Board Evaluation: Comprehensive Guide to Optimizing Board Performance

Board evaluations are a surefire way to increase the effectiveness of board meetings, improve corporate governance, and achieve company goals.

Almost 99% of S&P 500 and 97% of Russell 3000 companies regularly conduct the board evaluation.

What is a board evaluation?

The board evaluation process is a method of assessing a board’s performance and effectiveness. Its primary purpose is to verify that board members meet expectations, follow corporate bylaws, and are interested and proactive in moving toward the company’s goals.

Note: Regular board assessments are also a great way to demonstrate to management, staff, and investors that the board of directors cares about the company and its stakeholders.

Evaluation processes help organizations stay on track and make sure the board’s collective performance is working on the company’s growth and development. Moreover, it’s a great way to refine and adjust the board development plan.

A board of directors has three main roles in leading a company:

1. It sets a direction for the company’s development.
2. It controls the management and inner processes.
3. It provides advice and support.

By conducting a board member evaluation, the board ensures that the entire board and individual directors fulfill all three core duties.

The main factors for evaluating the board’s effectiveness include:

• Risk, strategy, and financial performance 
• Board composition and structure 
• Company reputation, integrity, and culture
• Management performance and succession planning  

Board evaluation features

Among the major board assessment features are the following:

• Defining goals and objectives of the board evaluation policy
• Reviewing existing requirements to the board, the company’s business model, governance structure, and specifics of the evaluation process itself
• Customizing board of directors evaluation forms to comply with directors’ committee roles
• Ensuring an intuitive user experience while going through the evaluation process
• Delivering written evaluation questionnaires via email or through the dedicated board evaluation software
• Enabling notifications that will remind every board member to submit responses
• Making sure all directors’ responses are anonymous
• Creating a detailed board evaluation report that highlights areas for improvement
• Including infographics and year-over-year comparative statistics in reports to track changes and continuous improvement
• Making a follow-up presentation that analyzes evaluation results and initiates discussion

Who should conduct a board evaluation?

There are several types of board evaluation in corporate governance differing mainly in who conducts a board evaluation process. 

Let’s define the four main methods of assessing board effectiveness, depending on who performs the evaluation.

1. Self-evaluation

Board self-assessment means that board members evaluate their own performance by answering a list of board evaluation questions. Ask each board member to reflect on their role on the board and how they assess the board’s commitment and performance. 

Because director responses are anonymous, this is the easiest way to get candid feedback, which encourages candor. Moreover, the self-assessment process improves individual board members’ involvement since regular self-reflection makes them strive to perform better.

If your company has never conducted board assessments before, self-assessments would be the best to start. Such a method of board performance evaluation doesn’t lay blame but rather highlights areas that need improvement. 

2. Peer-to-peer evaluations

Peer-to-peer (P2P) assessment means fellow board members evaluate each other. Just like self-evaluation, P2P allows getting valuable and practical feedback on individual board members’ performance. 

To conduct such an evaluation process, board members usually submit a questionnaire or are interviewed during one-on-one interviews. 

The purpose of a P2P evaluation is to get valuable feedback on how board members see a fellow director’s board performance. 

Some board members consider this type of board assessment stressful and are hesitant to be completely honest with their comments. That’s why it is immensely important to establish an atmosphere of trust and radical candor, where everyone’s thoughts matter. 

However, a P2P evaluation of board of directors helps to implement a collaborative culture that requires proactive and useful participation from all board members and results in effective decision-making.  

3. Executive director assessment

The executive director evaluation is very much like a peer-to-peer assessment, but instead of evaluating individual directors, the CEO evaluates the board as a whole. 

This board of directors evaluation is usually performed by the executive director, who submits a questionnaire aimed at assessing the board’s work and effectiveness regarding the company’s business strategy.

It’s essential to assess the whole board and avoid evaluating individual directors because such a board evaluation process can get personal and subjective connotations. 

Based on the results, board members define areas for improvement without singling out an individual director.

4. Independent third-party evaluation

For young companies that have never conducted board assessments, hiring an outside consultant is an option.

External legal counsel has the skills for effective board evaluation and can provide an unbiased opinion when there are conflicting ideas about the board’s performance.

With the help of an independent third-party expert, the board can set a list of board performance evaluation criteria for future evaluations that will highlight company-specific areas for improvement.

A consultant is also helpful for experienced boards who want to get an expert opinion on certain issues. By conducting an outside assessment, they get valuable tips and best practices that improve corporate governance and facilitate decision-making. 

Important: All types of board assessments can be combined with another type to provide a comprehensive outlook of the board’s performance.

