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.

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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. 

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 evaluations, 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 evaluation process
  • Reviewing existing requirements to the board, the company’s business model, governance structure, and specifics of the evaluation process itself
  • Customizing 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 management software
  • Enabling notifications that will remind every board member to submit responses
  • Making sure all directors’ responses are anonymous
  • Creating detailed reports that highlight 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 assessments that differ 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 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 to measure board effectiveness is 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: 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.

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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 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. 

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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.   

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