment or both.

It's helpful for boards to pick a few hot-button or ongoing issues that they've tackled over the past few years. Some boards find it helpful to review copies of meeting minutes for the most recent year. This exercise will reveal what issues the board worked on most heavily and whether they're the issues the board should be spending time on.

Making a Decision About Board Evaluations Tools and Processes

There are three ways to conduct board self-assessments ' surveys, interviews and group assessments. Seasoned boards often prefer to use some combination of those options for the best results.

Many boards prefer surveys because they're easy and convenient and can be completed anonymously. Surveys or questionnaires will yield quantitative results.

Some boards prefer the interview process because it allows board members to be intrinsically involved in the process. Interviews produce qualitative results and provide an opportunity to delve more deeply into the issues, which provides greater insight and more detailed information. Typically, the board gets survey questions ahead of time, so they can review them. An interviewer, who is often a third party, uses the questions as a base for obtaining and expanding on the board directors' answers.

Facilitated group assessments usually work best when a third-party administrator facilitates them. This method also produces qualitative results. This process only works well when the group already shares a high level of trust. Group processes can also be valuable as a team-building exercise.

A third party brings several benefits to board self-assessment exercises. They bring more expertise in assessment skills. Board members often feel like they can be more candid with third-party facilitators present and appreciate the objectivity they bring to the process.

Setting up the process includes deciding how to handle the results of the assessments. Boards need to decide who will share the feedback, who they will share it with and under what conditions they will share it.

How to Handle Committee Assessments

The New York Stock Exchange now requires boards to conduct an annual assessment of the main board committees. Boards have the liberty of doing this assessment as part of the board self-assessment or making it a separate process of its own.

Boards will also need to decide whether committee assessments will include only committee members or the whole board. As the whole board receives committee reports, they may have a different perspective than those who serve directly on the committees.

Setting Up a Board Evaluation Template

Boards that have done self-assessments in the past may find it helpful to use the past assessment tool as a starting point. Use the template to review past questions and to add questions that are newer and more relevant according to current board challenges.

Boards that are new to self-assessments may find any number of templates by doing a quick search online. These questions should merely serve as a base for developing a customized template. The questions may focus on a few important areas. Overall, the complete set of questions should be fairly well-rounded.

Diligent Board Self-Assessment Electronic Tool

Trust and anonymity are two of the most important components of the board self-assessment process. Electronic software solutions provide a beneficial framework that supports board self-evaluations that protect the integrity of the process. Electronic solutions for board assessments, like Diligent's Board Self-Assessment tool, are a convenient, efficient and cost-effective alternative to cumbersome spreadsheets and over-used templates. Boards that use Diligent's Board Self-Assessment tool can expect candid, objective results without the added cost of hiring a third-party administrator.

The Diligent Board Self-Assessment tool offers many valuable features, such as:
  • Setting up various types of questions
  • Monitoring submissions
  • Automatically reporting
  • Customizing reports
  • Adding graphics

Boards have the option of using the Diligent Board Self-Assessment Tool, along with group interview and group-session processes, for the most thorough self-assessment process.

Diligent designed the Board Self-Assessment Tool with the goals of confidentiality, trust and credibility in mind. The Diligent Board Self-Assessment Tool is part of the Governance Cloud ecosystem, which is a fully integrated suite of electronic board management software solutions.

The Right Process and the Right Tools Produce the Best Results

Many boards are finding it useful to go beyond the required regulatory requirements and doing peer review assessments. A combination of quantitative and qualitative approaches generally works best for peer review assessments. Nominating and governance committees use peer reviews as a tool to help them make renominating decisions.

Boards have much flexibility in deciding how to design their template and process for conducting board self-assessments. Regardless of how they choose to go about it, the end result should be the same. Boards should see a noticeable improvement in board and individual performance.
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Nicholas J. Price
Nicholas J. Price is a former Manager at Diligent. He has worked extensively in the governance space, particularly on the key governance technologies that can support leadership with the visibility, data and operating capabilities for more effective decision-making.