How to prepare for board evaluations?

To make the process of preparing for the evaluation process and conducting board assessments simpler, follow these five steps.

Step 1: Define objectives

Effective evaluation is only possible with clear objectives. Before preparing to conduct the board assessment, think about the goals you want to achieve. By having a clear expectation of board evaluations, it’s easier to assess and analyze their effectiveness.

Usually, board assessments are conducted to review two categories of board performance:

• Corporate leadership (“We want to demonstrate board’s commitment to performance management”)
• Problem resolution (“We obviously don’t have appropriate skills, motivation, or competencies to fully perform the board’s responsibilities at the moment”)

Step 2: Determine whom to evaluate

Deciding whom to evaluate greatly depends on the assessment objectives. 

Generally, boards evaluate these groups:

• Board as a whole (including committees)
• Individual directors
• Main governance personnel 

Often, all the evaluations are combined, and the board is assessed considering the individual and collective roles of board members.

Step 3: Outline evaluation topics

The topics for evaluation also depend on the evaluation objectives. Below are the most common points:

• Leadership. The priority of the evaluation process is to make sure appropriate directors occupy the board leadership roles and that the board is moving towards goals according to the company’s strategy.
• Refreshment mechanisms. The evaluation process should show whether the board has appropriate refreshment mechanisms and how active board members are when making decisions on re-nominations.
• Agenda and information. Another way board effectiveness evaluation measures are to assess whether they follow the company’s general agenda and whether board members have all the information to make informed decisions.
• Culture. A board assessment helps to learn whether the board of directors has a favorable atmosphere that inspires open and unbiased self-expression.

Step 4: Appoint an evaluation lead

Deciding who will be responsible for the evaluation process is the last step before conducting it. Usually, this is the task of the corporate board secretary. However, many companies prefer hiring an outside consultant who prepares all the materials, conducts the evaluation, and helps to analyze results. 

Step 5: Ask focused evaluation questions

Crafting the correct questions is critical to a successful board review.  These questions should be closely related to the objectives described in Step 1 and delve into the topics indicated in Step 3.  Here’s how to tackle this step:

1. Align questions with objectives. Ensure that each question is directly related to the precise goals you want to achieve. For example, if the goal is to assess board leadership, questions may focus on the chair’s ability to manage debates or the presence of a clear succession plan for senior posts.
2. Balance open-ended and closed-ended. It’s helpful to use a combination of question types when collecting data. Closed-ended questions that use a rating scale (e.g., “1-Strongly Disagree to 5-Strongly Agree“) are quick and easy to answer. Also, open-ended questions (e.g. “What suggestions do you have for improving board communication?”) encourage detailed responses with valuable insights.
3. Consider all perspectives. Create questions that focus on the board’s overall performance, individual directors, and important governance staff.
4. Focus on process and outcomes. Questions should focus on both the “how” and “what” of board actions. Analyze subjects such as the effectiveness of information exchange, decision-making procedures, and meeting specified goals.
5. Maintain confidentiality. When creating questions, be sure to keep anonymity in mind to encourage honest feedback. Consider using anonymous questionnaires that allow for extra comments.

Step 6: Conducting confidential one‑on‑one interviews

One-on-one interviews supplement data collected through surveys or questionnaires. These confidential meetings better understand individual and collective board member opinions. Here’s what you should consider for effective one-on-one interviews:

1. Scheduling and preparation. It is important to plan interviews well in advance to accommodate individual schedules and prepare interview questions beforehand.
2. Creating a safe space. Encourage open and honest feedback while exhibiting a neutral and non-judgmental approach, emphasizing confidentiality.
3. Guiding the discussion with active listening. Use the prepared questions as a guide, then let the conversation flow naturally depending on the interviewee’s replies. In turn, Harvard Business Review states the most important indicator of a successful interview is the employee’s active engagement.

Accordingly, you can measure it by the time they speak throughout the meeting. Strive for a balance, where the interviewee talks between 50% and 90% of the time.

Step 7: Individual director 360° evaluation

Let’s go beyond the typical self and peer evaluations. Consider taking a more comprehensive approach with individual director 360° evaluations. This approach integrates feedback from a wider range of views, resulting in a more complete picture of each board member’s performance.

While the 360° evaluation provides useful insights, some boards may still choose a more formal approach through a board resolution for performance evaluation. That’s all because it sets the particular objectives and framework for the assessment process.

Here’s how to use 360° evaluations for assessments of the board.

