Effective board governance doesn’t just happen – it takes a conscientious effort, both by directors and executive management to define roles, hone director skills and execute responsibilities.
To be effective, boards must have the right people, the right culture, the right issues, the right information, the right process, and the right follow-through. One clear objective must always be met: to create superior long-term shareholder value.
As a member of the director community, I have often wondered how we as a group—the board—can be sure we are adding value to the organizations we serve. How do we know? I think evaluations can help us answer this question with confidence, and so they should be taken seriously. Evaluations are the only tool available to the board to assess its own effectiveness.
Why Do We Undertake Board Evaluations?
Is it just that they are required? Shouldn’t we complete evaluations because we seek to function at our best? If organizations fail because of failures in leadership, I would make a passionate plea to all of us to embrace board evaluations instead of trying to shrug them off. An evaluation can help us define the value we want to create together, define our ideal for optimal performance and how we will get closer to our ideal.
Developing a board business plan is a value-creator for boards. An ideal business plan clearly defines specific performance goals for the board. Regularly evaluating performance against the plan, both at the committee level and at the individual director level, will make it more likely that board goals can be met.
If we learn we are failing, the evaluation should compel the board to take corrective actions. This may include replacing one or more directors, or challenging the board’s performance in other ways. An effective evaluation process offers a measurable and more objective means for determining what follow-through will be required to keep the board on a high-performance course. It keeps us accountable. And, if we are accountable, then we will be able to inspire accountability from management, and management from their teams and from our stakeholders. It starts with us.
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