1. Multi-source feedback. Collect feedback not just from directors and their colleagues, but also from key stakeholders such as top management, committee members, and external advisers.
2. Tailored instruments. Create customized assessment instruments that are consistent with the overall evaluation aims and subjects (see Step 3). These instruments might include behavioral questions that focus on certain talents or leadership styles pertinent to the board’s needs.

Growth mindset focus. Encourage directors to consider 360° feedback as a useful tool for professional development. The emphasis should be on identifying areas for improvement and establishing goals for future growth.

Step 8: Review and discuss the results

By the end of the evaluation process, devote time to the discussion of the results during board meetings. This is a chance for every board member to reflect on whether assessment objectives were accomplished and what should be done to improve the company’s internal processes.

It’s recommended to analyze the results of the board assessment by creating informative reports that will highlight all important issues. This is easy to do with the help of board management software that offers many features for automated-report creation and more.

Streamline the process with board meeting evaluation template

Looking to increase the efficacy of your board? Having a clear and fast review procedure is crucial. 

We’ve prepared a free, accessible template to help you evaluate your board and discover areas for improvement. With the template, you discover how to evaluate the board of directors and have a clear vision for effective governance.

Board evaluation best practices 

There are a few best practices for board evaluations that help to improve the board’s performance and corporate governance.   

For an even more effective evaluation process, follow these recommendations.

Devote 15 minutes of a board meeting time to conduct quick evaluations

The board evaluation process doesn’t always have to be time-consuming. Sometimes, using a few minutes of a board meeting’s time is the best way to get fast feedback on a certain issue.

Prepare a short questionnaire and ask board members to rate each statement from the list on a scale from 1 to 5.

Here are some examples to include in a questionnaire:

• The board has a common understanding of its roles and the general company’s goals.
• The structure of the board is clear.
• All board members feel comfortable expressing their thoughts.
• All board members are actively involved in decision-making.
• Every board member has enough skills to make important decisions regarding the company’s development.  

Opt for informal board evaluation practices

The evaluation process is often considered formal and highly structured. However, preparing for a formal assessment session is not always similarly effective as having a simple, quick discussion.

The purpose of any board assessment is to make board members share their opinions and reflect on the board’s performance. It’s easy to do with the Plus/Delta method. 

The Plus/Delta concept implies answering two questions:

• What’s working the best for us right now? (Plus)
• What did not go well and requires improvement? (Delta)

You can conduct this activity by handing every board member two sticky notes — Plus and Delta — and asking them to state the main achievements and failures of each. 

Discuss the future, not only day-to-day performance

It’s essential for the board of directors to not only reflect on day-to-day activities but also make sure everyone understands the company’s objectives and moves towards them.

The evaluation process is a great tool for reviewing the company’s mission statement and making certain adjustments when needed. Make sure you review where all board members’ ideas are aligned with the company’s vision. 

Board of directors evaluation tools

The evaluation process gets even easier to prepare and conduct with board assessment tools.

Many virtual board portals allow for a paperless board meeting since all evaluation activities can be handled online. 

Modern board portal providers offer many features that automate evaluation preparation and enable virtual board assessment. Additionally, the board can enjoy a virtual board meeting since board portals enable discussing the evaluation results with the help of Zoom or other video integrations from within the software. 

If you don’t know how to prepare for a board meeting or need help automating the board evaluation process, try iDeals, as it is our experts’ TOP choice. 

Summary

The board evaluation process is a method of assessing the board’s performance regarding the company’s objectives. The primary purpose of board assessments is to make sure that board members meet expectations, follow the company’s bylaws, and are interested in moving toward the company’s goals.

There are four main types of board assessment depending on who conducts it: self-evaluation, peer-to-peer evaluation, executive director evaluation, and independent third-party evaluation.

As a rule, board evaluations aim to assess two categories of board performance: corporate leadership and problem resolution.  

An effective board assessment allows for improving the atmosphere inside the board, facilitating decision-making, highlighting opportunities for improvement, and establishing a collaborative culture among board members. 

FAQ

What are the benefits of a board evaluation?

An effective board assessment encourages strategic thinking among board members, enhances their involvement and proactivity in decision-making, discloses opportunities for improvement, fosters management and board interaction, creates collaborative relationships among directors, and establishes a healthy organizational culture.  

How do you evaluate the performance of nonprofit boards? 

There’s basically not much difference between for-profit and nonprofit board evaluations. The fundamental purpose of any board assessment is to review the board’s performance regarding the company’s strategic plan and values. Thus, the questions you’ll want to ask the for-profit and nonprofit boards will differ and depend on your company’s mission and needs.